EB SECURITIES: Short plays and comic plays are transitioning towards "high-quality and industrialized." Suggest focusing on the industry's capacity release.

EB SECURITIES released a research report stating that the short video and animation industry in 2026 is at a crucial point of transformation towards "boutique and industrialization". With the mature application of AI video models like Kelin, animations, with their low cost, high production capacity, and strong visual impact, are taking over from live-action short films as the main force in platform content incremental growth. In terms of market size, the animation industry showed strong growth in 2025, with the market size expected to maintain rapid growth in 2026, allowing for the release of the value of a large number of IPs. At the same time, there is a vast potential for the international expansion of short videos/animations, and the growth of revenue from domestic companies' overseas short video apps is expected to continue. It is recommended to focus on industry capacity release and maintain a "buy" rating for the internet and media industry. EB SECURITIES' main points are as follows: Short video market in 2025: Stable growth domestically, expanding internationally 1) Domestic short video market size: According to the third-party organization DataEye, the market size of micro-short videos in China in 2025 is expected to reach RMB 63.43 billion, a 26% year-on-year growth, and is expected to increase to RMB 85.65 billion by 2027, with a compound annual growth rate of 19.2% from 2025 to 2027. The short video industry is still a typical "volume-driven" industry, with an investment flow scale of about RMB 42.3 billion in 2025, a 28% year-on-year increase from 2024. 2) Domestic short video supply: The pace of capacity release has significantly increased, with the supply of new films increasing from 34,600 in 2024 to 39,600 in the first half of 2025. However, the competition for "boutique" short films is intensifying, with the per-episode cost of ordinary short films ranging from RMB 400,000 to 700,000, while the cost of top-tier S-level series ranges from RMB 1.5 million to 3 million. Under high cost pressure, many small and medium-sized production teams are seeking opportunities to break through at low costs. 3) Short video internationalization: In 2025, China's short video internationalization saw significant growth, with total revenue soaring to USD 2.38 billion for the year, and downloads exceeding 1.21 billion, a 263% and 135% year-on-year increase, respectively. The income structure of various overseas short video apps remained stable, with the top three earners in 2025 being ReelShort, DramaBox, and GoodShort, collectively holding over 53% of the market share, indicating a relatively high market concentration. Animation market in 2025: The billion-dollar track driven by AI 2025 is the first year of AI animation in China, with the core of AI animation relying on online literary IP and completing the full process of digital production of scripts, character modeling, scene rendering, and voice synthesis through AI tools, presenting a composite content form of visual comic style and short film narrative rhythm. Animated series typically have episodes lasting 3-8 minutes, with a total duration of 80-120 minutes. The core feature is "dehumanization", breaking free from the dependence on actors and shooting locations, while maintaining the core advantages of strong plots and high conflict of short films. It is a new content carrier generated by the iteration of AI technology. 1) AI animation market size: According to data from Ju Engine, the market size in 2025 is expected to exceed RMB 20 billion, with a total of 46,931 animated series released for the year, achieving a leapfrog growth, especially in the second half of the year showing a "staggered growth" trend. From a commercial perspective, in 2025, the daily average GMV of AI animated series on the Douyin platform exceeded RMB 10 million. Top companies like Jiangyou Cultural Animation began a comprehensive transformation to focus on animated series in 2025, leading to rapid revenue growth. 2) Support for animated series from top companies: The launch of the Hongguo Free Animation App in 2025 is a landmark event for the development of animations, signaling the acceleration of investment from major players in this area, prompting platforms like iQiyi, Tencent, Bilibili, and Xiaohongshu to communicate with content production companies to secure production capacity. Companies like Douyin, iQiyi, Baidu, etc., are supporting animated series by providing cash incentives, revenue sharing with producers, etc. To address the shortage of original scripts, companies like Yuewen and Qimao opened up the rights to adapt over 100,000 online literary IPs in 2025. 3) AI effectively enhances animation production capacity: AI technology is integrated throughout the entire production chain of animated series in 2025, including planning and script stages, video production stages, audio and post-production stages. Throughout the entire process, AI systems can monitor production progress in real-time, allocate creative tasks, support industrial production capacity like "60 episodes produced by 15 people in 20 days", ultimately reducing the production cost of animated series to RMB 400 per minute and compressing the production cycle to 10-13 days. Risk analysis: Intensified competition in the industry, IP business expansion falling short of expectations, increase in investment flow costs leading to continued expansion of losses, stricter content regulation policies.