Minimum Guarantee Canceled, Hongguo (红果) Suspends Projects; Contractors Face "Food Shortage" and Work Stoppage

Sudden policy shift shutters production lines

It has been reported that Hongguo (红果) short dramas sent a mid‑February notice cancelling its guaranteed‑minimum (保底) cooperation with many third‑party producers, prompting multiple projects to be suspended and leaving numerous small and mid‑sized contractors effectively “out of food” and stopping work. Writers say scripts submitted before the Lunar New Year are still awaiting review and overall script pass‑rates have fallen sharply. Social media buzzed with claims that Hongguo would cut 90% of live‑action short drama projects, though it has been reported that Douyin Group (抖音集团) vice‑president Li Liang (李亮) posted on Weibo clarifying that Hongguo is “adjusting the guaranteed‑production mechanism, but will continue to strengthen investment in live‑action short dramas.”

From rapid scale to rapid retreat — how the model worked

Hongguo built scale quickly by offering three cooperation models — self‑produced, contracted (承制), and finished‑product purchases — with contracted productions historically supported by cash guarantees to underwrite production risk. It has been reported that guarantees could range into the tens of thousands of yuan (some parties cited 40k–50k RMB examples), enabling small producers to operate on thin margins. That model solved an early content‑supply crunch and helped Hongguo become a category leader, but insiders say it also encouraged cost‑cutting and homogenized, lower‑quality output as some producers chased guaranteed fees rather than creative value.

AI economics driving the pivot

Why the U‑turn? Reportedly, AI tools such as Seedance and 可灵 have lowered costs and compressed production cycles: a 120‑minute AI animated drama can reportedly be made for 100k–200k RMB in 2–3 weeks, versus roughly 1.5 million RMB and 1–2 months for a comparable live‑action short. It has been reported that Hongguo has already restructured incentives — in January it set tiered guarantees for AI‑assisted scripts (S+/S/A+/A) at 80k/60k/40k/20k RMB with permanent revenue‑sharing, and in February adjusted share coefficients and launched a dedicated AI manga/animation channel. Broader geopolitical forces also matter: Western export controls on advanced AI chips have accelerated domestic tool development and reshaped supply chains, making lower‑cost, locally‑developed AI production increasingly attractive.

Industry fallout and what comes next

The immediate fallout is real: several contract firms report frozen cashflows and paused shoots, and Chengdu‑based short‑drama company Zhongdu announced it will exit live‑action production and redeploy staff into AI roles and script development. Insiders predict AI content could account for 80–90% of supply, leaving live‑action as a smaller premium tier — but quality, platform curation and regulatory scrutiny remain unresolved. Who benefits? Big platforms and producers that can retool quickly. Who loses? Small contractors and creators dependent on guaranteed fees. The industry is in rapid re‑sorting — the next few quarters will show whether the AI pivot delivers sustainable viewer demand or simply reconfigures where the risk lands.