The downturn in long dramas drags down gross profit, and Yuewen is trying to bet on AI-powered comic dramas.

China Literature aims to offset the decline of long dramas through IP commercialization and AI animated dramas.

On March 17, China Literature Group (00772.HK) released its full-year 2025 financial report. Data shows that the company’s revenue for 2025 decreased by 9.3% year-on-year to 7.366 billion yuan, mainly due to delays in film and television project schedules, reduced online releases, and declining copyright operation income. As a result, gross profit also fell by 13.4% to 3.397 billion yuan.

In core business areas, including paid reading, advertising, and game distribution, online revenue in 2025 grew slightly by 0.4% year-on-year to 4.047 billion yuan, accounting for 54.9% of total revenue, once again becoming the company’s largest business segment. Another segment, comprising copyright operations and others, was affected by fewer film and TV releases and schedule delays, decreasing by 18.9% to 3.319 billion yuan.

Therefore, although main business revenue saw a slight increase, overall revenue decline and cost structure impacts led to a 24.8% drop in China Literature’s Non-IFRS net profit for 2025 to 858 million yuan.

Notably, China Literature’s achievements in IP commercialization and AI animated dramas are worth highlighting. The financial report shows that in 2025, GMV of China Literature’s IP derivatives more than doubled year-on-year, surpassing 1.1 billion yuan, more than twice the figure in 2024.

Regarding AI animated dramas, China Literature announced in October 2025 its strategic entry into the animated drama sector. By the end of 2025, approximately 1,000 animated dramas had been produced, with over 100 surpassing 10 million views, 12 exceeding 100 million views, and revenue in the second half of 2025 exceeding 100 million yuan. In traditional short dramas, through a premiumization strategy, China Literature achieved a maximum single-project revenue of 80 million yuan in 2025, though specific revenue data has not been disclosed in the financial report.

The shift in business focus is driven by the waning traditional long-form drama model. The financial report indicates that in 2025, copyright operation revenue declined by 20% due to fewer long dramas being released and scheduling uncertainties. Additionally, the full impairment of New丽 Media’s goodwill, a wholly owned subsidiary, signals a deep adjustment period for the long-form drama model.

Overall, China Literature aims to develop three pillars simultaneously: IP derivatives, short drama premiumization, and AI animated dramas, to counteract the decline of long dramas. However, their overall revenue share remains low, requiring continued investment over time.

The pain points faced by the transition from traditional long dramas to AI animated dramas are also shared by long-form drama platforms like iQIYI, Tencent Video, and Youku. Currently, the industry is alleviating pressure mainly by reducing long dramas and investing more in short dramas, especially AI short dramas. Even leading short drama platforms are shifting toward AI animated dramas.

Earlier reports indicated that ByteDance’s Hongguo short dramas would cut 90% of live-action short drama projects and suspend minimum guarantee collaborations with producers. In response, Hongguo’s chief editor Le Li stated that live-action short dramas are still mainstream at this stage. The key to AI live-action and animated dramas’ development in 2025 lies in whether a breakout work can emerge—similar to last year’s “Summer Fendela,” which led the industry in mass production. If such high-quality content appears, platform investments will increase accordingly.

According to DataEye Research Institute, the national animated drama market is estimated to reach 16.8 billion yuan in 2025, with further growth to 24.4 billion yuan in 2026. The primary growth driver is AI-driven capacity expansion on the supply side, followed by the replication of business models from the live-action short drama industry chain into the animated drama sector.

Currently, China Literature’s collaboration model for animated dramas mainly involves co-production and joint release, rather than traditional licensing. Regarding the relationship between animated dramas and traditional short dramas, Yang Zhan, General Manager of China Literature’s animated drama division, told First Financial that the focus of AI animated dramas is on technological breakthroughs. Upgrading AI technology enables mass content production, and different platforms will not adopt a “one-size-fits-all” approach to business layout. However, the content market will increasingly emphasize high-quality productions, and relying on poor-quality content to obtain subsidies will no longer be viable.