China Securities Co.,Ltd.: AI reshapes the interactive film and game industry chain; small and medium-sized teams achieve payment validation.

China Securities Co.,Ltd. released a research report stating that recent changes have emerged in the production and distribution of AI interactive film-games, with products from small and medium-sized teams beginning to achieve payment validation: the 6-person video team behind *Survivor's Notes* completed 700 minutes of content in 4 months, and third-party estimates in mid-October put sales at over 10,000 copies. Compared with traditional live-action interactive film-games, AI is expected to reduce live-action investment, lower the cost of adding new branches, and shorten production cycles, driving rapid supply growth. 1) On the technology side, models are improving video generation and 3D capabilities; 2) on the platform side, Douyin is soliciting interactive content, with supporting distribution, funding, and IP support; 3) on the content side, works by small teams and individuals are enriching supply; 4) on the channel side, Steam is handling global distribution, and ByteDance is expected to open up new traffic. AI interactive film-games have produced small and medium-sized hits and are expected to become a new growth content category after AI dramas *Love Is All Around*, which went viral in 2023, used live-action footage to carry branching storylines, and content expansion required coordinating actors, scenes, filming, and post-production. The recently emerged AI interactive game *Survivor's Notes* replaces part of the visual production process with AI video generation, while coding agents connect 3D assets with game engines, further transforming the story into explorable, operable interactive entertainment. China Securities Co.,Ltd. believes that AI will simultaneously lower initial investment and reduce the marginal cost of adding story branches, shortening the cycle from idea to playable version. Suppliers are expected to expand from teams with filming resources to small and medium-sized creators and game teams with 3D production and gameplay development capabilities. At this stage, a distinction should be made between "AI-assisted production" and "real-time generation during gameplay": the former has already been used for pre-rendered visuals and program development, while the latter still needs to address character memory, response speed, and ongoing inference costs. 1. Technology side: the upper limit of multimodal model capabilities is opening up, connecting video production, 3D assets, and interactive development Model iterations over the past two months have extended multimodal production from single-asset generation to complete workflows. Astra, Opus 5.5, and Kimi K3.1 Pro can participate in modeling and development through code and tools; Kling 4.0 and Seedance 2.5 4K improve shot performance, creative control, and delivery quality. Combining these two routes is expected to reduce the cost for creators of repeatedly switching among scripts, assets, scenes, and interaction. Improvements in video generation capabilities are first conducive to the large-scale production of branching storylines. Kling 4.0 supports multiple reference materials and keyframe control, while Seedance 2.5 4K provides a process of first generating low-resolution samples and then outputting 4K final footage. China Securities Co.,Ltd. believes that such capabilities are expected to help creators validate shots faster, adjust character performance, and reuse character and scene settings, reducing the cost of asset trial and error when adding story branches and enabling small teams to produce longer and more complete narrative content. Enhanced coding and tool-calling capabilities extend AI's role from visual production to playable product development. Kimi K3.1 Pro can edit Blender assets via scripts and combine with engines such as Unity to build experiences. China Securities Co.,Ltd. believes that model participation in asset organization, scene construction, and interactive code writing is expected to reduce collaboration costs across different production stages, allowing individuals and studios to produce testable versions faster; game teams with 3D production and gameplay development experience are also expected to extend their existing capabilities into interactive storytelling. World models provide a longer-term increment in spatial interaction. Tim demonstrated some of ByteDance's world model capabilities at a launch event, showing the direction of content extending from "watchable" to "enterable and modifiable." 2. Platform support: Douyin solicits interactive content, with distribution, funding, and IP stepping in simultaneously The Douyin Group short drama copyright center has included interactive dramas and interactive film-games in its cooperation solicitation, and the platform has begun to further intervene in organizing the supply of interactive content. According to the solicitation document cited in public reports on October 20, vertical and horizontal screen content, live-action or AI content can all participate, and applicants cover individuals, studios, and companies. Joint distribution, joint funding, and joint IP development are three optional cooperation models, corresponding respectively to finished-product commercialization, development cost support, and access to adaptation resources, with support covering different stages of content production and distribution. The specific division of labor under joint distribution is that partners provide finished interactive content, while the short drama copyright center provides product distribution and operations capabilities. The terms propose providing content with product capabilities for operations and monetization across mainstream channels. China Securities Co.,Ltd. believes that this is expected to make up for the shortcomings of small and medium-sized teams in channel connection, launch operations, and revenue conversion, enabling creators to obtain support from the platform's commercialization capabilities after completing scripts, visuals, and interaction. Existing public materials have not yet specified the exact distribution entry points, revenue-sharing methods, or traffic guarantees, and the actual scope of cooperation still needs to be based on signed agreements. Joint IP development includes copyright cooperation and copyright fee subsidies, intervening in two areas: project topic selection and licensing costs. For creators, the character relationships, worldview, and audience awareness of existing IP can provide a foundation for branching storylines, character interaction, and subsequent content expansion; copyright fee subsidies are expected to reduce the investment required to obtain adaptation resources. China Securities Co.,Ltd. believes that if further linked with ByteDance-system IP resources such as Fanqie, the matching efficiency between high-quality stories and AI production teams is expected to improve, and teams with content planning and interactive development capabilities will also gain more room for topic selection. 3. Content side: works by small teams and individuals are emerging, and payment validation has begun to appear The recent supply of AI interactive content is extending from single shots and short demonstrations to works with complete storylines, scenes, and gameplay. Cases that have appeared cover pre-rendered AI video narratives, explorable 3D spaces, and action games developed with AI assistance. For long-form film-games, the main focus is production organization and payment conversion, while individual 3D works reflect tool integration capabilities. *Survivor's Notes* has already converted a small team's AI video production capability into sellable long-form branching content. The core video team had about 6 people and used 4 months to complete about 700 minutes of branching material, with a script of more than 260,000 Chinese characters; the director's log confirms that the visuals were AI-generated and the characters used live-action voice acting, and the 6-person figure is not the headcount for the entire project. The work was released on Steam as a buy-to-play title priced at RMB29. According to Gamalytic estimates cited in materials from October 14, cumulative sales exceeded 10,000 copies, with an 89% positive review rate and an average playtime of 7.1 hours. Sales and playtime preliminarily indicate that users are willing to pay for story experiences carried by AI visuals. *The Little Prince: Journey of the Stars* demonstrates a path for individual creators to transform a text story into an explorable 3D space. The author Sac self-reported completing the creation in 16 days, using Opus 5.5 to write core code and operate tools, combining Tripo to generate assets, and then using Blender and Unity to organize scenes and integrate characters and interaction. The creator's production capability also extends from generating visuals to connecting assets, engines, and operating logic. *Bu Wen Fan Chen* provides a paid sample of a major company combining AI content with game mechanics. Developed and published by Zhaoxiguangnian, the title launched in early access on Steam on September 23, combining AI visuals and NPC dialogue with cultivation, exploration, and other gameplay; a development team announcement on October 13 disclosed that sales had exceeded 260,000 copies. Representative work visuals: branching video and explorable 3D scenes From the above cases, AI has mainly changed the production methods for visuals, assets, and code, while story organization, gameplay design, and experience polishing still determine whether a work can attract users. China Securities Co.,Ltd. believes that more attention should be paid to teams capable of continuously delivering high-quality content: those that can both integrate multimodal tools into production workflows and organize scripts, 3D assets, and interaction mechanisms into complete products. Game companies with engine development, 3D production, and publishing experience are expected to expand their participation in this process. 4. Channel side: Steam handles independent supply, and the ByteDance ecosystem is expected to open up new traffic Steam provides small and medium-sized creators with distribution and feedback mechanisms aimed at global players. The store, tags, wishlists, user reviews, and personalized recommendations give vertical themes a chance to find target users, and works can build reputation through demo feedback and continuous updates. China Securities Co.,Ltd. believes that after AI lowers production costs, such distribution entry points are expected to handle more long-tail supply; however, exposure still depends on player response and product appeal, and content providers still need to do well in positioning, store operations, and early user accumulation. The increment from the ByteDance ecosystem lies in directing mass content traffic toward interactive consumption. This cooperation solicitation shows that the platform has begun to organize the supply of interactive dramas and film-games; if tools, IP, finished-product distribution, and recommendation mechanisms are further connected, interactive content is expected to become a new source of content and traffic for the ByteDance ecosystem. China Securities Co.,Ltd. believes that in the future there is a possibility of forming an independent entry point or platform similar to Hongguo that aggregates a large amount of interactive content.