AI Revolutionizes China's Entertainment Landscape, Compressing Costs by Up to 95%
Artificial intelligence is revolutionizing China's entertainment landscape at an unprecedented pace. Goldman Sachs' latest research report finds that AI has compressed content production costs by an average of 80% to over 90%, with production cycles dramatically shortened.
In the first eight months of 2026, output of short and mini dramas expanded 13-fold compared to all of 2025, while new game releases (including mini-games) grew more than eightfold. However, not all sectors are benefiting equally from this growth, top-tier IP and distribution platforms are reaping the rewards, while production and execution layers face systematic compression.
Goldman Sachs estimates that AI can reduce production costs for animation, music, advertising videos, and short dramas by 80% to 95%, with complex interactive content such as games and long-form series seeing cost reductions of 30% to 70%. Furthermore, AI has increased content output speed by at least 5 to 10 times.
As AI-generated content quality improves, audience acceptance is rising rapidly. On Hongguo, a leading short drama platform, over 90% of series are already AI-generated. However, the infinite expansion of supply is creating new problems, user attention is becoming increasingly fragmented, and the difficulty for new IP to break through is rising.
Goldman Sachs categorizes AI's impact on the entertainment industry value chain into three layers: IP divergence, production compression, and platform gains. Top-tier evergreen IP is positioned to leverage AI to extend its lifecycle, while long-tail IP faces greater differentiation pressure and new IP finds it increasingly difficult to gain user recognition in a highly fragmented attention environment.
The report highlights the benefits of online gaming as the most resilient vertical within the entertainment sector. Gaming stocks such as Tencent Holdings (00700.HK) and NetEase (09999.HK) are leading AI adoption, with companies like XD Inc. (02400.HK) poised to benefit from the expansion in game supply.