Recently, a new innovation has captivated the Chinese market and has started to solidify its presence abroad: microdramas. Also known as minidramas or vertical dramas, these "mobile soap operas" are emerging as a major new entertainment format.
While comparisons to Quibi, which previously tried to popularize premium vertical video, are common, today’s microdramas actually have more in common with mobile gaming than Hollywood.
The top two apps in the market are developed by mobile game studios, the apps monetize through gamified virtual economies, and they are even starting to adopt interactivity in their video content. Looking further ahead, these apps are already leveraging AI in significant ways that offer lessons to game developers, particularly as Netflix and startups like Series Entertainment focus on the next generation of interactive narrative content on mobile.
What are Microdramas?
Microdrama apps offer narrative live action video series, mostly over-the-top melodramas. The “stories in the app are like snippets from low-quality soaps — or as if those mobile storytelling games came to life”, said TechCrunch of ReelShort, one of the market leaders.
The apps — all of which have similar layouts and content formats — must consistently create and release new content to attract and retain users. Most of the top apps release a new series each week, and each series has 70-150 episodes that are 1-3 minutes long — essentially the length of a feature film in total. The first 10-20 episodes are free and are routinely published to platforms like TikTok to acquire users. After that, users must unlock the next episodes by watching ads or paying for them through virtual coins.
In China, the microdrama market is estimated at 38B RMB ($5.3B) in 2023, meaning it is already 70% as large as the country’s century-old film industry, and the market is expected to hit 50B RMB ($7B) in 2024.
In 2023, Kuaishou (a major Douyin/TikTok competitor) had 270M daily active users for microdramas (70% of Kuaishou’s total DAU), with over 94M being paid users or those watching more than 10 episodes a day, an annual increase of over 52%. There are over 100,000 microdrama channels on Kuaishou alone.
Since 2022, and especially in 2023, the industry has begun to look internationally for growth, especially following a state crackdown on “unsavory” content (similar to the 2021-22 freeze on new game licenses).
ReelShort was the first microdrama app to go global when it launched in 2022. Led by California-based entrepreneur Joey Jia’s Crazy Maple Studio, ReelShort has ownership ties and close operational connections to China’s COL Group, which also publishes games, operates a web novel platform, and counts Tencent as an investor. ReelShort has exploded in the U.S., attracting competitors like DramaBox and ShortTV. Collectively, these three services dominate today’s market in terms of MAU and revenue, with competing apps far behind.
The Microdrama Revenue Model
Each microdrama app relies on a wide gamut of monetization strategies, with many similarities to mobile games. Invariably, there is a simple virtual economy with a single currency, and though some apps cosmetically differentiate between “bonus” coins and regular coins, they have the same purchasing power. Coins can be obtained from in-app stores via IAP, rewarded video, or completing offer wall tasks. Both the rewarded video and offer walls regularly promote mobile games.
There are also light gamification elements: check-in streaks reward users with coins, and watching an ad after claiming a streak can double the coins received. In-app pop-up dialogs and push notifications also encourage engagement in the virtual economy.
Surprisingly, interstitial or pre-roll ads are relatively rare. Like mobile games, microdrama apps rely primarily on rewarded video for ad monetization, and subscriptions allow users to watch without limit. IAP merchandising consists of an in-app store offering coin packs of various sizes, with an increasing value per coin at higher price points. Completing a series can require significant investment: On ReelShort, watching a full show “can require a $20-$50 splurge.”
These IAP storefronts are fairly basic, but do feature some of the hallmarks of mobile gaming’s influence: new user discounts, limited time sales, and pop-ups when users run out of coins. There is, however, still a great deal of opportunity for more complex economies, possibly with multiple currencies, bundles, and more digital items/consumables — similar to how interactive fiction games already monetize through IAP.
While the in-app virtual currency stores are still evolving through more complex and creative features, the content itself is already highly optimized for monetization. Each episode ends with a dramatic climax to keep users moving to the next one; the shows pack in a great deal of drama in the first 10-20 free episodes to quickly get users invested in the story. The plot is structured so that the paywall is always timed right after a major narrative event.
In the microdrama’s home market of China, however, these forms of pay-per-view or rewarded ads are not the primary monetization methods. Instead, the main revenue streams are a cut of the platform’s ad and e-commerce revenue based on the microdrama’s audience engagement. (Typically, the platforms are WeChat, Douyin, or Kuaishou.)
Microdrama services lean heavily into brand sponsorships and e-commerce promotions, especially partnering with beauty and clothing brands, a common “traffic sharing” tactic used in China’s consumer internet — similar to how YouTube or Instagram monetizes in the West. For Chinese consumers, willingness to pay for microdramas is partially constrained by piracy, which has led these apps to seek more lucrative Western audiences.
Microdramas and Interactive Fiction Games
Interactive story games and microdramas clearly appeal to similar audiences, so it’s perhaps no surprise that the developers of DramaBox and ReelShort — the top two microdrama apps globally — are also narrative game developers.
Before releasing ReelShort in 2022, Crazy Maple Studio launched Chapters: Interactive Stories in 2017, a game which is still the genre leader by monthly revenue and in the top four by MAU, according to data.ai. Crazy Maple and its Chinese parent company, COL Group, have together developed and published mobile games in a variety of genres. DramaBox publisher STORYMATRIX is also behind GoStories, a similar app in the genre which hasn't had as much success.
While cross-promotion is a strategy ReelShort is already pursuing, the app is also integrating narrative gaming elements directly into some of its shows. Currently, ReelShort has a small number of interactive shows, but the interaction is limited to choosing one of two dialog options about once per episode, with fairly minimal narrative impact.
This is understandable, to limit the additional filming required for interactive shows, but it does hint at a possible future state in which Crazy Maple’s two major products — ReelShort and Chapters — look increasingly alike.
The microdrama market has grown quickly and already dwarfs the interactive stories gaming market. DramaBox alone had 1.5 times the app store revenue as the top 15 interactive stories games combined in July, according to data.ai. But the future of both entertainment formats is likely to become more intertwined.
Netflix offers an opposing example, as a premium video subscription service moving into interactive fiction. The company has been heavily investing in building out its Netflix Stories game, a separate app with a collection of animated interactive narratives based on its live action IPs. The company even plans to add a new title every month to the game. Netflix has also licensed with Scriptic, a crime and horror-themed interactive fiction service.
However, the streaming service has bowed out of its short-lived vertical video offering and its "Bandersnatch"-style “Interactive Experiences”, with former VP of Games Mike Verdu explicitly describing Netflix Stories as the successor to that format. While Netflix’s larger game strategy still attracts questions and scrutiny, it's clear interactive fiction will be a core part of the video provider’s subscription offering, though its video content is still clearly optimized for TV, not mobile.
Embracing AI in Content Development
Microdramas and interactive fiction also share the increasingly robust adoption of AI. Apps like ReelShort rely not only on algorithmically generated titles that optimize for the click-through rate (like "Snatched a Billionaire To Be My Husband") but also use AI to write the entire script.
Many globally popular shows are adapted from existing Chinese microdramas, in which case, AI is leveraged not only to translate scripts before reshooting a series with Western-looking actors, but in some cases to “replace Chinese faces with Western ones” to avoid reshooting at all. This strategy has spawned a cottage industry of “AI face-swapping services” for as little as 50,000 RMB ($7.1K) per series. Considering that filming internationally often costs $100,000 to $150,000 (about six times more than filming in China), AI-face swapping can seem a prudent choice, even if the implementation still often falls short as “there is no widely acclaimed model available.”
Interactive fiction is also having an AI moment. Scriptic, the app that is now part of Netflix’s subscription, raised $5.7M from the likes of BITKRAFT and Amazon’s Alexa Fund to pivot toward generative storytelling. Andreessen Horowitz-backed Series Entertainment (previously known as Series AI) recently acquired Choices developer Pixelberry from Nexon. Both firms are building AI-native tools to create interactive fiction: the Rho game engine from Series and a “cloud-based creator suite” from Scriptic. Previously, this was the role of specialized narrative game engines like Twine and Ren’Py — Netflix had also built its own tool for interactive films called Branch Manager. But interactive fiction may be uniquely suited to generative text-to-video, image, and audio tools, given all the background imagery, bite-sized videos, and mountains of dialogue required for an endless content treadmill of stories.
The Future of Mobile Storytelling
The end result of AI’s increasing prevalence in microdramas and interactive fiction could eventually look like a truly interactive video, a format which would fully bridge the interactivity of narrative fiction games with the realistic video of microdramas.
Microdramas are also likely to maintain and grow their foothold internationally, even if their global popularity may never quite match their ubiquity in China. This is in part due to the reliance on higher friction UA for native apps in the West, instead of seamless distribution via China’s miniprograms.
Thematically and business-wise, microdramas also have much in common with soap operas or paperback romance novels, and may even benefit from significant tailwinds in the fantasy romance publishing business.
That is not to say there aren’t already significant challenges: The microdrama market is already hypercompetitive globally, and many of the top apps are struggling to turn a profit as they try to outgrow their rivals. Content costs are currently very low as the apps rely on non-union talent in LA or Eastern Europe, but costs are rising as companies try to outcompete each other on quality. ReelShort’s higher production values means it spends almost twice as much shooting a series as some of its competitors. But the real drain on profitability is UA spend, an issue which surely resonates with many mobile gaming firms.
The Chinese domestic market is approaching saturation, and international growth is both expensive and hypercompetitive. Most apps are spending around 80% of their revenue on UA, a number which may continue to rise. At this year’s ChinaJoy gaming conference, marketing firm Yujin Culture estimated that over 90% of domestic microdrama apps were unprofitable. ReelShort’s Crazy Maple Studio itself only posted 240,000 RMB ($34,000) in profit in 2023, despite its massive growth, largely due to UA costs.
New players may still enter the market too, further driving up marketing and content production costs. One of ReelShort’s leading actors, Kasey Esser, is launching his own separate app later this year. Hulu, the buyer of Quibi’s content library, is also rumored to be considering launching a microdrama service.
These apps will need to further differentiate themselves in order to attract, retain, and monetize users, likely by leaning on innovation from their gaming roots and the AI innovations that also are shared with interactive fiction games.
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