2024 marks a crucial year for the micro-series industry to enter its 2.0 era. According to data, 12,000 short drama-related enterprises were registered in mainland China in 2020. As of November 2024, the number of newly registered short drama enterprises in China has reached 16,100. In addition to the growth of short drama enterprises, the user base of short dramas is expanding even more rapidly. Statistics from the "China Micro-Series Industry Development White Paper (2024)" show that in just the first half of 2024, the scale of short drama users in China has reached 576 million, accounting for 52.4% of total internet users and surpassing the number of users in other online cultural and social platforms. In 2024, regions such as Beijing, Shanghai, Zhejiang, and Henan have introduced various support policies for micro-series, demonstrating the governments emphasis on this cultural industry. Therefore, we believe that micro-series will flourish even more in 2025 and attract more investors to enter the market.
Through keyword searches of "micro-series" in recent case studies over the past three years, the author has identified that at least 70% of disputes in this emerging format stem from "investment-related contractual conflicts", primarily involving failed returns or regulatory compliance issues. While both traditional film/TV industries and micro-series ventures face lucrative opportunities, investment failures remain common. By analyzing typical pitfalls and real-world cases of failed investments in micro-series, the author outlines key risk factors to help potential investors better prepare for entering this market in 2025.
First, project due diligence is the key before investment
Before investing, investors should consult professionals to verify the authenticity of the project they intend to invest in, avoiding scams that promise "low investment and high returns" for TV dramas. After confirming the projects feasibility, investigate the production team including directors and producers. Additionally, review the short dramas previously released by the production team to assess their professional expertise, credibility, and whether they possess the capability to successfully pass the review process and launch the project.
The contract shall be signed and the investment shall be paid only after sufficient due diligence on the project and the production team. Otherwise, if the invested party refuses to pay the agreed investment during the performance of the contract and finds problems, it will violate the contract and be suspected of breach of contract. In such case, not only will the investment dividend not be obtained, but also high liquidated damages will be paid.
Case 1:
Cao Moumou entered an investment and production contract for micro-series with a Beijing-based company, agreeing to invest 100,000 yuan to be paid in two installments to the companys account. Cao Moumou was required to pay a penalty if he failed to make the payment. After signing the contract, Cao Moumou paid 70,000 yuan as agreed, but refused to pay the remaining 30,000 yuan, citing the companys failure to pay employee salaries and alleged acts of dishonesty. The company subsequently filed a lawsuit demanding payment of the penalty. The court ultimately ruled that the investment contract between Cao Moumou and the company was valid. However, since Cao Moumou failed to fulfill his contractual obligations, he was deemed to have breached the contract and was ordered to pay the penalty.
2. The investment contract shall be clear, clear and unified to avoid conflicting clauses.
Investment contracts should be clearly defined and well-drafted, avoiding the practice of signing multiple separate agreements. It is advisable to engage professional legal experts for drafting. When multiple contracts are executed without expert oversight, they may not only involve different legal relationships but also contain conflicting terms. For instance, inconsistent jurisdictional clauses, conflicting breach-of-contract provisions, or ambiguous other stipulations could lead to differing interpretations of contractual terms. This often results in frequent disputes that cannot be resolved through a single lawsuit, increasing litigation costs while potentially yielding unsatisfactory outcomes.
Case 2:
On August 16,2022, the plaintiff Dongyang Company entered a "Production Commissioning Agreement" with the defendant Jiaxing Company for the web series "The Ruffian in the Old Street". On September 30, the plaintiff submitted the complete episodes of "The Ruffian in the Old Street" via WeChat group and mailed the final payment invoice on October 4. On October 18,2022, the plaintiff provided revised versions of the full series, but the defendant failed to respond with any feedback. The defendant subsequently uploaded and screened the series on Youku Videos Jiuzhou Weiyi Theater platform on October 19,2022, yet still did not settle the outstanding balance.
The defendant argued that the plaintiff failed to the micro-series according to its requirements. The "Investment Agreement with Dongyang Yixiang Tiankai Pictures Co., Ltd.", "Framework Agreement for Online Micro-Series Production", and "Production Contract for Online Micro-Series The Rogue in the Old Street " signed by both parties constitute separate legal relationships. The defendant contended that the plaintiff breached the overall cooperation agreement, which consequently led to its failure to pay the final installment for the involved agreements.
The court did not accept the defendants defense, and ordered him to pay the balance, liquidated damages and legal fees.
3. The key contents of the investment contract shall be clearly agreed, including the nature of the contract, breach of contract clauses, rights and obligations clauses, etc., as follows:
1. The nature of the investment contract should be clearly agreed: is it a t production or partnership? Is it a pure investment or cooperative shooting? Is it an investment or a loan? If the nature of the investment contract is not clear, the two parties may have different interpretations, which may lead to different litigation results in the face of disputes.
2. The breach of contract clause shall specify: for example, how to bear the liability for breach of contract if the production team fails to complete the filming? How to bear the liability for breach of contract if the short drama cannot be reviewed, filed and launched online?
The author particularly emphasizes that the review and filing process should be explicitly stipulated as a primary clause. Given the regulatory measures implemented following the explosive growth of micro-series over the past two years, obtaining proper approval has become essential. Investors must therefore pay close attention to these provisions to ensure smooth production launches. Additionally, clauses defining the production teams liability for non-compliance should be included to address potential legal risks.
Case 3:
On December 22,2021, the plaintiff Dong Moumou (Party B) and the defendant Mengxin Film & Television Company (Party A) entered a "Short Drama Cooperation Agreement for I Cant See You Love ". The Party A section was signed by Zong Moumou, while the Party B section was signed by the plaintiff. The contract stipulated: (5) Party A shall produce the film according to Grade A rating standards. If the films rating is downgraded due to Party As production issues, Party A shall bear full responsibility.... Subsequently, as the film failed to obtain filing approval, the plaintiff requested to terminate the contract and refund the investment.
The defendant argued that the plaintiff and defendant were engaged in a t production collaboration. As the project initiator, the plaintiff provided the script and completed planning and filing procedures, while Mengxin Film & Television Company undertook the filming and production work. Party A commenced production after receiving production fees from Party B. The defendant claimed they had completed all required tasks and therefore should not refund the corresponding fees. They further denied that Jing Run, a key project figure, was their employee, asserting that Jing Runs statements could not represent the defendants position.
After deliberation, the court held that: First, although the contract stipulates that the short drama in question was co-produced by both parties, other clauses indicate that defendant Mengxin Film & Television Company solely handled all production, filming, and distribution activities, with the plaintiff merely serving as a financial contributor. Second, while Mengxin Film & Television Company argued that third-party Jing Run, not an employee of the defendant, could not represent the companys position, chat records from the plaintiff-defendant work group revealed that Jing Run had uploaded the budget and investment agreement for the short drama "I Cant See You Love Me" to the group. Jing Run also provided explanations regarding specific clauses in the shooting budget and cooperation terms. Defendant Zong Moumous replies in the group— "Yes, yes" —demonstrate that Jing Runs statements were approved by Mengxin Film & Television Company. Third, as a professional film production company, Mengxin Film & Television Company bears greater responsibility for reviewing the script ion and ensuring compliance with filing requirements. Fourth, the plaintiffs investment in the short drama was intended to generate revenue through video platform distribution. Therefore, the contract explicitly stipulates liability for production-related review failures and requires the defendant to produce the drama according to Grade A rating standards.
Finally, the court ruled that the defendant Mengxin Film and Television Company should return the investment of 588,000 yuan to the plaintiff, and bear the corresponding liability for breach of contract and liquidated damages.
4. The identity of participants in micro dramas shall be clarified
During domestic film and television production processes, all parties typically communicate through WeChat group chats. Investors generally do not proactively verify individual identities of participants, instead assuming them as production team members. However, many individuals in these groups lack formal employment relationships with film companies or production teams. In case of disputes, production crews or studios may deny the individuals identities, thereby invalidating their previously confirmed information and leading to unfavorable legal outcomes for investors. Therefore, its crucial to clearly identify all relevant personnel. If contractual terms fail to specify identities, investors should verify participants identities through direct inquiries in WeChat chat records to mitigate risks.
Case 4:
On June 18,2022, the Plaintiff and Defendant entered an "Online Micro-Series Investment and Production Agreement" (hereinafter referred to as the "Production Agreement"). The agreement stipulated that the Plaintiff would be responsible for producing the involved short series, including all related creative work, filming, post-production editing, and production tasks. The Defendant, as a co-investor, contributed an investment of 810,000 yuan. During the cooperation period, the Plaintiff fulfilled its production obligations under the agreement, and the Defendant had approved over 30 episodes of the finalized script. However, the Defendant failed to make any payments as agreed. The Defendants refusal to pay was justified by claiming that the Production Agreement was a partnership agreement with indefinite duration, allowing the Defendant to terminate it at any time. This decision was based on two factors: the departure of the Defendants former employee Tong Rui (a key collaborator) on June 30,2022, and pandemic-related disruptions that made continued collaboration unfeasible. The Defendant argued that continuing the agreement would result in mutual losses due to the Plaintiffs breach of contract, thus rendering compensation unnecessary.
The court held that although the defendant argued the investment filming agreement constituted a partnership contract, the disputed documents title, the rights and obligations outlined in its provisions, and Article 1s clause stating "agreement to tly fund the filming project" all demonstrate that the parties were t investors rather than partners. Furthermore, the agreement failed to specify essential partnership terms including membership admission, withdrawal procedures, termination of partnership, and t liability for debts, thereby lacking the legal characteristics of a partnership contract. Article 17 explicitly states: "Nothing herein shall constitute or be deemed to constitute a partnership between the parties...," which unequivocally denies their partnership relationship. Consequently, the defendant holds no right to terminate the agreement at will.
The above are the common legal risks of micro short drama investors. The author would to remind investors who want to enter micro short drama again that there are risks in micro short drama investment, do not blindly enter the market, and sign an investment contract with professional supervision to avoid investment failure and loss of money.
