Shanxi: AI applications catalyze the overlay of supply and demand trends towards improvement, the media industry's fundamentals are expected to marginally improve.

Shanxi released a research report stating that throughout the year, AI remained a catalyst for the growth of the media sector in 2024. Looking ahead to 2025, the emergence of high-quality AI applications domestically and internationally may continue to enhance the growth and valuation of the media industry. At the same time, the gaming and film industries are expected to benefit from the start of a new gaming cycle, improved supply of quality content, and industry innovation empowered by AI. Key points from Shanxi are as follows: - Performance fluctuated throughout the year, with stable revenue growth in the industry. - In 2024, the media index rose by a cumulative 2.23%, ranking 19th out of 31 primary sub-industries according to the Shenwan index. - In the media sub-sectors, advertising and publishing saw increases of 7.42% and 6.68% respectively, leading the growth. From Q1 to Q3 of 2024, the media industry achieved revenue of 366.21 billion yuan, up 0.82% year-on-year, with net profit attributable to the parent company reaching 23.3 billion yuan, down 32.28% year-on-year. Within the sub-sectors, advertising and gaming sectors showed impressive revenue performance, with growth rates of 8.4% and 5.1% respectively. - Big AI models are in fierce competition, and the application side of AI is expected to accelerate its implementation. - Since the emergence of ChatGPT in 2022, the trend of big models has been growing rapidly. In 2023, the domestic big models experienced explosive growth, rapidly iterating their capabilities and expanding their modes. In 2024, the inference and understanding capabilities of big models made a leap forward, and began exploring applications in specific fields. With the rapid development of generative AI, the gradual improvement of AI infrastructure, and the continuous advancement of deep learning technology, the application scenarios of generative AI are gradually increasing, potentially helping industries achieve digital and intelligent transformation. According to iResearch Consulting, China's generative artificial intelligence industry is expected to surpass the trillion-dollar mark by 2030. Domestic AI application traffic continues to grow, with ByteDance's Douyin performing notably well. - The film industry faced pressure in 2024, with attention on the 2025 Spring Festival and AI+film applications. - In 2024, due to the shortage of quality content supply, domestic film market box office revenue decreased by 22.34% year-on-year. Looking ahead to 2025, with a sufficient number of registered films serving as reserves and a booming number of newly registered films, the content supply side of the film market is expected to improve significantly in 2025. Additionally, the release of high-quality films during the Spring Festival season is expected to boost film box office revenue and restore market confidence. AI-based video technology continues to improve, potentially delivering more precise, efficient, and diverse video content. - The domestic game market continued its growth trend, with the start of a new product cycle driving performance growth. - In 2024, China's game market revenue was 325.783 billion yuan, a year-on-year increase of 7.53%. CMGE's revenue increased by 5.01% year-on-year, while revenue from PC games increased by 2.56% year-on-year. Revenue from the overseas market in 2024 was 18.557 billion US dollars, a year-on-year increase of 13.39%. In the medium to long term, AI empowering the gaming industry will bring about innovation in gameplay and efficiency in production. In 2025, the gaming market is expected to benefit from the steady start of a new gaming product cycle and the continuous improvement in the competitiveness of overseas products, driving steady revenue growth in the gaming industry. - Investment recommendation: Focus on large models, AllinAI to develop new growth opportunities such as Kunlun Tech (300418.SZ), Shanghai Film (601595.SH) which continues to expand its IP business, and Hangzhou Electronic Soul Network Technology (603258.SH) which benefits from the start of the new gaming cycle. - Risk warning: Policy risks, macroeconomic downturn risks, product launches falling short of expectations, intensifying competition, etc.