In March 2026, OpenAI quietly shut down Sora after six months of commercial irrelevance. In the same month, China’s AI video industry produced more new titles than Netflix has released in its entire history. The contrast captures something essential about where artificial intelligence is actually being deployed at scale: not in Silicon Valley’s research labs, but in the vertical studios of Chongqing and Zhejiang, churning out one- to three-minute serialized dramas for 660 million Chinese smartphone users.
China’s micro-drama industry, a format of serialized stories told in episodes of one to three minutes, viewed vertically on a phone, is now projected to exceed 120 billion yuan (approximately $16.5 billion) in 2026, surpassing the country’s entire theatrical box office for the first time. It has become, without anyone in Silicon Valley quite noticing, the world’s first mass commercial application of AI-generated video. The Next Web provides an in-depth analysis of this quickly growing space in China.
AI Tools That Drive Output
The micro-drama production model that emerged in China around 2023 was already engineered for speed. Studios operated in clusters of compact sets, known informally as “shudian,” or vertical studios, where sets for hospitals, mansions, subway platforms, and banquet halls sat side by side, allowing crews to shoot scenes in rapid succession. A typical live-action micro-drama could be produced in six to eight weeks for a few hundred thousand yuan. AI has compressed this cycle further. Companies have begun allocating approximately 30 percent of their production budgets to AI-driven workflows, cutting total production time from three months to one and reducing costs to roughly one-fifth of traditional shoots.
The numbers reflect this shift. In January 2026’s top 100 micro-drama chart, AI-generated titles accounted for 38 percent of entries, up from 7 percent a year earlier. DataEye, the industry tracking firm, reported that more than 10,000 AI-generated animated micro-dramas were going live each month by the start of 2026. The tools driving this expansion, including ByteDance’s Seedance 2.0, Kuaishou’s Kling 3.0, and Shengshu Technology’s Vidu, have pushed the quality of generated footage to the point where, for certain genres, the difference between AI-produced and live-action content is no longer immediately obvious to viewers scrolling through their feeds.
The State’s Role
What distinguishes China’s AI micro-drama boom from other AI-generated content experiments is the state’s role. Chongqing built the Liangjiang Film and Television Animation Cultural and Creative Park, a facility designed specifically for vertical-format content that now hosts more than 300 production crews annually, earning the city the nickname “Vertical Hengdian.” Linping, in Zhejiang province, allocated over 100 million yuan to support content creators and constructed China’s first dedicated micro-drama film base. The maximum guaranteed state incentive can reach two million yuan per individual drama, with additional support structures covering funding, content development, data access, and traffic allocation.
The National Radio and Television Administration (NRTA) has simultaneously tightened its regulatory framework, establishing a tiered content review system based on production budgets. Productions exceeding one million yuan require provincial-level approval. The NRTA has removed more than 25,000 episodes for content violations, and has issued specific guidance on animated micro-dramas, requiring pre-broadcast review. The regulatory architecture serves a dual purpose: it encourages the industry’s growth as an economic engine and a tool for cultural export, while ensuring that content remains within acceptable boundaries. It is industrial policy applied to entertainment.
From Domestic to International Markets
China’s micro-drama industry is no longer a domestic phenomenon. In the first eight months of 2025, overseas micro-drama revenue reached $1.525 billion, a 195 percent year-on-year increase. Platforms including ReelShort, DramaBox, GoodShort, and My Drama have established significant user bases in the United States and Southeast Asia, with ReelShort alone generating approximately $400 million in revenue in 2024. The global micro-drama market reached an estimated $11 billion in 2025 and is projected to hit $14 billion in 2026. Harvard Business Review published “Lessons from China’s Short-Drama Boom” in March 2026, describing the industry as a complete operating system: a production methodology, an algorithmic growth engine, and a modular monetization stack honed in one of the world’s most competitive digital markets. The comparison with Quibi, the American short-form streaming service that burned through $1.75 billion and shut down in 2020 after less than a year, is instructive. Quibi tried to create short-form video by slicing Hollywood-style content into smaller pieces. China’s micro-drama industry did the opposite: it built an entirely new production model designed from the ground up for vertical screens, algorithmic distribution, and consumption in fragmented bursts. The addition of AI has accelerated this model’s advantage. As the NRTA’s AI content labeling crackdown continues to evolve, the micro-drama sector will be one of the primary testing grounds for how China regulates AI-generated content at industrial scale.
(Related: China’s AI Video Generators Go Global, Filling the Void Left by OpenAI’s Sora)