Hello! I'm your financial analyst friend. Today, we're going to discuss a report on the state of China's film and entertainment industry for the first half of 2026.
Let's start with the conclusion: The past six months haven't been easy for the film industry, but it's not completely stagnant either. Although most companies are losing money, they're not sitting idle; they're all striving in two new directions: one is turning old stories into new products (IP development), and the other is using AI technology to create content (AI empowerment).
Now, I'll break down this complex financial report into simpler language to show you the real situation of these 20 listed companies.
1. Box Office Shrinks, Movie Companies Suffer Heavy Losses
If you've been to the cinema recently, you might have noticed fewer people. The numbers don't lie: in the first half of 2026, the total box office in mainland China was only 17.356 billion yuan, which is more than 40% less than last year, and the number of viewers also decreased by 34%. This has basically returned to the levels seen during the pandemic in 2022.
This has led to a harsh reality: Only the big movies are doing well, while smaller films are struggling to survive. Although movies like "Flying Life 3" and "A Letter to Grandma" were very popular, earning 4.4 billion yuan and over 2 billion yuan respectively, they absorbed almost all the market's revenue, leaving little space for other films.
This is reflected in the financial reports: 11 companies suffered losses.
- Bona Film lost the most money, although the amount of loss decreased by 84% compared to last year. This was mainly because they were more cautious and produced fewer films, not because business improved.
- Ruyi Film (formerly Wanda Film) had revenue of over 5 billion yuan but still lost 155 million yuan. Its cinema box office decreased by nearly 40%, and it could only rely on advertising revenue to stay afloat; all other businesses declined.
- Huanrui Century fared even worse. Although its revenue increased, its costs rose sharply (by 697%), doubling its losses. This shows that in a highly competitive content market, if your content isn't appealing, no amount of investment will make a difference.
In simple terms: The movie market is in a tough period. Unless you can create a phenomenon like "Nezha," most movie companies are struggling to survive by spending less money.
2. Drama Market Shrinks in Quantity but Improves in Quality; Short Videos Are Competing for Audience
The situation in the drama market isn't much better. Only 274 new long dramas were released online in the first half of the year, fewer than last year. Why? Because users' time is being taken up by short videos and micro-dramas.
Data shows that the average daily usage time for short videos has reached 129 minutes, surpassing that of long videos. This means people have less patience for 40-episode dramas and prefer short, fast-paced dramas with many twists.
In this context, drama companies face a dilemma:
- Rigid Costs: Actor and production costs are difficult to reduce.
- Long Revenue Cycles: Dramas don't generate immediate revenue like movies; they require a long distribution period and are heavily affected by platform purchasing policies.
For example, Huace Film didn't lose money overall, but its revenue from drama production and distribution plummeted by 90%. It managed to stay afloat thanks to another business: computing power services (which can be understood as providing AI computing resources), whose revenue increased by 184%.
In simple terms: Traditional long dramas are being overshadowed by short videos and micro-dramas. Companies that stick to traditional large-scale, long-production methods will struggle to adapt to users' fragmented, fast-paced viewing habits.
3. IP Monetization: From Selling Rights to Selling Merchandise
In this report, only two companies achieved both revenue and profit growth: Ningmeng Film and Aofei Entertainment. What do they have in common? They both focus on IP (intellectual property) derivative development.
In the past, film companies made money by selling rights to TV stations or platforms, but that's no longer effective. The new approach is to maximize the value of an IP by developing it into various products such as toys, clothing, games, and even physical attractions.
- Aofei Entertainment is a typical example. It not only produces animations but also sells toys and baby products. In the first half of the year, it launched trendy products based on popular games like "Honor of Kings" and "Tian Guan Ci Fu," expanding its audience from children to young adults. Although part of its profit increase came from a one-time tax refund, its main business of selling toys is still profitable.
- Ningmeng Film focuses on globalizing its drama IPs. Its drama "Yaxi" was released in over 190 countries, and it also sells related merchandise. It even invested in a company specializing in IP commercialization, further tapping into the IP's value.
- Shanghai Film owns high-rated Chinese animated IPs like "Chinese Fantasy" and "Langlang Mountain Little Monster," generating 950 million yuan in sales through licensing.
However, there's a catch: Many companies talk about IP development but are still in the initial stages. For example, Hengdian Film has established a new company for IP development, but its derivative sales are still minimal and haven't become a significant source of revenue.
In simple terms: IP development is the future of the industry, but it requires technology. Some companies (like Aofei and Ningmeng) have already found success, while others (like Hengdian) are still in the process. To evaluate a company's IP strategy, look at whether it has its own IPs and whether it can continuously turn them into profitable products, rather than relying on a single hit.
4. AI Isn't a Panacea, but It's a Necessary Tool for Cost Reduction and Efficiency
Everyone in the film industry is talking about AI, as if not using it means falling behind. But we need to remember: AI is a tool, not a magic solution.
The benefits of AI are clear:
- Lowering Costs: Transforming a novel into an animation or drama used to be very expensive; now, AI helps medium-sized IPs be adapted at lower costs.
- Accelerating International Expansion: AI translation has greatly improved. Yuewen Group saw its revenue from foreign languages increase by 160% thanks to AI. It used to be costly to hire translators; now, AI can handle this in seconds, making it easier to expand content overseas.
- Content Production: Zhongwen Online has released over 1,200 AI-generated short dramas, and although most weren't successful, 10 of them attracted millions of views. This shows that AI helps companies quickly test different themes and find popular ones.
However, AI also has its limitations:
- Low Conversion Rates: Only 0.47% of AI-generated dramas become successful. This means out of 1,000 AI-generated dramas, only 4-5 might be successful. The quality of AI-generated content varies greatly, and many don't appeal to viewers.
- Limited Financial Impact: Many companies mention AI in their reports, but the actual revenue from AI is minimal. For example, Huanrui Century reported that AI-generated dramas accounted for less than 1% of its total revenue, and Ciwén Media stated that its AIGC platform is still under development and hasn't generated any revenue.
In simple terms: AI can help companies save money and speed up processes, especially in international expansion and short drama production. But don't expect it to immediately turn losses into profits. For now, AI is more of a supporting tool than a profit generator. Companies that rely on AI without tangible financial results should be cautious.
5. Final Conclusion: Strategy Matters More Than Execution
Putting these points together, we can make a judgment about the film and entertainment industry:
- The overall market is declining: The traditional markets for movies and long dramas are shrinking.
- Structural Opportunities Exist: Short videos, IP derivatives, and international content expansion are promising areas for growth.
- Differentiation is Increasing: Companies with strong IP management and efficient AI applications (like Aofei and Yuewen Online) are reducing losses or growing by expanding their audience and lowering costs.
- Companies That Rely on Single Hits or Traditional Models Will Continue to Lose Money: Those that still depend on hit movies or traditional drama distribution and are stuck in the conceptual stage of IP development will face further losses.
Advice for Investors:
If you follow this industry, don't just focus on the amount of talk about AI or IP; look at the company's cash flow and non-recurring gains and losses.
- If a company's profit increase comes mainly from tax refunds, asset sales, or investment income, its core business may not be strong.
- If a company's revenue is declining, but its AI and IP businesses are growing and generating revenue, it might be overcoming the current challenges.
In one sentence: The winter of the film industry hasn't passed, but spring is quietly emerging through IP and AI. Those who can turn IPs into sustainable products and use AI to reduce content costs will survive and thrive.