Q2 2026 China Literature Ltd Earnings Call

August 11, 2026

Operator 2: Good evening, ladies and gentlemen. Welcome to China Literature's 2026 Interim Results Conference Call. A copy of the interim results announcement can be found and downloaded from its investor relations website, ir.yuewen.com. At this time, all lines have been placed on listen-only mode, and the floor will be open for questions following today's presentation. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to your host today, Ms. Maggie Zhou, Head of Capital Markets and Investor Relations at China Literature. Maggie, please go ahead.

Operator: Good evening, ladies and gentlemen. Welcome to China Literature's 2026 Interim Results Conference Call. A copy of the interim results announcement can be found and downloaded from its investor relations website, ir.yuewen.com. At this time, all lines have been placed on listen-only mode, and the floor will be open for questions following today's presentation. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to your host today, Ms. Maggie Zhou, Head of Capital Markets and Investor Relations at China Literature. Maggie, please go ahead.

Speaker #1: At this time, all lines have been placed on listen-only mode, and the floor will be open for questions following today's presentation. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad.

Speaker #1: I would now like to hand the conference over to your host today, Ms. Maggie Zhou, Head of Capital Markets and Investor Relations at China Literature.

Speaker #1: Maggie, please go ahead.

Speaker #2: Thank you, Operator. Ladies and gentlemen, welcome to our 2026 interim results conference call. Joining us today on the call are Mr. Xiaonan Ho, our CEO, and Ms. Jackie Hsu, our VP of Finance.

Maggie Zhou: Thank you, operator. Ladies and gentlemen, welcome to our 2026 Interim Results Conference Call. Joining us today on the call are Mr. Hou Xiaonan, our CEO, and Mr. Jackie Xu, our VP of Finance. For today's call, Mr. Hou will discuss the company's strategies and business highlights, and Mr. Xu will go through the financials. We will then open the call for questions. Before we begin, I would also like to remind you that management comments during the call will include forward-looking statements that are based on our current expectations. All statements other than statements of historical facts during the conference call are forward-looking statements, which are subject to a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of sources outside of the company.

Speaker #2: For today's call, Ms. Ho will discuss the company's strategies in business highlights and Ms. Hsu will go through the financials. We will then open the call for questions.

Speaker #2: Before we begin, I would also like to remind you that management comments during the call will include forward-looking statements that are based on our current expectations.

Speaker #2: All statements other than statements of historical fact made during the conference call are forward-looking statements, which are subject to a number of risks and uncertainties, and may not be realized in the future for various reasons.

Speaker #2: Information about general market conditions is coming from a variety of sources outside of the company. These presentations also contain some unaudited, non-FX financial measures that should be considered in addition to, but not as a substitute for, the measures of the company's financial performance prepared in accordance with IFRS.

Maggie Zhou: This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for, the measures of the company's financial performance prepared in accordance with IFRS. Please take a minute to read the risk factors and non-IFRS financial discussions in China Literature's 2026 interim results earnings release. I'll now turn the call over to our Chief Executive Officer, Mr. Hou Xiaonan.

Speaker #2: So, please do take a minute to read the risk factors and non-FX financial discussions in China Literature's 2026 interim results earnings release. I will now turn the call over to our Chief Executive Officer, Mr. Xiaonan Ho.

Hou Xiaonan: Thank you for joining us on today's earnings conference call. Before we go over our financial results, let me share a few thoughts on the industry landscape and our strategic priorities. Over the past year, we have had multiple in-depth discussions about where the content industry is headed. In particular, two structural shifts stand out. One is the continued rise of fragmented content consumption. The other is the revolutionary reshaping of the entire content ecosystem by AI. In response to these trends, we turned our insights into action and made decisive strategic moves. We started with live-action short dramas, kept up with the technology wave, and finally incubated a brand-new content format, the AI-animated drama, by integrating AI deeply into the creative process.

Speaker #3: Thank you for joining us on today's earnings conference call. Before we go over our financial results, let me share a few thoughts on the industry landscape and our strategic priorities.

Speaker #3: Over the past year, we have had multiple in-depth discussions about where the content industry is headed. In particular, two structural shifts stand out. One is the continued rise of fragmented content consumption.

Speaker #3: The other is the revolutionary reshaping of the entire content ecosystem by AI. In response to these trends, we turned our insights into action and made decisive strategic moves.

Speaker #3: We started with live-action short dramas, kept up with the technology wave, and finally incubated a brand-new content format: AI-animated drama by integrating AI deeply into the creative process.

Speaker #3: In the first half of this year, our short drama and AI-animated drama businesses delivered exceptional growth. With combined revenues exceeding RMB 430 million, over three times that of the same period last year, accounting for 27% of our IP operation revenues, and serving as a key contributor to the 42% year-on-year increase in IP operation revenues.

Hou Xiaonan: In H1 of this year, our short drama and AI-animated drama businesses delivered exceptional growth, with combined revenues exceeding RMB430 million, over 3 times that of the same period last year, accounting for 27% of our IP operation revenues and serving as a key contributor to the 42% year-on-year increase in IP operation revenues. More specifically, our short drama business delivered a steady stream of hit titles in H1 2026, achieving a blockbuster rate 4 times the market average while maintaining a balance of male and female-oriented dramas across our content portfolio. We also built a scalable approach to developing blockbuster IP into serialized short dramas, validating the potential of serialized IP operations in the short drama sector.

Speaker #3: More specifically, our short drama business delivered a steady stream of hit titles in the first half of 2026, achieving a blockbuster rate four times the market average, while maintaining a balance of male- and female-oriented genres across our content portfolio.

Speaker #3: We also built a scalable approach to developing blockbuster IPs into serialized short dramas. Validating the potential of serialized IP operations in the short drama sector.

Speaker #3: Meanwhile, leveraging the AI technology, we adapted over 1,000 online literature titles into AI-animated dramas. Among which, 46 titles surpassed 100 million views each, 367 titles exceeded 10 million views each, and the proportion of titles reaching 1 million views was five times the industry average.

Hou Xiaonan: Meanwhile, leveraging the AI technology, we adapted over 1,000 online literature titles into AI-animated dramas, among which 46 titles surpassed 100 million views each, 367 titles exceeded 10 million views each, and the proportion of titles reaching 1 million views was 5 times the industry average. In our view, these high hit rates reflect not only our ability to anticipate industry trends, but also the strength of our premium IP library and the deep creative ecosystem we have built across the IP value chain over the years. AI tools are undoubtedly ushering content supply into a new era defined by greater scale and speed, but this doesn't diminish the value of content. On the contrary, it reinforces the scarcity and value of premium IP. Visual content has become easier to produce, but only stories with cross-generational appeal that truly touch people's hearts will remain the foundation for sustainable monetization.

Speaker #3: In our view, these high hit rates reflect not only our ability to anticipate industry trends, but also the strength of our premium IP library and the deep creative ecosystem we have built across the IP value chain over the years.

Speaker #3: AI tools are undoubtedly ushering content supply into a new era defined by greater scale and speed. But this doesn't diminish the value of content.

Speaker #3: On the contrary, it reinforces the scarcity and value of premium IP. Visual content has become easier to produce. But only stories with cross-generational appeal that truly touch people's hearts will remain the foundation for sustainable monetization.

Speaker #3: Powered by our IP plus AI engine, we harness the synergy between technology and creativity to accelerate the high-quality transformation of stories from texts to visuals.

Hou Xiaonan: Powered by our IP plus AI engine, we harness the synergy between technology and creativity to accelerate the high-quality transformation of stories from text to visuals, opening up the next decade of IP value creation. That mission guides us as we look into the future. With that, let me now walk you through our operating highlights for H1 2026. First, in IP incubation, our online reading ecosystem continues to serve as a super reservoir of premium content. In H1 2026, our platform attracted 240,000 new writers, generated over 460,000 online literature works, and added more than 30 billion characters, securing a strong source of content supply. Emerging generation writers are gaining momentum. Among newly signed writers who generated more than RMB1 million in revenue during H1, those under 30 accounted for 57%, representing a 49% increase year-over-year. Promising works continue to emerge.

Speaker #3: Opening up the next decade of IP value creation—that mission guides us as we look into the future. With that, let me now walk you through our operating highlights for the first half of 2026.

Speaker #3: First, in IP incubation, our online reading ecosystem continues to serve as a super reservoir of premium content. In the first half of 2026, our platform attracted 240,000 new writers, generated over 460,000 online literature works, and added more than 30 billion characters, securing a strong source of content supply.

Speaker #3: Emerging generation writers are gaining momentum. Among newly signed writers who generated more than RMB 1 million in revenue during the first half, those under 30 accounted for 57%, representing a 49% increase year over year.

Speaker #3: Promising walks continue to emerge. Unseeded, the number of titles receiving user collections rose 37% year over year. While the number of titles receiving monthly tickets grew 26% year over year.

Hou Xiaonan: On Qidian, the number of titles receiving user collections rose 37% year-over-year, while the number of titles receiving monthly tickets grew 26% year-over-year. With the return of a series of top-tier platinum and phenomenal writers, two new titles attracted more than 200,000 readers each on their first day of launch, setting new records for debut performance on the platform. Meanwhile, we accelerated the transformation from text to visuals. In H1 2026, while solidifying our traditional strengths in film, drama series, and animation, we also stepped up our efforts in emerging segments such as short dramas and AI-animated drama, resulting in exceptional growth.

Speaker #3: With the return of a series of top-tier platinum and phenomenal writers, two new titles attracted more than 200,000 readers each on their first day of launch.

Speaker #3: Setting new records for debut performance on the platform. Meanwhile, we accelerated the transformation from text to visuals. In the first half of 2026, while solidifying our traditional strengths in film, drama series, and animation, we also stepped up our efforts in emerging segments such as short dramas and AI-animated drama, resulting in exceptional growth.

Speaker #3: In the premium drama series and film segment, several drama series adapted from China Literature's IPs premiered this year, including top-tier titles such as Blossoms of Power, Baihua Sha, The Air, Jia Ye, and Ashes to Crown, Qiao O Chu.

Hou Xiaonan: In the premium drama series and film segment, several drama series adapted from China Literature's IPs premiered this year, including top-tier titles such as "Blossoms of Power: Baihua Sha," "The Heir: Jiaye," and "Ashes to Crown: Chao Chu." They all ranked among the top titles on platform popularity charts during their respective broadcasting periods. Meanwhile, we also released our self-produced drama series, "No Ping, No Gain: Yan Xiao You Wei," "The Devil Between Us: Chu Le," and "Lady Liberty: Ai Qing Miao Sheng Hua." These titles broke new ground across genres such as urban and crime dramas, winning both critical acclaim and strong audience traction.

Speaker #3: They all ranked among the top titles on platform popularity charts during their respective broadcasting periods. Meanwhile, we also released our self-produced drama series No Ping, No Ging, Yan Xiao You Wei, The Devil Between Us, Chu Le, and Lady Liberty, 18 Male Shen Hua.

Speaker #3: These titles broke new ground across genres such as urban and crime dramas, winning both critical acclaim and strong audience traction. In the animation segment, we released sequels of classic animated titles including Battle Through the Heavens, Do Po Tang Qiong, The Outcast, Yi Ren Zhi Xia, Almighty Mage, Qian Zhi Fa Shi, and Stellar Transformations, Xin Chen Bian.

Hou Xiaonan: In the animation segment, we released sequels of classic animated titles, including "Battle Through the Heavens: Dou Po Cang Qiong," "The Outcast: Yi Ren Zhi Xia," "Almighty Mage: Quan Zhi Fa Shi," and "Star Transformations: Xing Chen Bian." All these titles ranked among the top titles on platform popularity charts during their respective broadcasting periods. Among them, "The Outcast: Yi Ren Zhi Xia" achieved a popularity index of over 21,800 on Tencent Video, making it the most popular 2D animated series on the platform in the past three years. According to Enlightent, since the start of this year, eight out of the top 10 animation series by cumulative views across all platforms were adapted from China Literature's IPs, further demonstrating our market influence in animation content. In the short drama and AI animated drama segment, as mentioned earlier, we achieved major breakthroughs.

Speaker #3: All these titles ranked among the top titles on platform popularity charts during their respective broadcasting periods. Among them, The Outcast (Yi Ren Zhi Xia) achieved a popularity index of over 2,108,000 on Tencent Video, making it the most popular 2D animated series on the platform in the past three years.

Speaker #3: According to Enlightened, since the start of this year, 8 out of the top 10 animation series' cumulative views across all platforms were adapted from China Literature's IPs.

Speaker #3: Further demonstrating our market influence in animation content, in the short drama and AI-animated drama segment, as mentioned earlier, we achieved major breakthroughs. In the first half of 2026, we launched over 90 short dramas, with many breakout hits.

Hou Xiaonan: In H1 2026, we launched over 90 short dramas with many breakout hits. In male-oriented genres, "The Invisible Bodyguard: Yin Shen Shi Wei" was a blockbuster, with a popularity index exceeding 100 million and total views across all platforms surpassing 5 billion. In female-oriented genres, sequels of our original "Sweet Life: Tian Qi" IP performed strongly and setting a benchmark for commercialization. In the AI animated drama segment, our top-tier title, "Three Thousand Shelters: San Qian Bi Hu," surpassed 3 billion views across all platforms, driving the original novel into the top 10 of the best-seller ranking on Qidian. We also explored opportunities to develop premium AI animated drama platforms, launching Qidian Theater, Qidian Juchang, and ToonScroll in China and overseas respectively. All these achievements were driven by China Literature's extensive IP library, strong creator ecosystem, and robust capabilities in IP development across the industry chain.

Speaker #3: In male-oriented genres, The Invisible Bodyguard, Ying Shen Shi Wei, was a blockbuster. With a popularity index exceeding 100 million, and total views across all platforms surpassing 5 billion.

Speaker #3: In female-oriented genres, sequels of our original 'Sweet Wife, Qian Xi' IP performed strongly and set a benchmark for commercialization. In the AI-animated drama segment, our top-tier title '3,000 Shares' also performed well.

Speaker #3: San Tian Bi Hu surpassed 3 billion views across all platforms, driving the original novel into the top 10 of the best-seller ranking on CDN.

Speaker #3: We also explored opportunities to develop premium AI-animated drama platforms, launching CDN Theater, CDN剧场, and Toons Group in China and overseas, respectively. All these achievements were driven by China Literature's extensive IP library, strong creator ecosystem, and robust capabilities in IP development across the industry chain.

Speaker #3: Next, let me turn to IP commercialization. In the first half of 2026, our IP merchandise business continued to maintain rapid growth, with GMV reaching RMB 780 million, representing year-over-year growth of more than 60%.

Hou Xiaonan: Next, let me turn to IP commercialization. In H1 2026, our IP merchandise business continued to maintain rapid growth, with GMV reaching CNY 780 million, representing a year-over-year growth of more than 60%. This growth was driven by our continued enhancement across four core areas: product, channel, operation, and ecosystem. On the product front, we strengthened our presence in the light and soft merchandise category, characterized by high-frequency purchases and strong repeat purchase rates, while extending into new categories such as plush toys, lifestyle products, and precious metals. Our design excellence and supply chain efficiency enabled us to deliver a steady stream of high-quality products, positioning Yuewen Haowu as one of the leading brands in China's anime merchandise market. On the channel front, we strengthened our self-operated online sales network, including mini-programs, live streaming rooms, and flagship e-commerce stores.

Speaker #3: This growth was driven by our continued enhancement across four core areas: product, channel, operation, and ecosystem. On the product front, we strengthened our presence in the light and soft merchandise category, characterized by high-frequency purchases and strong repeat purchase rates.

Speaker #3: While expanding into new categories such as plush toys, lifestyle products, and precious metals, our design excellence and supply chain efficiency enabled us to deliver a steady stream of high-quality products.

Speaker #3: Positioning viewing goods as one of the leading brands in China's anime merchandise markets. On the channel front, we strengthened our self-operated online sales network, including mini programs like streaming rooms and flagship e-commerce stores.

Speaker #3: We also optimized our offline store network and deepened collaboration with our channel partners. These efforts led to improvements in both channel profitability and brand control.

Hou Xiaonan: We also optimized our offline store network and deepened collaboration with our channel partners. These efforts led to improvements in both channel profitability and brand control. We also continued to strengthen our sales velocity and supply chain management, improving inventory turnover efficiency and turning sales growth into solid profit contribution. On the operation front, we launched campaigns around iconic IP characters, driving deeper fan engagement and stronger consumer conversion. During H1, we organized the Glory Pilgrimage pop-up event in four cities to celebrate the birthday of Ye Xiu, the leading character of The King's Avatar. We also launched The Outcast Boy Group, bringing the IP to a broader audience through idol style marketing and deepening the emotional connection between the IP and users. On the ecosystem front, we accelerated the expansion of our overseas channels.

Speaker #3: We also continued to strengthen our sales velocity and supply chain management, improving inventory turnover efficiency and turning sales growth into solid profit contribution. On the operational front, we launched campaigns around iconic IP characters, driving deeper fan engagement and stronger consumer conversion.

Speaker #3: During the first half, we organized the Glory Pilgrimage (荣光巡礼) pop-up event in four cities to celebrate the birthday of Ye Xu, the leading character of The King's Avatar.

Speaker #3: Qian Zhi Gao Shou. We also launched The Outcast boy group, Yi Ren Nan Tuan, bringing the IP to a broader audience through idol-style marketing and deepening the emotional connection between the IP and users.

Speaker #3: On the ecosystem front, we accelerated the expansion of our overseas channels together with our partners, we opened our first global collectible toy concept store in Singapore, while selective products on the overseas online store for Lord of the Mysteries, Guimi Zhuzhu, sold out shortly after launch.

Hou Xiaonan: Together with our partners, we opened our first global collectible toy concept store in Singapore, while selected products on the overseas online store for Lord of the Mysteries sold out shortly after launch. The popularity of our hit merchandise further amplified the appeal of our IPs, driving users back to our content ecosystem, spending on while reading animation and drama series. Now, let me share an update on our progress in AI. At China Literature, AI is not confined to a single application. We have deeply integrated it into every stage of the content creation journey, from the spark of inspiration to user reach around the world. Recently, we launched the Buddy series of AI agents purposely built for the creative content industry, and upgraded three core products, NovelBuddy, DramaBuddy, and IPBuddy to provide content creators and operators with a comprehensive suite of AI-powered tools.

Speaker #3: The popularity of our hit merchandise further amplified the appeal of our IPs, driving users back to our content ecosystem spanning online reading, animation, and drama series.

Speaker #3: Now, let me share an update on our progress in AI. At China Literature, AI is not confined to a single application. We have deeply integrated it into every stage of the content creation journey, from the spark of inspiration to user reach around the world.

Speaker #3: Recently, we launched the Buddy series of AI agents, purposely built for the great ACF content industry. An upgraded three-core product: Noble Buddy, 作家助手, Drama Buddy, 漫剧助手, and IP Buddy, y, 版权助手, to provide content creators an operators with the comprehensive suite of AI-powered tools.

Hou Xiaonan: NovelBuddy is designed for online literature creators. In addition to AI-assisted writing support, it also provides copyright protection and anti-plagiarism services, helping safeguard creators' rights. DramaBuddy focuses on AI-animated drama production, covering the entire process, including creative ideation, content production, and project management, enabling the scalable production of premium AI-animated dramas. IPBuddy serves as the all-seeing eye of our in-house copyright, enabling the value assessment of a title within minutes and greatly improving the efficiency of selecting IP for adaptation and commercialization. Meanwhile, AI has also accelerated our global expansion. As of H1 2026, more than 30,000 AI-translated works were available on the WebNovel platform, contributing 40% of the platform's novel revenue during H1 of the year and enabling Chinese stories to reach global multilingual audiences more efficiently. We remain firmly convinced of the transformative power of IP and AI.

Speaker #3: Noble Buddy is designed for online literature creators in addition to AI-assisted writing support. It also provides copyright protection and anti-plagiarism services. Helping safeguard creators' rights.

Speaker #3: Drama Buddy focuses on AI-animated drama production. Covering the entire process, including creative ideation, content production, and project management, enabling the scalable production of premium AI-animated dramas.

Speaker #3: IP Buddy serves as the all-seeing eye of our in-house copyright team, enabling the value assessment of a title within minutes and greatly improving the efficiency of selecting IPs for adaptation and commercialization.

Speaker #3: Meanwhile, AI has also accelerated our global expansion. As of the first half of 2026, more than 30,000 AI-translated works were available on the RAP Noble platform, contributing 40% of the platform's Noble revenue during the first half of the year and enabling Chinese stories to reach global multilingual audiences more efficiently.

Speaker #3: We remain firmly convinced of the transformative power of IP and AI. Over the past two decades, the internet has lowered the barriers to literary creation and paved the way for China Literature’s growth into the company it is today.

Hou Xiaonan: Over the past two decades, the internet lowered the barriers to literary creation and paved the way for China Literature's growth into the company it is today. We believe that over the next two decades, AI will raise the ceiling for creators and drive a substantial value enhancement of the entire content ecosystem. Deeply integrating AI into the creative process to drive growth is a key strategic priority for our future. We see AI as an amplifier of IP values with the power to make great stories reach their true, full potential. We also recognize that the more capable AI becomes, the scarcer and more valuable original human creativity will be. That is why China Literature will continue to strengthen its support for original creators, ensuring that technology empowers creativity and that great stories thrive for generations to come. This concludes my remarks.

Speaker #3: We believe that over the next two decades, AI will raise the ceiling for creators and drive a substantial value enhancement of the entire content ecosystem.

Speaker #3: Deeply integrating AI into the creative process to drive growth is a key strategic priority for our future. We see AI as an amplifier of IP value, with the power to make great stories reach their true full potential.

Speaker #3: We also recognize that the more capable AI becomes, the faster and more valuable original human creativity will be. That is why China Literature will continue to strengthen its support for original creators, ensuring that technology empowers creativity and that great stories thrive for generations to come.

Speaker #3: This concludes my remarks. Now, I'd like to invite Ms. Xu to present our financial performance. Thank you.

Hou Xiaonan: Now I'd like to invite Mr. Xu to present our financial performance. Thank you.

Speaker #1: Thank you, Mr. Ho. Hello, everyone. In the first half of 2026, our total revenues increased by 10.7% year over year to RMB 3.53 billion.

Jackie Xu: Thank you, Mr. Hou. Hello, everyone. In H1 2026, our total revenues increased by 10.7% year-over-year to RMB3.53 billion. Let's start with our online business. Online business revenues were RMB1.84 billion compared with RMB1.99 billion in H1 2025, mainly due to competitive pressure, which led to increased proportion of lower monetizing free content and the shifted content distribution from online reading to short dramas and AI-animated dramas on our self-operated products within the Weixin ecosystem. In terms of operating metrics, our total average MAUs were 134.1 million compared with 141.3 million in H1 2025. The decline was mainly due to our ongoing shift of core content distribution to our own platform products, leading to a continuous drop in MAUs on third-party channels as user activity fell.

Speaker #1: Let's start with our online business. Online business revenues were RMB 1.84 billion, compared with RMB 1.99 billion in the first half of 2025, mainly due to competitive pressure, which led to an increased proportion of lower-monetizing free-to-read content and shifted content distribution from online reading to short dramas and AI-animated dramas.

Speaker #1: On our self-operated products, reading duration ecosystem in terms of operating metrics, our total average MAUs were 134.1 million. Compared with 141.3 million in the first half of 2025, the decline was mainly due to our ongoing shift of core content distribution to our own platform products.

Speaker #1: This led to a continued drop in MAUs on Tencent channels as user activity fell. Average MPUs were 8.2 million, compared with 9.2 million in the first half of 2025, mainly because we distributed more free content on our self-owned platform products.

Jackie Xu: Average MPUs were 8.2 million, compared with 9.2 million in H1 2025, mainly because we distributed more free content on our self-owned platform products. Monthly ARPU increased 4.5% to RMB32.7, reflecting a mixed effect as lower ARPU users shifted to free content during H1 2026. Now turning to IP operations and other businesses. In H1 2026, revenue from IP operations and others increased by 14.3% year-over-year to RMB1.69 billion. In this segment, revenue from IP operations increased by 41.9% year-over-year to RMB1.61 billion, primarily driven by rapid growth across multiple business lines, including short dramas, AI-animated dramas, TV and web series, and IP merchandise products. In particular, revenue from short dramas and AI-animated dramas exceeded RMB430 million, up 2.3 times year-over-year.

Speaker #1: Monthly output increased 4.5% to 32.7 RMB. Reflecting a mixed effect as lower output users shifting to free content during the first half of 2026.

Speaker #1: Now turning to IP operations and other businesses, in the first half of 2026, revenues from IP operations and others increased by 14.3% year over year, to 1.69 billion RMB.

Speaker #1: We did this segment. Revenues from IP operations increased by 41.9% year over year to RMB 1.61 billion, primarily driven by rapid growth across multiple business lines, including short dramas, AI-limited dramas, TV and web series, and IP merchandise products.

Speaker #1: In particular, revenues from short dramas and AI-limited dramas exceeded RMB 430 million, up 2.3 times year over year. This accounted for approximately 27% of IP operations revenues, and has become a new growth engine for our IP business.

Jackie Xu: This accounted for approximately 27% of IP operations revenue and has become a new growth engine for our IP businesses. Our IP merchandise business also maintains strong growth momentum, with GMV increasing over 60% year-over-year to RMB780 million. Revenue from the others category, mainly generated by sales of physical books, increased by 14.4% year-over-year to RMB77 million. Now let's look at costs and expenses. In H1 2026, our cost per revenue increased by 10.2% year-over-year to RMB1.74 billion, primarily driven by higher production costs for short dramas, AI-animated dramas, and TV and web series, which rose in line with revenue growth as more content was released during the period. As a result of the foregoing, our gross profit increased by 11.1% year-over-year to RMB1.79 billion. Gross margin was up from 50.5% to 50.7% year-over-year.

Speaker #1: Our IP merchandise business also maintains strong growth momentum. With GMV increasing over 60% year over year, to 718 million RMB. Revenues from the other category, mainly generated by sales of fifth books, increased by 14.4% year over year, to 77 million RMB.

Speaker #1: Now let's look at costs and expenses. In the first half of 2026, our cost per revenues increased by 10.2% year over year, to 1.74 billion RMB.

Speaker #1: Primarily driven by higher production costs for short dramas, AI-limited dramas, and TV and web series, which rose in line with revenue growth as more content was released.

Speaker #1: During the period, as a result of the foregoing, our gross profit increased by 11.1% year over year to RMB 1.79 billion. Gross margin was up from 50.5% to 50.7% year over year.

Speaker #1: Our selling and marketing expenses increased by 9.6% year over year, to RMB 1.01 billion, mainly driven by higher marketing and promotional spending to support the expansion of our IP businesses.

Jackie Xu: Our selling and marketing expenses increased by 9.6% year-over-year to RMB1.01 billion, mainly driven by higher marketing and promotional spending to support the expansion of our IP businesses. As a percentage of revenue, our selling and marketing expenses decreased from 28.9% to 28.6% year-over-year. Our G&A expenses increased by 15.5% year-over-year to RMB560 million, reflecting higher personnel and administrative expenses related to the scaling of IP businesses. As a percentage of revenue, our G&A expenses increased from 15.2% to 15.9% year-over-year. Our net other losses were RMB25 million, compared with net other gains of RMB523 million in the prior period.

Speaker #1: As a percentage of revenues, our selling and marketing expenses decreased from 28.9% to 28.6% year over year. Our G&A expenses increased by 15.5% year over year, to RMB 560 million.

Speaker #1: Reflecting higher personal and administrative expenses related to scaling our IP businesses, as a percentage of revenues, our G&A expenses increased from 15.2% to 15.9% year over year. Our net other losses were RMB 25 million, compared with net other gains of RMB 583 million in the prior period.

Speaker #1: The change was mainly due to RMB 134 million in late payment tax surcharges incurred by a subsidiary of the company during the first half of 2026.

Jackie Xu: The change was mainly due to RMB134 million in late payment tax surcharges incurred by a subsidiary of the company during H1 2026, compared with RMB598 million of net gains on the index total of NXT in H1 2025. As a result of the above factors, our operating profit was RMB271 million, compared with RMB826 million in H1 2025. On a non-IFRS basis, operating profit was RMB367.2 million, compared with RMB449 million in H1 2025. Our income tax expense increased from RMB150 million to RMB225 million, mainly due to RMB166 million in supplementary income tax payments by a subsidiary of the company. Together with related late payment tax surcharges of RMB134 million, which was recorded in our losses, these tax-related items reduced our profit by RMB300 million.

Speaker #1: Compared with RMB 598 million of net gains on the deemed disposal of an NST in the first half of 2025, as a result of the bar factors, our operating profit was RMB 271 million.

Speaker #1: Compared with RMB 876 million, in the first half of 2025, on a non-FS basis, operating profit was RMB 367.2 million. Compared with RMB 449 million in the first half of 2025, our income tax expense increased from RMB 115 million to RMB 225 million, mainly due to RMB 166 million in supplementary income tax payments by a subsidiary of the company.

Speaker #1: Together with related late payment tax surcharges of 134 million RMB, which was recorded in other losses, this tax-related items reduced our profit by 300 million RMB.

Speaker #1: Our net profit to shareholders was RMB 135 million. Compared with RMB 850 million in the first half of 2025, on a non-FS basis, our net profit to shareholders was RMB 259 million, to 28 sessions.

Jackie Xu: Our net profit to shareholders was RMB135 million, compared with RMB850 million in H1 2025. On a non-IFRS basis, our net profit to shareholders was RMB259 million. Q&A session.

Speaker #2: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two.

Operator 2: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Maggie Ye with CLSA. Please go ahead.

Operator: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Maggie Ye with CLSA. Please go ahead.

Speaker #2: If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Maggie Yee with CLSA. Please go ahead.

Speaker #3: Thank you. Maggie介绍我的提问。我的问题是关于短剧跟AI漫剧的。我们看到这一块在国内的市场正在快速增长。想请教管理层是否有对短剧加AI漫剧行业最新发展的趋势的解读，以及阅文在短剧跟AI漫剧相关的收入有多少的空间。此外随着阅文平台上AI漫剧规模逐步扩大，管理层预计AI漫剧对于传统的阅读内容的消费起到替代效应会持续多久？我来翻译一下。 We have witnessed a rapid growth of short drama and AI-powered animated drama in China so wondering what is management's latest view on the industry's long-term growth trend.

Maggie Ye: 感谢管理层接受我的提问，我的问题是关于短剧跟AI漫剧的，我们看到这一块在国内的市场正在快速增长，想请教管理层，是否有对短剧加AI漫剧行业最新发展的趋势的解读，以及阅文在短剧跟AI漫剧相关的收入有多少的空间？此外，随着阅文平台上AI漫剧规模逐步扩大，管理层预计AI漫剧对于传统阅读内容的消费的替代效应会持续多久？我来翻译一下。We have witnessed the rapid growth of short drama and AI-powered animated drama in China.

Maggie Ye: [Foreign language]We have witnessed the rapid growth of short drama and AI-powered animated drama in China.

Maggie Ye: Wondering what is management's latest view on industry's long-term growth trend and your outlook for China Literature's own revenue opportunity in the segment. Additionally, as the AI generated content scales on China Literature's platform, how do management expect the substitution effect on the traditional reading consumption to persist? Thank you.

[Translator]: Wondering what is management's latest view on industry's long-term growth trend and your outlook for China Literature's own revenue opportunity in the segment. Additionally, as the AI generated content scales on China Literature's platform, how do management expect the substitution effect on the traditional reading consumption to persist? Thank you.

Speaker #3: And your outlook for China Literature's revenue opportunity in the segment. Additionally, as AI-generated content scales on China Literature's platform, how does management expect the substitution effect on traditional reading consumption to persist?

Speaker #3: Thank you.

Speaker #1: 好，谢谢你的问题。然后我来回答一下这个问题。谈到了短剧和漫剧，我们看到现在短剧和漫剧靠这种大批量的生产和流量驱动的这种粗放的模式正在加速地出清。如果看趋势的话，正在是从量到质的这样的一个转换过程中。所以行业的竞争逻辑也是转向谁真正能把故事讲好，能够持续地产出爆款。所以这就对拥有大量的IP储备和精品制作能力的阅文是一个结构性的利好。因为阅文是拥有中国最大的原创文学库，从源头解决了行业最核心的痛点，就是缺乏好故事。我们的爆款的方法论也已经跑通。上半年短剧的爆款率达到了市场均值的4倍。AI漫剧的百万播放率是行业均值的5倍，破亿的作品我们累计有46部。在生态层面，我们此前也针对AI漫剧的业务推出了火种计划，总投入超过1亿元人民币。从IP的开放、平台扶持、系统培训、资金支持四个维度构建行业的生态，我们自研的漫剧助手DramaBuddy也已经服务了200多个工作室，为生态的建设提供了很强的技术支持。

Hou Xiaonan: 好，谢谢你的问题，我来回答一下这个问题。谈到了短剧和漫剧，我们看到现在短剧和漫剧靠这种大批量的生产和流量驱动的这种粗放的模式，正在加速地出清。如果看趋势的话，正在是从量到质的这样的一个转换过程中。所以行业的竞争逻辑也是转向了谁真正能把故事讲好，能够持续地产出爆款。所以这就对拥有大量的IP储备和精品制作能力的阅文是一个结构性的利好。因为阅文是拥有中国最大的原创文学库，从源头解决了行业最核心的痛点，就是缺乏好故事。我们的爆款的方法论也已经跑通，上半年短剧的爆款率达到了市场均值的4倍，AI漫剧的百万播放率是行业均值的5倍，破亿的作品我们累计有46部。在生态层面，我们此前也针对AI漫剧的业务推出了火种计划，总投入超过1亿元人民币。从IP的开放、平台扶持、系统培训、资金支持四个维度构建行业的生态。我们自研的漫剧助手DramaBuddy也已经服务了200多个工作室，为生态的建设提供了很强的技术支持。

Hou Xiaonan: [Foreign language]

Speaker #3: This is Monkey, CEO of China Literature. So, thanks for your question. I will take your question regarding short dramas and AI-animated dramas. We believe that the mass production and traffic-driven growth model for short dramas and AI-animated dramas is rapidly fading, and the trend is shifting from quantity to quality.

Maggie Zhou: This is the CEO of China Literature. Thanks for your question. I will take your question regarding the short dramas and AI animated dramas. We believe the mass production and traffic-driven growth model for short dramas and AI animated dramas is rapidly fading, and the trend is shifting from quantity to quality. The competition now focuses on storytelling quality and hit-making consistency. This represents a structural advantage for top-tier players like China Literature, with rich IP reserves and premium content production capabilities. China Literature has the largest original literature IP library in China, addressing the industry's core problem at the source, which is the shortage of compelling stories. Our proven methodology for hit-making is already delivering results. In H1, the hit rate of our short drama was 4 times the market average.

[Translator]: This is the CEO of China Literature. Thanks for your question. I will take your question regarding the short dramas and AI animated dramas. We believe the mass production and traffic-driven growth model for short dramas and AI animated dramas is rapidly fading, and the trend is shifting from quantity to quality. The competition now focuses on storytelling quality and hit-making consistency. This represents a structural advantage for top-tier players like China Literature, with rich IP reserves and premium content production capabilities. China Literature has the largest original literature IP library in China, addressing the industry's core problem at the source, which is the shortage of compelling stories. Our proven methodology for hit-making is already delivering results. In H1, the hit rate of our short drama was 4 times the market average.

Speaker #3: And the competition now focuses on storytelling, quality, and the hit-making consistency. This represents a structural advantage for top-tier players like China Literature with rich IP reserves and premium content production capabilities.

Speaker #3: And China Literature has the largest original literature IP library in China, addressing the industry core problem at its source, which is the shortage of compelling stories.

Speaker #3: Our proven methodology for hit-making is already delivering results. In the first half of the year, the hit rate of our short drama was four times the market average, and for AI animated dramas, the rate of titles exceeding 1 million views was five times the industry average.

Maggie Zhou: For AI animated dramas, the rate of titles exceeding 1 million views was 5 times the industry average, and 46 titles each exceeded 100 million views. On the ecosystem front, we launched Project Spark Craft, especially for AI animated drama business. The project plans to invest over CNY 100 million in building up the industry ecosystem across four dimensions: IP cooperation, platform support, systematic training, and funding. Our in-house developed AI agent DramaBuddy, 漫剧助手, purpose-built for AI animated dramas, has also served over 200 studios providing technical support for ecosystem development.

[Translator]: For AI animated dramas, the rate of titles exceeding 1 million views was 5 times the industry average, and 46 titles each exceeded 100 million views. On the ecosystem front, we launched Project Spark Craft, especially for AI animated drama business. The project plans to invest over CNY 100 million in building up the industry ecosystem across four dimensions: IP cooperation, platform support, systematic training, and funding. Our in-house developed AI agent DramaBuddy, [Foreign language], purpose-built for AI animated dramas, has also served over 200 studios providing technical support for ecosystem development.

Speaker #3: And 46 titles each exceeded 100 million views. On the ecosystem front, we launched Project Sparkcraft, especially for the AI animated drama business. The project plans to invest over RMB 100 million in building up the industry ecosystem across four dimensions: IP cooperation, platform support, systematic training, and funding.

Speaker #3: Our in-house developed AI agent, DramaBuddy, purpose-built for AI animated dramas, has also served over 200 studios, providing technical support for ecosystem development.

Speaker #1: 阅文在这个趋势中的策略也是非常清晰。简单讲，就是一托IP，拥抱生态。我们主动地加强剧本和IP开发，以及投流和商业化，这两个大的环节。把制作的视觉化的制作环节更多地是用好外部工作室的能力。这种自控两头、外包中间的这种轻资产的模式，也让我们能够充分地借助行业生态的这种快速扩张的产能。我想这也是当下最适配阅文的打法。我们认为AI漫剧是IP从文字形态向视觉形态的自然延伸，和精品阅读会形成互补关系。今年以来，我们各改编的爆款也持续给我们的文字作品带来了反哺，特别是短漫剧的改编显示出强劲的后劲。举例而言，我们的爆款漫剧《三天庇护》全网播放量突破了30亿，带动原著小说重回起点畅销搒前十。我们的短剧，我这么样重申，播出后推动原作的突破了10万军订，验证了优质视觉化内容可以为阅读业务输送增量的用户。

Hou Xiaonan: 阅文在这个趋势中的策略也是非常清晰，简单讲就是依托IP，拥抱生态。我们主动地加强剧本和IP开发，以及投流和商业化这两个大的环节。把视觉化的制作环节，更多的是用好外部工作室的能力。这种自控两头、外包中间的轻资产的模式，也让我们能够充分地借助行业生态的这种快速扩张的产能。我想这也是当下最适配阅文的打法。那我们认为AI漫剧是IP从文字形态向视觉形态的自然延伸，和精品阅读会形成互补关系。今年以来，我们各改编的爆款也持续给我们的文字作品带来了反哺，特别是短漫剧的改编，显示出强劲的后劲。举例而言，我们的爆款漫剧《三千庇护》全网播放量突破了30亿，带动原著小说重回起点畅销榜前十。我们的短剧《我真没想重生啊》播出后，推动原作突破了10万均订，验证了优质视觉化内容可以为阅读业务输送增量的用户。

Hou Xiaonan: [Foreign language]

Speaker #3: In response to this trend, China Literature's strategy is very clear, that is, we leverage our rich IP reserves to embrace the entire ecosystem. We are proactively strengthening our capabilities in two critical procedures, including the development of script and IP, as well as user acquisition and commercialization, while outsourcing the visual production to external studios.

Maggie Zhou: In response to this trend, China Literature's strategy is very clear: that is, we leverage our rich IP reserve to embrace the entire ecosystem. We are proactively strengthening our capabilities in two critical procedures, including the development of scripts and IPs, as well as user acquisition and commercialization, while outsourcing the visual production to external studios. This asset-light model of controlling both upstream and downstream while outsourcing the midstream allows us to rapidly scale production capacity by leveraging the industry ecosystem, an approach that is most suitable to China Literature at this stage. We believe that AI animated dramas represent a natural extension of IP from text to visual formats, complementing our premium literature business. Since the beginning of this year, various hit adaptations have been continuously feeding back positively into literature works. The adaptations of short dramas and AI animated dramas, in particular, have demonstrated strong momentum.

[Translator]: In response to this trend, China Literature's strategy is very clear: that is, we leverage our rich IP reserve to embrace the entire ecosystem. We are proactively strengthening our capabilities in two critical procedures, including the development of scripts and IPs, as well as user acquisition and commercialization, while outsourcing the visual production to external studios. This asset-light model of controlling both upstream and downstream while outsourcing the midstream allows us to rapidly scale production capacity by leveraging the industry ecosystem, an approach that is most suitable to China Literature at this stage. We believe that AI animated dramas represent a natural extension of IP from text to visual formats, complementing our premium literature business. Since the beginning of this year, various hit adaptations have been continuously feeding back positively into literature works. The adaptations of short dramas and AI animated dramas, in particular, have demonstrated strong momentum.

Speaker #3: This asset-like model of controlling both upstream and downstream, while outsourcing the midstream, allows us to rapidly scale production capacity by leveraging the industry ecosystem, an approach that is most suitable to China Literature at this stage.

Speaker #3: We believe that AI animated dramas represent a natural extension of IP from text to visual formats, complementing our premium literature business. Since the beginning of this year, various hit adaptations have been continuously feeding back positively into literature works.

Speaker #3: The adaptations of short dramas and AI animated dramas in particular have demonstrated strong momentum. For example, one of our blockbuster AI animated dramas, 3000 Shelters, has surpassed 3 billion views across all platforms.

Maggie Zhou: For example, one of our blockbuster AI animated dramas, Three Thousand Shelters,《三千庇护》, has surpassed 3 billion views across all platforms, directly driving the original novel back into the top 10 of the best-seller rankings on Qidian. Following the release of our short drama, I Really Didn't Want to Be Reborn,《我真没想重生啊》, the original novel exceeded 100,000 average subscribers per chapter, validating that high quality visual content can channel incremental users to our online reading business.

[Translator]: For example, one of our blockbuster AI animated dramas, Three Thousand Shelters, [Foreign language], has surpassed 3 billion views across all platforms, directly driving the original novel back into the top 10 of the best-seller rankings on Qidian. Following the release of our short drama, I Really Didn't Want to Be Reborn, [Foreign language], the original novel exceeded 100,000 average subscribers per chapter, validating that high quality visual content can channel incremental users to our online reading business.

Speaker #3: Directly driving the original novel back into the top 10 of the best-seller ranking on TDM following the release of our short drama, 'I Really Didn’t Want to Be Reborn.'

Speaker #3: 我真没想重生。 The original novel exceeded 100,000 average subscribers per chapter, validating that high-quality visual content can channel incremental users to our online reading business.

Speaker #1: 尽管存在非核心的阅读用户，像漫剧用户迁移的情况，但是我们觉得漫剧的核心价值还是在于破圈，就是打破IP形态的边界，能够推动阅文海量的IP库和创作生态的视觉化的价值释放。我想这也是阅文最大的机遇。放在整个阅文的IP库的视角来看，目前被开发的IP占比不足千分之一，所以随着AI工具持续降低制作门槛，未来IP的开发速度和覆盖的广度都还有巨大的提升空间。

Hou Xiaonan: 尽管存在非核心的阅读用户向漫剧用户迁移的情况，但是我们觉得漫剧的核心价值还是在于破圈，就是打破IP形态的边界，能够推动阅文海量的IP库和创作生态的视觉化的价值释放。我想这也是阅文最大的机遇。那放在整个阅文的IP库的视角来看，目前被开发的IP占比不足1/1000。所以随着AI工具持续降低制作门槛，未来IP的开发速度和覆盖的广度都还有巨大的提升空间。

Hou Xiaonan: [Foreign language]

Speaker #3: There are some non-core readers may migrate to AI animated dramas, the core value of AI animated dramas lies in reaching more audience in addition to the original users.

Maggie Zhou: While some non-core readers may migrate to AI animated dramas, the core value of AI animated dramas lies in reaching more audience in addition to the original users, and breaking through the boundaries of IP formats, unlocking the value of visualizing China Literature's vast IP library and creative ecosystem. This is our greatest opportunity. If we look at the entire IP library of China Literature, the proportion of IP that has been developed so far is less than 0.1%. As AI tools continue to lower the barriers to content production, there remains enormous room for growth in both the speed and scope of IP development going forward.

[Translator]: While some non-core readers may migrate to AI animated dramas, the core value of AI animated dramas lies in reaching more audience in addition to the original users, and breaking through the boundaries of IP formats, unlocking the value of visualizing China Literature's vast IP library and creative ecosystem. This is our greatest opportunity. If we look at the entire IP library of China Literature, the proportion of IP that has been developed so far is less than 0.1%. As AI tools continue to lower the barriers to content production, there remains enormous room for growth in both the speed and scope of IP development going forward.

Speaker #3: And breaking through the boundaries of IP formats, unlocking the value of visualizing China Literature's best IP library and the creative ecosystem, and this is our greatest opportunity.

Speaker #3: If we look at the entire IP library of China Literature, the proportion of IP that has been developed so far is less than 0.1%.

Speaker #3: As AI tools continue to lower the barriers to content production, there remains enormous room for growth in both the speed and scope of IP development going forward.

Hou Xiaonan: 好，谢谢。

Hou Xiaonan: [Foreign language]

Speaker #3: Thank you.

Maggie Zhou: Thank you.

[Translator]: Thank you.

Speaker #2: Your next question comes from GG Zhao with Wangfa. Please go ahead.

Operator 2: Your next question comes from Gigi Zhao with Wangfa. Please go ahead.

Operator: Your next question comes from Gigi Zhao with Wangfa. Please go ahead.

Speaker #4: 谢谢关于陈先生我的提问。然后我还是想问一下短剧和漫剧的一个分发上的一个情况，因为可能大家看到整体的渠道的竞争可能会有一些这种潜在的挤压。对，我不知道就是说我们能不能分享一下漫剧和短剧在分发渠道上整体的分布的一个情况。比如说像红火或者是我们现在也在做一些自由的APP，微信小程序的一个占比。然后以及我们后面把漫剧还有短剧这些内容去做到海外的发行的一个战略，大体上是怎么样的？可不可以分享一下？And I will translate the question myself. I want to ask about the displacement between manga dramas and short dramas in terms of distribution channels.

Gigi Zhao: 谢谢管毅晨接受我的提问。我还是想问一下短剧和漫剧的分发上的情况，因为可能大家看到整体的渠道的竞争，可能会有一些潜在的挤压，我不知道我们能不能分享一下漫剧和短剧在分发渠道上整体的分布的情况，比如说像红果，或者是我们现在也在做一些自有的APP、微信小程序的一个占比，以及我们后面把漫剧还有短剧这些内容做到海外的发行战略大体上是怎么样的，可不可以分享下？And I will translate the question myself.

Gigi Zhou: [Foreign language] And I will translate the question myself.

Gigi Zhao: I want to ask about the competitive dynamic and mutual displacement between manga dramas and short dramas in terms of distribution channels. How are the distribution channels for the two formats distributed overall? For example, the share between Hongguo and the self-developed apps and mini-programs. What are overseas strategies for your manga dramas and short dramas going forward? Thank you.

Gigi Zhou: I want to ask about the competitive dynamic and mutual displacement between manga dramas and short dramas in terms of distribution channels. How are the distribution channels for the two formats distributed overall? For example, the share between Hongguo and the self-developed apps and mini-programs. What are overseas strategies for your manga dramas and short dramas going forward? Thank you.

Speaker #4: How are the distribution channels for the two formats distributed overall? For example, the share between 红火 and the self-developed apps and mini programs. What are the overseas strategies for your manga dramas and short dramas going forward?

Speaker #4: Thank you.

Speaker #1: 好，谢谢您的问题。我们现在的短剧和漫剧是全渠道分发的策略，所以包括红火、抖音、快手、视频号、B站这些主流的平台，还有我们还有自有的小程序和APP。此外我们现在也在和长视频平台在洽谈合作。上半年我们有超过一半的漫剧和短剧在红火投放。我们是目前是不依赖于单一渠道。具体投放在哪个平台，然后采取付费还是免费，我们会根据每部作品的内容的特性，还有市场的窗口来判断。未来也会随着这些视频平台的格局的变化，我们也会灵活地去调整我们的渠道策略。

Hou Xiaonan: 好，谢谢您的问题。我们现在的短剧和漫剧是全渠道分发的策略，所以包括红果、抖音、快手、视频号、B站这些主流的平台，还有我们自有的小程序和APP。此外，我们现在也在和长视频平台洽谈合作。那上半年我们有超过一半的漫剧和短剧在红果投放。那我们目前是不依赖单一渠道，那具体投放在哪个平台然后采取付费还是免费，我们会根据每部作品的内容的特性，还有市场的窗口来判断。未来也会随着这些视频平台的格局的变化，我们也会灵活地去调整我们的渠道策略。

Hou Xiaonan: [Foreign language]

Speaker #3: Our China Literature CEO, Mr. Hall, will take this question. Our short dramas and AI-animated dramas are distributed through a full set of industry channels, including leading platforms such as Honghuo, Douyin, Kuaishou, Tencent Video Account and Baidu, as well as our own mini programs and apps.

Maggie Zhou: China Literature CEO Xiaonan Hou will take this question. Our short dramas and AI animated dramas are distributed on a full set of industry channels, including leading platforms such as Hongguo, Douyin, Kuaishou, Tencent video accounts, and Bilibili, as well as our self-owned mini-programs and apps. In addition, we are currently in discussions with long-form video platforms as well regarding potential partnerships. In H1, over half of our short-form dramas and AI animated dramas were launched on Hongguo. We do not rely on any single channel. Decisions on which platform a specific title is to be distributed on, and whether to adopt a paid or free model are made by our operation team based on each title's content features and marketing timing. As the landscape of the distribution channels, the video platforms continues to evolve, we will remain agile in adjusting our channel strategy accordingly.

[Translator]: China Literature CEO Xiaonan Hou will take this question. Our short dramas and AI animated dramas are distributed on a full set of industry channels, including leading platforms such as Hongguo, Douyin, Kuaishou, Tencent video accounts, and Bilibili, as well as our self-owned mini-programs and apps. In addition, we are currently in discussions with long-form video platforms as well regarding potential partnerships. In H1, over half of our short-form dramas and AI animated dramas were launched on Hongguo. We do not rely on any single channel. Decisions on which platform a specific title is to be distributed on, and whether to adopt a paid or free model are made by our operation team based on each title's content features and marketing timing. As the landscape of the distribution channels, the video platforms continues to evolve, we will remain agile in adjusting our channel strategy accordingly.

Speaker #3: In addition, we are currently in discussions with long-form video platforms as well. Regarding potential partnerships, in the first half of the year, over half of our short-form dramas and AI-animated dramas were launched on 红火.

Speaker #3: We do not rely on any single channel. Decisions on which platform a specific title is to be distributed on, and whether to adopt a paid or free model, are made by our operation team based on each title's content features and the marketing timing.

Speaker #3: As a landscape of the distribution channels, the video platforms continues to evolve. We will remain agile in adjusting our channel strategy accordingly.

Speaker #1: Great. 在海外方面，我们今年推出了我们的海外的精品漫剧平台To Scroll。年内会计划上线超千部的作品，同时我们也在探索海外本土的原创IP的漫剧开发。背后的逻辑也很清晰，因为全球的短剧和漫剧市场的空间是巨大的。中国在短内容形态上的产业经验非常领先，具有突出的优势。其次，漫剧的题材以二次元、异世界、奇幻等类型为主。这些品类天然的有很强的跨文化的这种共通性，海外的受众的接受门槛低。第三，AI大幅下降了压缩了这些内容制作的成本，使得规模化出海在经济上可行。总体来说，我们的海外漫剧和短剧业务整体处于早期的探索阶段。后续我们也将在取得实质性进展时，适时向市场更新相关的数据。

Hou Xiaonan: 在海外方面，我们今年推出了我们的海外的精品漫剧平台，ToonScroll。年内会计划上线超千部的作品。同时，我们也在探索海外本土的原创IP的漫剧开发。背后的逻辑也很清晰，因为全球的短剧和漫剧市场的空间是巨大的。中国在短内容形态上的产业经验非常领先，具有输出的优势。其次，漫剧的题材以二次元、异世界、奇幻等类型为主，这些品类天然的有很强的跨文化的这种共通性，海外的受众的接受门槛低。第三，AI大幅压缩了这些内容制作的成本，使得规模化出海在经济上可行。总体来说，我们的海外漫剧和短剧业务整体处于早期的探索阶段。后续我们也将再取得实质性进展时，适时向市场更新相关的数据。

Hou Xiaonan: [Foreign language]

Speaker #3: We launched our overseas premium AI animated drama platform To Scroll, and plan to release over 1,000 titles within the year. We are also exploring the development of AI animated dramas based on overseas original IP.

Maggie Zhou: This year we launched our overseas premium AI animated drama platform Toon Scroll, and plan to release over 1,000 titles within the year. We are also exploring the development of AI animated dramas based on overseas original IP. The rationale behind this strategy is clear. First, as the global market for short dramas and AI animated dramas is vast, China has built up proven expertise in short-form content production that is readily exportable. Second, AI animated dramas are predominantly centered around genres such as anime, Isekai, fantasy, and these categories inherently carry stronger cross-cultural appeal and face lower barriers to be accepted by international audience. Third, AI has significantly reduced content production costs, making large-scale overseas expansion economically viable. In general, our overseas short drama and AI animated drama business remains in its early stage of exploration. We will provide timely updates to the market as we make meaningful progress going forward.

[Translator]: This year we launched our overseas premium AI animated drama platform Toon Scroll, and plan to release over 1,000 titles within the year. We are also exploring the development of AI animated dramas based on overseas original IP. The rationale behind this strategy is clear. First, as the global market for short dramas and AI animated dramas is vast, China has built up proven expertise in short-form content production that is readily exportable. Second, AI animated dramas are predominantly centered around genres such as anime, Isekai, fantasy, and these categories inherently carry stronger cross-cultural appeal and face lower barriers to be accepted by international audience. Third, AI has significantly reduced content production costs, making large-scale overseas expansion economically viable. In general, our overseas short drama and AI animated drama business remains in its early stage of exploration. We will provide timely updates to the market as we make meaningful progress going forward.

Speaker #3: The rationale behind this strategy is clear: first, as the global market for short dramas and AI animated dramas is vast, and China has built up proven expertise in short-form content production, that is readily exportable.

Speaker #3: Second, AI animated dramas are predominantly centered around genres such as anime, isekai, fantasy, and these categories inherently carry stronger cross-cultural appeal and face lower barriers to be accepted by international audiences.

Speaker #3: Third, AI has significantly reduced content production costs, making large-scale overseas expansion economically viable. In general, our overseas short drama and AI animated drama business remain in their early stages of exploration.

Speaker #3: We will provide timely updates to the market as we make meaningful progress going forward.

Speaker #1: 同时我想指出，就是说漫剧是一个快速发展的市场。这个市场的潜力非常大。这个主要原因是因为漫剧是当前AI视频应用最直接的场景，而AI对于视频的制作的赋能已经贯穿了全流程，从前期的策划中的辅助选题、剧本的生成、场景的设计，到中期拍摄中的这种虚拟制片，包括虚拟的场景，以及后期制作中实现的智能剪辑、特效合成。所以就视频制作的各个环节都在被AI重新定义。我们也预测未来真人和AI的界限会持续的模糊，也将重塑整个内容生产。所以短剧和漫剧未来的内容形态很可能会超出我们今天想象的边界。

Hou Xiaonan: 通俗来讲，漫剧是一个快速发展的市场，这个市场的潜力非常大。主要原因是因为漫剧是当前AI视频应用最直接的场景，而AI对于视频的制作的赋能已经贯穿了全流程，从前期的策划中的辅助选题、剧本的生成、场景的设计，到中期拍摄中的虚拟制片，包括虚拟的场景，以及后期制作中实现的智能剪辑、特效合成。所以视频制作的各个环节都在被AI重新定义。我们也预测，未来真人和AI的界限会持续地模糊，也将重塑整个内容生产。所以短剧和漫剧未来的内容形态很可能会超乎我们今天想象的边界。

Hou Xiaonan: [Foreign language]

Maggie Zhou: Meanwhile, we would also like to note that the AI animated drama industry is growing very rapidly, and the market potential is enormous. AI animated dramas represent one of the most direct use cases for AI-generated video technology, and AI empowers the entire workflow of video production, including pre-production, where it assists in topic analysis, script generation, and scene design; filming, where it enables virtual production and virtual set rendering; and post-production, where it delivers intelligent editing and automated visual effects composition. Every stage is being redefined by AI. We expect the boundary between human-created and AI-generated short dramas to become increasingly blurred over time, which will fundamentally reshape content creation. The future forms of short dramas and AI animated dramas may probably extend far beyond what we can imagine today.

[Translator]: Meanwhile, we would also like to note that the AI animated drama industry is growing very rapidly, and the market potential is enormous. AI animated dramas represent one of the most direct use cases for AI-generated video technology, and AI empowers the entire workflow of video production, including pre-production, where it assists in topic analysis, script generation, and scene design; filming, where it enables virtual production and virtual set rendering; and post-production, where it delivers intelligent editing and automated visual effects composition. Every stage is being redefined by AI. We expect the boundary between human-created and AI-generated short dramas to become increasingly blurred over time, which will fundamentally reshape content creation. The future forms of short dramas and AI animated dramas may probably extend far beyond what we can imagine today.

Speaker #3: Meanwhile, we would also like to note that the AI animated drama industry is growing very rapidly, and the market potential is enormous. AI animated drama could present one of the direct use cases for AI-generated video technology, and AI empowers the entire workflow of video production.

Speaker #3: Including Bidui production, where it assists in topic analysis, script generation, and scene design. So Ming, where it enables virtual production, and virtual stage rendering, and post-production, where it delivers intelligent editing and automated visual effects composition.

Speaker #3: Every stage is being redefined by AI. We expect the boundary between human-created and AI-generated short dramas to become increasingly blurred over time, which will fundamentally reshape content creation.

Speaker #3: The future forms of short dramas and AI-animated dramas may probably extend far beyond what we can imagine today. Thank you.

Hou Xiaonan: 谢谢。

Hou Xiaonan: [Foreign language]

Maggie Zhou: Thank you.

[Translator]: Thank you.

Speaker #2: Your next question comes from Rebecca Soo with Morgan Stanley. Please go ahead.

Operator 2: Your next question comes from Rebecca Xu with Morgan Stanley. Please go ahead.

Operator: Your next question comes from Rebecca Xu with Morgan Stanley. Please go ahead.

Speaker #4: 谢谢管理层。我是Morgan Stanley的Rebecca。我的第一个问题是关于在线阅读业务的。刚才管理层其实在回答漫剧问题的时候稍微提到了在线阅读。在线阅读的非核心用户有所流失，我们上半年在线阅读也出现了一个同比收入的下滑。想请教管理层如何理解这一次的下滑，这是一个阶段性的变化还是结构性的变化？管理层对这块业务的中长期展望是什么样的？然后短期有没有什么策略可以稳住这一块的基本盘？I'll translate myself. My question is regarding the online reading business. Could management help us break down the key drivers behind the weakness in the first half?

Rebecca Xu: 谢谢管理层。我是摩根士丹利Rebecca Xu。我的第一个问题是关于在线阅读业务的。刚才管理层其实在回答孟志问题的时候，稍微提到了在线阅读的非核心用户有所流失。那我们上半年在线阅读也出现了一个同比的收入的下滑，想请教管理层如何理解这一次的下滑？那这是一个阶段性的变化呢，还是结构性的变化？那管理层对这块业务的中长期的展望是什么样的？然后短期的话，有什么策略可以稳住这一块的基本盘？My question is regarding the online reading business.

Rebecca Xu: [Foreign language]

[Translator]: My question is regarding the online reading business.

Rebecca Xu: Could management help us break down the key drivers behind the weakness in H1, which factors are temporary and which may reflect more general changes? Could management share the medium or long-term outlook for the online reading business, and what are the key drivers for that? Thank you.

[Translator]: Could management help us break down the key drivers behind the weakness in H1, which factors are temporary and which may reflect more general changes? Could management share the medium or long-term outlook for the online reading business, and what are the key drivers for that? Thank you.

Speaker #4: Which factors are the temporary and which are which may reflect more external changes? And also, could management share the media or long-term outlook for the online reading business, and what are the key drivers for that?

Speaker #4: Thank you.

Speaker #1: 好，谢谢。这个问题我们请黄总来回答一下。

Hou Xiaonan: 好，谢谢。这个问题我们请黄总来回答一下。谢谢你的问题。首先我想说的是，在线阅读业务，在阅文看来长期还是保持稳态的，战略定位也没有发生改变。对于刚才你提到上半年收入的下滑的部分，我们看到的主要是一部分用户粘性较低的渠道端的调整，而核心付费阅读产品和生态依然是保持稳定的。具体的讲，首先在我们的所有的用户中，自有平台的微信生态渠道中，有一部分变现效率相对较低的免费阅读的内容占比有所提升。第二个，就是分发内容的形态，其实正在从纯文字向短剧、漫剧等视觉形态迁移。其实我们看来，这也是一个自然的生态再分配。用户的注意力向可视化的内容转移，而重要的是，这个可视化的内容也是由我们自己的IP所孵化而来的。并且刚才讲到《三千庇护》的这个案例，还有很多的案例，并且最终可以反哺到阅读的生态。所以我们可以说用户价值在我们的生态内，从文字端流向了视觉端，而这两端也都为阅文所拥有。

Huang Yan: [Foreign language]

Speaker #5: 好，Rebecca，继续你的问题。首先我想说的是，在线阅读业务在日本看来长期还是保持稳态的，战略定位也没有发生改变。对于刚才你提到上半年收入的下滑的部分，我们看到的主要是部分用户联系较低的渠道端的调整，而核心付费阅读产品和生态依然是保持稳定的。具体的讲，首先在我们的所有的用户中，自有平台的微信生态渠道中，有一部分变现效率相对较低的免费阅读的内容占比有所提升。第二个就是分发内容的形态其实正在从纯文字向短剧、漫剧等视觉形态迁移。其实我们看来这也是一个自然的生态再分配。用户的注意力向可视化的内容转移，而重要的是可视化的内容也是由我们自己的 IP 所孵化而来的，并且刚才讲到 3000 庇护的案例还有很多的案例，并且最终可以反哺到阅读的生态。所以我们可以说用户价值在我们的生态内，从文字端流向了视觉端，而这两端也都为阅文所拥有。

Speaker #3: Thank you for the question. Mr. Huang, Senior VP of China Literature, will take this question. First of all, from our view, the core online reading business will remain stable with its strategic position in keeping unchanged.

Maggie Zhou: Thank you for your question. Mr. Huang, Senior VP of China Literature will take this question. First of all, from our view, the core online reading business will remain stable with its strategic positioning keeping unchanged. The revenue decline in H1 you mentioned was mainly due to the adjustments made for channels with lower user stickiness, while the core page read products and ecosystems remained steady. First of all, for our users, the proportion of free-to-read content with relatively lower monetization efficiency increased on our cell phone channels within reading ecosystem. Secondly, the content distribution is shifting from text to visuals such as short dramas and AI animated dramas. This is the natural reallocation of content and traffic in the ecosystem, in our view.

[Translator]: Thank you for your question. Mr. Huang, Senior VP of China Literature will take this question. First of all, from our view, the core online reading business will remain stable with its strategic positioning keeping unchanged. The revenue decline in H1 you mentioned was mainly due to the adjustments made for channels with lower user stickiness, while the core page read products and ecosystems remained steady. First of all, for our users, the proportion of free-to-read content with relatively lower monetization efficiency increased on our cell phone channels within reading ecosystem. Secondly, the content distribution is shifting from text to visuals such as short dramas and AI animated dramas. This is the natural reallocation of content and traffic in the ecosystem, in our view.

Speaker #3: The revenue decline in the first half you mentioned was mainly due to the adjustments made for channels with lower user stickiness, while the core pay-to-read product and ecosystem remain steady.

Speaker #3: First of all, for our users, the proportion of pay-to-read content with relatively lower monetization efficiency increased on our self-owned channels within Weixing ecosystem. Secondly, the content distribution is shifting from text to visuals, such as short dramas and AI animated dramas.

Speaker #3: This is a natural reallocation of content and traffic in the ecosystem, in our view. Specifically, user attention is shifting toward visual content. While the visual content is adapted from our own IP and can ultimately feed incremental value back into the reading ecosystem, as we previously mentioned, AI-animated dramas such as "3000 Shelters," "17 People Who," and other project cases actually channeled incremental users back to the reading ecosystem.

Maggie Zhou: Specifically, user attention is shifting towards visual content, while the visual content is adapted from our own IP and can ultimately feed incremental value back into the reading ecosystem. As we previously mentioned, AI animated dramas such as 'Three Thousand Shelters'三千庇护' and the other project cases actually channeled incremental users back to the reading ecosystem. In this sense, user value is flowing from tech to visual formats within our ecosystem, and both formats are owned by China Literature.

[Translator]: Specifically, user attention is shifting towards visual content, while the visual content is adapted from our own IP and can ultimately feed incremental value back into the reading ecosystem. As we previously mentioned, AI animated dramas such as 'Three Thousand Shelters'[Foreign language] and the other project cases actually channeled incremental users back to the reading ecosystem. In this sense, user value is flowing from tech to visual formats within our ecosystem, and both formats are owned by China Literature.

Speaker #3: In this sense, user value is shifting is flowing from text to visual formats within our ecosystem. And both formats are owned by China Literature.

Speaker #5: The final one down to the 在线业务的根基没有动摇。今天上半年我们的精品内容创作者的生态保持是非常活跃的。头部的作家生态也很稳固。在最近的一年，阅文的白金大神的续约率是 100%。与此同时，我们也看到新生态作家快速崛起。在最近的一年内，万定作品中新人新作占比达到了 54%。同时我们还保持着对于阅文站外的外部作家的吸引力。今年上半年，我们的投稿量其实同比是增长的，增长了 14%，其中也包括了来自站外平台的多位娱乐作家的投稿。而这背后是一套优质的稳定的创作者生态和持续领先的孵化 IP 的这样的能力。这也是正是为下游的短剧也好，漫剧也好，影视还有衍生品等业务去打下基础的核心资产。我们认为这也是阅文难以复制的护城河。

Huang Yan: 当然，我们讲就是阅文的在线业务的根基没有动摇。今年上半年，我们的精品内容创作者的生态保持是非常活跃的，头部的作家生态也很稳固。在最近的一年，阅文的白金大神延续率是100%。与此同时，我们也看到新生态作家快速崛起。在最近的一年内，万订作品中，新人新作占比达到了54%。同时我们还保持着对于阅文站外的外部作家的吸引力。今年上半年，我们的投稿量其实同比是增长的，增长了14%，其中也包括了来自站外平台的多元化作家的投稿。它的背后是一套优质的、稳定的创作者生态和持续领先的孵化IP的这样的能力，这也是正式为下游的短剧也好，漫剧也好，影视，还有衍生品等业务去打下基础的核心资产。我们认为这也是阅文难以复制的护城河。

Huang Yan: [Foreign language]

Speaker #3: 我 believe the foundation of our online business remains solid in the first half of this year. The ecosystem of our premium content creators stayed vibrant.

Maggie Zhou: We believe the foundation of our online business remains solid. In H1 of this year, the ecosystem of our premium content creators stayed vibrant, and the top-tier writers continue to hold steady. In the recent year, the contract renewal rates for our platinum and the phenomenal writers reached 100%. At the same time, emerging generation writers have been rising rapidly, with new writers and their debut works accounting for 54% of all titles that exceeded 10,000 average subscribers per chapter over the past 12 months. We have also continued to attract external writers with the submission volume we received growing 14% year over year in H1 of this year, including submissions from a number of quality writers previously active on other platforms. Behind all of this is a robust and stable creator ecosystem, along with consistently leading IP incubation capabilities.

[Translator]: We believe the foundation of our online business remains solid. In H1 of this year, the ecosystem of our premium content creators stayed vibrant, and the top-tier writers continue to hold steady. In the recent year, the contract renewal rates for our platinum and the phenomenal writers reached 100%. At the same time, emerging generation writers have been rising rapidly, with new writers and their debut works accounting for 54% of all titles that exceeded 10,000 average subscribers per chapter over the past 12 months. We have also continued to attract external writers with the submission volume we received growing 14% year over year in H1 of this year, including submissions from a number of quality writers previously active on other platforms. Behind all of this is a robust and stable creator ecosystem, along with consistently leading IP incubation capabilities.

Speaker #3: In the top tier, writers continue to hold steady. In the recent year, the contract renewal rates for our Platinum and Phenomenal writers reached 100%.

Speaker #3: At the same time, emerging generation writers have been rising rapidly, with new writers and their debut works accounting for 54% of all titles that exceeded 10,000 average subscribers per chapter over the past 12 months.

Speaker #3: We have also continued to attract external writers, with the submission volume we received growing 14% year over year in the first half of this year, including submissions from a number of writers previously active on other platforms.

Speaker #3: Behind all of this is a robust and stable creator ecosystem, along with consistently leading IP incubation capabilities. These are the core assets that lay the foundation for downstream businesses, such as short dramas, AI-animated dramas, TV series, films, and merchandise.

Maggie Zhou: These are the core assets that lay the foundation for downstream business, such as short dramas, AI animated dramas, TV series, films, and merchandise. We believe they also constitute the moat of China Literature that is difficult to be replicated.

[Translator]: These are the core assets that lay the foundation for downstream business, such as short dramas, AI animated dramas, TV series, films, and merchandise. We believe they also constitute the moat of China Literature that is difficult to be replicated.

Speaker #3: And we believe they also constitute the moat of China Literature that is difficult to be replicated.

Speaker #5: All right. 列强中长期在线阅读的增长空间和应对策略主要集中在三个方面。第一个是继续夯实精品内容的生态，也我们也拥抱并且加速文字到视觉的内容形态升级。在放大 IP 价值的同时，也能够同时去反哺阅读。第二个是从供给端扩容，维护好创作者的生态。第三个是出海，就坚定地推进出海战略，打开我们在海外的变现空间。这三个我们现在看来会形成合力，在稳定孵化优质内容的同时，也通过 IP 和 AI 的联合的驱动，就把单一的这种文字内容裂变成更加丰富的多媒体形态，也希望以此来推动阅文下一个阶段的增长。

Huang Yan: 面向中长期，在线阅读的增长空间和应对策略主要集中在三个方面。第一个是继续夯实精品内容的生态，我们也拥抱并加速文字到视觉的这个内容形态升级，在放大IP价值的同时，也能够同时去反哺阅读。第二个是从供给端扩容，维护好创作者的生态。第三个是出海，坚定地推进出海战略，打开我们在海外的变现空间。这三个我们现在看来会形成合力。在稳定孵化优质内容的同时，也通过IP和AI的联合驱动，把单一的这种文字内容裂变成更加丰富的多媒体形态，也希望以此来推动阅文下一个阶段的增长。

Huang Yan: [Foreign language]

Speaker #3: Okay. Into the media to long term to growth potential and the strategic focus for online reading business are centered on three key directions. First, we will continue to solidify our premium content ecosystem, embrace and accelerate the content format upgrade, from text to visuals to amplify IP value, while also feeding value back into the reading business.

Maggie Zhou: Looking into the immediate long term, the growth potential and the strategic focus for our online reading business are centered on three key directions. First, we will continue to solidify our premium content ecosystem, embrace and accelerate the content format upgrade from text to visual to amplify IP value, while also feeding value back into the reading business. Second, we will expand the content supply and maintain a healthy and vibrant creator ecosystem. Third, we will firmly advance our overseas expansion strategy to unlock monetization opportunities in overseas markets. These three measures will form powerful synergies, steadily incubate quality content, and transform text-based content into richer multimedia formats, driven by the joint integration of IP and AI to propel China Literature into its next phase of growth.

[Translator]: Looking into the immediate long term, the growth potential and the strategic focus for our online reading business are centered on three key directions. First, we will continue to solidify our premium content ecosystem, embrace and accelerate the content format upgrade from text to visual to amplify IP value, while also feeding value back into the reading business. Second, we will expand the content supply and maintain a healthy and vibrant creator ecosystem. Third, we will firmly advance our overseas expansion strategy to unlock monetization opportunities in overseas markets. These three measures will form powerful synergies, steadily incubate quality content, and transform text-based content into richer multimedia formats, driven by the joint integration of IP and AI to propel China Literature into its next phase of growth.

Speaker #3: Second, we will expand the content supply and maintain a healthy and vibrant creator ecosystem. Third, we will firmly advance our overseas expansion strategy to unlock monetization opportunities in overseas markets.

Speaker #3: These three measures will form powerful synergies steadily incubate quality content and transform tech-based content into richer, multimedia formats driven by the joint integration of IP and AI to propel China Literature into its next phase of growth.

Huang Yan: 谢谢。

Huang Yan: [Foreign language]

Speaker #3: Thank you.

Maggie Zhou: Thank you.

[Translator]: Thank you.

Speaker #1: Your next question comes from Xu Qingzheng with CICC. Please go ahead.

Operator 2: Your next question comes from Xueqing Zhang with CICC. Please go ahead.

Operator: Your next question comes from Xueqing Zhang with CICC. Please go ahead.

Speaker #3: 感谢管理层接受我提问。我这边有两个问题。第一是关于整体 IP 运营的，因为我关注到公司 IP 业务上半年多点开花，衍生品 GMV 增长亮眼。然后刚刚大家也都提到的短剧漫剧孵化了新的增长点。想请教管理层如何看待下半年的增长趋势，会有哪些增量？尤其是关于游戏授权，我们也注意到阅文授权的 IP 游戏大作其实下半年有比较多的上线。这块会有一些增量的预期吗？然后第二个问题是关于新力传媒的，长视频行业现在还处于一个调整期，新力作为行业领先的影视公司如何面临挑战，以及结合 AI 视频模型怎么看待新力后续的一个战略。谢谢自己翻译一下。Sex management for taking my question, I have a couple of questions. My first one is about overall IP business.

Xueqing Zhang: 感谢管理层接受我提问，我这边有两个问题。第一是关于整体IP运营的，因为我关注到公司IP业务上半年多点开花，衍生品GMV增长亮眼，然后刚刚那儿也都提到的短剧、漫剧孵化了新的增长点。那想请教管理层如何看待下半年的增长趋势，会有哪些增量？尤其是关于游戏授权，我们也注意到阅文授权的IP游戏大作，其实下半年有比较多的上线，这块会有一些增量的预期吗？然后第二个问题是关于新丽传媒的。长视频行业现在还处于一个调整期，那新丽作为行业领先的影视公司，如何面临挑战，以及结合AI视频模型，怎么看待新丽后续的一个战略？谢谢，我自己翻译一下。Thanks management for taking my question.

Xueqing Zhang: [Foreign language]

[Translator]: Thanks management for taking my question.

Xueqing Zhang: I have a couple of questions. My first one is about our IP business. IP operations delivered broad-based growth in the H1, with particularly strong growth in merchandised GMV, while short dramas and AI animated dramas emerged as new growth drivers. How does management view the growth outlook for the H2? Where do you expect the key incremental contributions to come from? In particular, on game licensing, we have noticed that several major games based on IP licensed by China Literature will launch in the H2. Do you expect these titles to make a meaningful incremental contribution? My second question is about New Classics Media. The long-form video industry is undergoing a period of adjustments. As a leading television production company, how is Xinli responding to the industry challenge?

[Translator]: I have a couple of questions. My first one is about our IP business. IP operations delivered broad-based growth in the H1, with particularly strong growth in merchandised GMV, while short dramas and AI animated dramas emerged as new growth drivers. How does management view the growth outlook for the H2? Where do you expect the key incremental contributions to come from? In particular, on game licensing, we have noticed that several major games based on IP licensed by China Literature will launch in the H2. Do you expect these titles to make a meaningful incremental contribution? My second question is about New Classics Media. The long-form video industry is undergoing a period of adjustments. As a leading television production company, how is Xinli responding to the industry challenge?

Speaker #3: IP operations delivered broad-based growth in the first half, with particularly strong growth in merchandise GMV, while short dramas and AI animated dramas emerged as new growth drivers.

Speaker #3: So how does management view the growth outlook for the second half and where do it spare the key incremental contributions to come from? In particular, on game listening, we have noticed that several major games based on IP licensed by China Literature will launch in the second half.

Speaker #3: So, do you expect these titles to make a meaningful, incremental contribution? My second question about New Classic Media is: the long-form video industry is undergoing a period of adjustment, as are leading television production companies.

Speaker #3: How is NCM responding to the industry challenge? And with the rapid development of AI video generation models, how does management view the company's strategy and opportunities going forward?

Xueqing Zhang: With the rapid development of AI video generation models, how does management view the company's strategy and opportunities going forward? Thank you.

[Translator]: With the rapid development of AI video generation models, how does management view the company's strategy and opportunities going forward? Thank you.

Speaker #3: Thank you.

Speaker #1: This is the conference operator. We have temporarily lost connection with the speaker line. Please continue to hold. The conference will continue shortly. Thank you for holding.

Operator 2: This is the conference operator. We have temporarily lost connection with the speaker line. Please continue to hold. The conference will continue shortly. Thank you for holding. The conference will now recommence.

Operator: This is the conference operator. We have temporarily lost connection with the speaker line. Please continue to hold. The conference will continue shortly. Thank you for holding. The conference will now recommence.

Speaker #1: The conference will now recommence.

Maggie Zhou: Our CEO, Xiaonan Hou, will take your questions regarding our IP development, and later on, Mr. Cao from Youku Business Media will take your questions on media production.

Speaker #3: Our CEO, Mr. Hall, will take your question regarding our IP development, and later, Mr. Tao from Newcastle Media will take your question on media production.

Speaker #5: Great. I'll check如你所说。上半年我们的 IP 业务确实是多点开花，然后短剧漫剧都孵化了新的增长点，而且衍生品的 GMV 也增长亮眼。展望下半年，我们的 IP 业务会继续保持增长的势头，尤其是在新业务方面的多点开花。首先，短剧和漫剧的方面，我们会在保证爆款率的基础上持续扩充产能。国内跟海外双线布局精品化的内容，短剧我们今年计划全年生产不少于 200 部，比去年增长 70%。漫剧精品的月产量已经突破了 100 部，爆款的方法论也持续得到了验证。AI 降低了视觉内容的供给门槛，这个其实是让优质的 IP 越发稀缺。上半年我们的短剧和漫剧的爆款率均高于行业均值的数倍，这背后也是我们长期积累的 IP 储备和全产业链的创作土壤。以及具备情感粘性、跨代际传播的故事内核。同时，我们也将在海外同步上线我们的精品的漫剧的平台，以进一步布局我们的精品化路线。

Hou Xiaonan: 确实如你所说，上半年我们的IP业务确实是多点开花，短剧、漫剧都孵化了新的增长点，而且衍生品的GMV也增长亮眼。展望下半年，我们的IP业务会继续保持增长的势头，尤其是在新业务方面多点开花。首先，在短剧和漫剧方面，我们会在保证爆款率的基础上，持续扩充产能，国内跟海外双线布局精品化的内容。短剧我们今年计划全年生产不少于200部，比去年增长70%。漫剧精品的月产量已经突破了100部，爆款的方法论也持续得到了验证。AI降低了视觉内容的供给门槛，其实是让优质的IP越发稀缺。上半年我们的短剧和漫剧的爆款率均高于行业均值的数倍。这背后也是我们长期积累的IP储备和全产业链的创作土壤，以及具备情感粘性、跨代际传播的故事内核。同时，我们也将在海外同步上线我们的精品漫剧平台，以进一步布局我们的精品化路线。

Hou Xiaonan: [Foreign language]

Speaker #3: Yes, as you mentioned, our IP business in the first half delivered very good results in various aspects with AI animated dramas and short dramas becoming our new growth drivers, and our merchandise business continued to achieve very good GMV performance and growth.

Maggie Zhou: Yes, as you mentioned, our IP business in H1 delivered very good results in various aspects, with AI animated dramas and short dramas becoming our new growth drivers, and our merchandise business continued to achieve very good GMV performance and growth. Looking into H2 of the year, our IP business will continue to gain momentum, especially for the new business segments. Specifically for short-form drama and AI animated dramas, we are expanding production capacity while maintaining a high hit rate and pursuing a premium content strategy both domestically and internationally. Specifically for short dramas, we plan to produce no fewer than 200 titles this year, representing an increase of approximately 70% year-over-year. In terms of AI animated dramas, our capacity of premium production has already exceeded 100 titles, and our proven methodology for creating hits continues to deliver results.

[Translator]: Yes, as you mentioned, our IP business in H1 delivered very good results in various aspects, with AI animated dramas and short dramas becoming our new growth drivers, and our merchandise business continued to achieve very good GMV performance and growth. Looking into H2 of the year, our IP business will continue to gain momentum, especially for the new business segments. Specifically for short-form drama and AI animated dramas, we are expanding production capacity while maintaining a high hit rate and pursuing a premium content strategy both domestically and internationally. Specifically for short dramas, we plan to produce no fewer than 200 titles this year, representing an increase of approximately 70% year-over-year. In terms of AI animated dramas, our capacity of premium production has already exceeded 100 titles, and our proven methodology for creating hits continues to deliver results.

Speaker #3: So, looking into the second half of the year, our IP business will continue to gain momentum, especially for the new business segment. Specifically, for short-form drama and AI-animated dramas, we are expanding production capacity while maintaining a high hit rate.

Speaker #3: And pursuing a premium content strategy both domestically and internationally. Specifically, for short dramas, we plan to produce no fewer than 200 titles this year, representing an increase of approximately 70% year over year.

Speaker #3: In terms of AI animated dramas, our capacity of premium production has already exceeded 100 titles, and our proven methodology for creating hits continues to deliver results.

Speaker #3: While AI has lowered the barrier to visual content production, it has intensified the scarcity of high-quality IP. In the first half of the year, both our short dramas and AI-animated dramas consistently outperformed the industry drop-off rate average by several multiples.

Maggie Zhou: While AI has lowered the barrier to visual content production, it has intensified the scarcity of high-quality IP. In H1, both our short dramas and AI animated dramas consistently outperformed the industry's blockbuster rate average by several multiples, a testament to our deep IP reserve, a creative ecosystem spanning the whole value chain, and the story core that delivers cross-generational emotional resonance. At the same time, we have also rolled out premium AI animated drama platforms both domestically and internationally to further strengthen our premium content strategy.

[Translator]: While AI has lowered the barrier to visual content production, it has intensified the scarcity of high-quality IP. In H1, both our short dramas and AI animated dramas consistently outperformed the industry's blockbuster rate average by several multiples, a testament to our deep IP reserve, a creative ecosystem spanning the whole value chain, and the story core that delivers cross-generational emotional resonance. At the same time, we have also rolled out premium AI animated drama platforms both domestically and internationally to further strengthen our premium content strategy.

Speaker #3: This is a testament to our deep IP reserve, a creative ecosystem spanning the full value chain, and the story core that delivers cross-generational emotional resonance. At the same time, we have also rolled out premium AI-animated drama platforms, both domestically and internationally, to further strengthen our premium content strategy.

Speaker #5: 衍生品方面，我们在 2026 年的上半年在 IP 影响力、产品开发，还有渠道拓展、品牌授权等四个维度持续同步发力。整体的势能增长明显。头部 IP 影响力方面，我们聚焦优质 IP 来做深做透，在品牌拓展、活动运营、体验打造三个层面同步加强。系统释放 IP 的势能，通过向夜修的生日会，还有艺人男团出道等沉浸式的活动拉近和用户的距离。不仅激活了核心粉丝的复购，更在情感层面上加深了 IP 角色与用户的连接。产品开发方面，月更好物旗下的子品牌好物赏已经快速成为中国头部的活面品牌，推出了多套优质的一番赏产品，覆盖了箱包、服饰、毛绒等全新的热门品类，满足了用户对不同衍生品的需求。我们推出的产品一经上线，几乎都是秒售罄的状态。然后渠道拓展方面，我们的全渠道网络正在不断完善，包括线上小程序、直播间、电商旗舰店快速地增长。同时也配合线下门店体系的持续扩张。目前全国门店总数达到了 17 家，尤其是今年上半年，我们线上自营渠道 GMV 体量已经达到去年同期的 3 倍多。所以也印证了我们自营渠道的建设成效。也反映了用户对月更好物品牌的认可度不断提升。品牌授权方面，今年以来，我们持续和谷子潮玩，我们与来自谷子潮玩 3C 数码、食品饮料、服饰、连锁餐饮等各个领域的数百个商家的品牌达成了授权合作。展望下半年，我们将持续聚焦产品的迭代、渠道的拓展，还有运营效率的提升，核心是推动利润转化效率的进一步提升，以实现更高质量、更可持续的增长。

Hou Xiaonan: 衍生品方面，我们在2026年的上半年，在IP影响力、产品开发，还有渠道拓展、品牌授权等四个维度持续同步发力，整体的势能增长明显。头部IP影响力方面，我们聚焦优势IP来做深做透，在品牌拓展、活动运营、体验打造三个层面同步加强，系统释放IP的势能。通过像叶修的生日会，还有艺人男团出道等沉浸式的活动，拉近和用户的距离，不仅激活了核心粉丝的复购，更在情感层面加深了IP角色与用户的连接。产品开发方面，阅文好物旗下的子品牌好物赏已经快速成为中国头部的国漫品牌，推出了多套优质的一番厂产品，覆盖了箱包、服饰、毛绒等全新的热门品类，满足了用户对不同衍生品的需求。我们推出的产品，已经上线的几乎都是秒售罄的状态。渠道拓展方面，我们的全渠道网络正在不断完善，包括线上小程序、直播间、电商旗舰店快速地增长，同时也配合线下门店体系的持续扩张，目前全国门店总数达到了17家。尤其是今年上半年，我们线上自营渠道GMV体量已经达到去年同期的3倍多，也印证了我们自营渠道的建设成效，也反映了用户对阅文好物品牌的认可度不断提升。品牌授权方面，今年以来，我们与来自古着潮玩、3C数码、食品饮料、服饰、连锁餐饮等各个领域的数百个上家的品牌达成了授权合作。展望下半年，我们将持续聚焦产品的迭代、渠道的拓展，还有运营效率的提升。核心是推动利润转化效率的进一步提升，以实现更高质量、更可持续的增长。

Hou Xiaonan: [Foreign language]

Speaker #3: 好，OK。In the first half of 2026, our merchandise business continued to gain momentum across four key dimensions: IP influence, product development, channel expansion, and brand licensing resulting in apparently stronger overage action.

Maggie Zhou: Well, in H1 2026, our merchandise business continued to gain momentum across four key dimensions: IP influence, product development, channel expansion, and brand licensing, resulting in apparently stronger overall traction. Regarding top-tier IP influence, we are deepening our operations of flagship IPs and reinforcing them across three fronts, which are category expansion, event-driven activation, and user experience to systematically unlock their full potential. For example, our immersive events like the Glory Pilgrimage pop-ups for Ye Xiu's birthday and the debut of The Outcast Boy Group brought the IP closer to users, driving repeat purchases among core fans while deepening emotional connections between our IP characters and their audience.

[Translator]: Well, in H1 2026, our merchandise business continued to gain momentum across four key dimensions: IP influence, product development, channel expansion, and brand licensing, resulting in apparently stronger overall traction. Regarding top-tier IP influence, we are deepening our operations of flagship IPs and reinforcing them across three fronts, which are category expansion, event-driven activation, and user experience to systematically unlock their full potential. For example, our immersive events like the Glory Pilgrimage pop-ups for Ye Xiu's birthday and the debut of The Outcast Boy Group brought the IP closer to users, driving repeat purchases among core fans while deepening emotional connections between our IP characters and their audience.

Speaker #3: Regarding top tier IP influence, we are deepening our operations of flagship IPs and reinforcing them across three fronts, which are category expansion, event-driven activation, and user experience, to systematically unlock their full potential.

Speaker #3: For example, our immersive events like the Glory Sugar Merch pop-up for Ye Xiu's birthday and the debut of the Outcast Boy group brought the IP closer to users, driving repeat purchases among core fans while deepening emotional connections between our IP characters and their audience.

Speaker #3: On product development fronts, Yuegeng has consistently helped the sub-brand of Yuegeng Goods rapidly grow into one of China's leading domestic anime merchandise brands, with multiple premium Ichiban Kuji-style product series covering new and popular categories such as bags and luggage, apparel, and plush toys, addressing diverse fan demands for merchandise.

Maggie Zhou: On product development fronts, Yuewen Ichiban Kuji, the sub-brand of Yuewen Group, has rapidly grown into one of China's leading domestic anime merchandise brands, with multiple premium Ichiban Kuji style product series covering new and popular categories such as bags and luggage, apparel, and plush toys, addressing diverse fan demand for merchandise. Virtually every product we have launched today has sold out within moments of release. Regarding channel expansion, our omni-channel network continues to improve. Our mini programs like Qin Yu and e-commerce flagship stores are growing rapidly, while our offline store network is also expanding steadily, and currently we operate a total of 17 stores across the country.

[Translator]: On product development fronts, Yuewen Ichiban Kuji, the sub-brand of Yuewen Group, has rapidly grown into one of China's leading domestic anime merchandise brands, with multiple premium Ichiban Kuji style product series covering new and popular categories such as bags and luggage, apparel, and plush toys, addressing diverse fan demand for merchandise. Virtually every product we have launched today has sold out within moments of release. Regarding channel expansion, our omni-channel network continues to improve. Our mini programs like Qin Yu and e-commerce flagship stores are growing rapidly, while our offline store network is also expanding steadily, and currently we operate a total of 17 stores across the country.

Speaker #3: Virtually every product we have launched today has sold out within moments of release. Regarding channel expansion, our omni-channel network continues to improve. Online mini programs like Stream Room and e-commerce flagship stores are growing rapidly, while our offline store network is also expanding steadily and currently we operate a total of 17 stores across the country.

Speaker #3: Notably, in the first half of this year, GME from our online self-operated channels was three times that of the same period last year, underscoring both the effectiveness of our self-operated channel network and the user scoring brand recognition for 月更 goods.

Maggie Zhou: Notably, in H1 of this year, GMV from our online self-operated channels was 3 times that of the same period last year, underscoring both the effectiveness of our self-operated channel network and the user's growing brand recognition for Yuewen Group. Regarding brand licensing, since the beginning of this year, we have entered into licensing partnerships with hundreds of brands from a variety of industries, including goods and fashion toys, 3D digital products, food and beverage, apparel, restaurant chains, and others. Looking into H2 of this year in terms of merchandise business, we will continue to focus on product iteration, channel expansion, and operational efficiency improvements. A key objective is to improve profit conversion efficiency and to achieve higher quality and more sustainable growth.

[Translator]: Notably, in H1 of this year, GMV from our online self-operated channels was 3 times that of the same period last year, underscoring both the effectiveness of our self-operated channel network and the user's growing brand recognition for Yuewen Group. Regarding brand licensing, since the beginning of this year, we have entered into licensing partnerships with hundreds of brands from a variety of industries, including goods and fashion toys, 3D digital products, food and beverage, apparel, restaurant chains, and others. Looking into H2 of this year in terms of merchandise business, we will continue to focus on product iteration, channel expansion, and operational efficiency improvements. A key objective is to improve profit conversion efficiency and to achieve higher quality and more sustainable growth.

Speaker #3: Regarding brand licensing, since the beginning of this year, we have entered into licensing partnerships with hundreds of brands from a variety of industries, including goods and fashion toys, 3C digital products, food and beverage, apparel, restaurant chains, and others.

Speaker #3: So looking into the so looking into the second half of this year in terms of merchandise business, we will continue to focus on product iteration, channel expansion, and operational efficiency, improvements.

Speaker #3: A key objective is to improve profit conversion efficiency and to achieve higher quality and more sustainable growth.

Speaker #5: 对，然后在海外方面，我们的出海业务整体处于快速的发育期。路径也非常清晰。在线阅读方面，作为出海内容的底座，保持非常稳定的状态。然后 AI 的翻译持续驱动小语言、小语种的增长，同时我们也持续加速开发原创 IP。已经有多本由海外本土作者创作的原创作品进入了线下出版、有声改编等多形态的开发。展望下半年，也计划有多部作品开启新的合作。可视化和实体出海方面，我们的精品漫剧平台 Toast Pro 年内的计划上线超千部作品，首个全球潮玩集合店已经在新加坡开业，都为未来的业务增量提供贡献。

Hou Xiaonan: 对，然后在海外方面，我们的出海业务整体处于快速的发育期，路径也非常清晰。在线阅读方面，作为出海内容的底座，保持非常稳定的状态。然后AI的翻译持续驱动小语言、小语种的增长。同时，我们也持续加速开发原创IP。已经有多本由海外本土作者创作的原创作品进入了线下出版、有声改编等多形态的开发。展望下半年，也计划有多部作品开启新的合作。在可视化和实体出海方面，我们的精品漫剧平台ToonScroll年内的计划上线超千部作品。首个全球潮玩集合店已经在新加坡开业，都为未来的业务增量提供贡献。

Hou Xiaonan: [Foreign language]

Speaker #3: Regarding our overseas business, it is still in a growth phase with a clear strategic roadmap. The domestic online reading business currently supplies the content foundation for our international expansion and AI-powered translation is accelerating global reach, including those languages less commonly spoken.

Maggie Zhou: Regarding our overseas business, it is still in a growth phase with a clear strategic roadmap. The domestic online reading business currently supplies the content foundation for our international expansion, and AI-powered translation is accelerating global reach, including those languages less commonly spoken. The AI-powered translation is a key driver for the global reach. At the same time, incubation of original local IP is underway and is steadily expanding. Multiple original literature works created by local writers in overseas markets have already entered the adaptation stages into various formats, including offline publication and audiobooks. We plan to initiate collaborations on a series of additional titles in the H2 of the year.

[Translator]: Regarding our overseas business, it is still in a growth phase with a clear strategic roadmap. The domestic online reading business currently supplies the content foundation for our international expansion, and AI-powered translation is accelerating global reach, including those languages less commonly spoken. The AI-powered translation is a key driver for the global reach. At the same time, incubation of original local IP is underway and is steadily expanding. Multiple original literature works created by local writers in overseas markets have already entered the adaptation stages into various formats, including offline publication and audiobooks. We plan to initiate collaborations on a series of additional titles in the H2 of the year.

Speaker #3: So the AI-powered translation is a key driver for the global reach. At the same time, incubation of original local IP is underway, and steadily expanding.

Speaker #3: Multiple original literature works created by local writers is in overseas markets have already entered the adaptation stages into various formats, including offline publication and audiobooks, and we plan to initiate collaborations on a series of additional titles in the second half of the year, in terms of visualization and commercialization in the overseas markets.

Maggie Zhou: In terms of visualization and commercialization in the overseas markets, our premium AI-animated drama platform ToonScroll plans to launch over 1,000 titles within the year, and we have opened our first global collectible toy concept store in Singapore, both of which will contribute to future business growth.

[Translator]: In terms of visualization and commercialization in the overseas markets, our premium AI-animated drama platform ToonScroll plans to launch over 1,000 titles within the year, and we have opened our first global collectible toy concept store in Singapore, both of which will contribute to future business growth.

Speaker #3: Our premium AI animated drama platform Toast Grown plans to launch over 1,000 titles within the year, and we have opened our first global collectible toy concept store in Singapore, both of which will contribute to future business growth.

Speaker #5: 对，然后在游戏方面，我们是通过像游戏厂商授权优质 IP 来获取版权金，加上流水分成。对于月更来讲，是一种高毛利、低风险的常态化收入，也会进入我们的 IP 运营业务里面。我们展望下半年，会有多款的重点授权的游戏预计上线。那么代表性的项目包括由三七互娱发行的 MMO 斗破苍穹、斗帝之路，已经在 2026 年 7 月 29 号进行了公测。赘叙的模拟经营手游，会定档于明天，也就是 8 月 12 号进行全平台公测。由快手研发的优异五的旗舰 MMO 的鬼迷之主，定于 8 月 21 号进行全平台的公测。目前预约已经全面开放。

Hou Xiaonan: 对，然后在游戏方面，我们是通过向游戏厂商授权优质IP来获取版税金，加上流水分成。对于阅文来讲是一种高毛利、低风险的常态化收入，也会计入我们的IP运营业务里面。我们展望下半年，会有多款的重点授权的游戏预计上线。代表性的项目包括由三七互娱发行的MMO《斗破苍穹：斗帝之路》，已经在2026年7月29号进行了公测。那智趣的模拟经营手游，会定档于明天，也就是8月12号进行全平台公测。那由快手研发的旗舰MMO《诡秘之主》，定于8月21号进行全平台的公测。目前预约已经全面开放。

Hou Xiaonan: [Foreign language]

Maggie Zhou: In terms of games, we license our premium IP to game studios, earning both up-front licensing fees and a grossing sharing, which is a high margin, low risk revenue stream for China Literature that contributes to our IP operations business on a recurring basis. Looking into the H2 of this year, a number of key game titles are selected for launch. Notably, projects include, first of all, an MMO game adapted from Battle Through the Heavens, Doupo Cangqiong, published by 37 Interactive Entertainment, which started open beta testing on 29 July 2026. Secondly, a management simulation mobile game adapted from My Heroic Husband, Zhui Xu, set to launch its open beta testing across all platforms tomorrow, 12 August 2026.

[Translator]: In terms of games, we license our premium IP to game studios, earning both up-front licensing fees and a grossing sharing, which is a high margin, low risk revenue stream for China Literature that contributes to our IP operations business on a recurring basis. Looking into the H2 of this year, a number of key game titles are selected for launch. Notably, projects include, first of all, an MMO game adapted from Battle Through the Heavens, Doupo Cangqiong, published by 37 Interactive Entertainment, which started open beta testing on 29 July 2026. Secondly, a management simulation mobile game adapted from My Heroic Husband, Zhui Xu, set to launch its open beta testing across all platforms tomorrow, 12 August 2026.

Speaker #3: We license our premium IP to game studios, earning both upfront licensing fees and a grossing share. Grossing share is a high-margin, low-risk revenue stream for China Literature that contributes to our IP operations business on a recurring basis.

Speaker #3: Looking into the second half of this year, a number of key game titles are selected for launch, notably projects include first of all, an MMO game adapted from Battle Through the Heavens, 斗破苍穹, published by 三七 Interactive Entertainment, which started open beta testing on July the 29th, 2026.

Speaker #3: Secondly, a management simulation mobile game adapted from My Heroic Husband 吹雪, set to launch its open beta testing across all platforms tomorrow, August the 12th, 2026.

Speaker #3: And third, a flagship UE5 MMO game adapted from Lord of the Mysteries, 鬼迷之主, developed by 快手, scheduled for open beta testing on August the 21st, 2026, for which pre-registration is now fully open.

Maggie Zhou: Third, a flagship UE5 MMO game adapted from Lord of the Mysteries, Gui Mi Zhi Zhu, developed by Kuaishou, scheduled for open beta testing on 23 August 2026, for which pre-registration is now fully open.

[Translator]: Third, a flagship UE5 MMO game adapted from Lord of the Mysteries, Gui Mi Zhi Zhu, developed by Kuaishou, scheduled for open beta testing on 23 August 2026, for which pre-registration is now fully open.

Speaker #5: 以上是 IP 运营在下半年的一些相关情况。关于心力的问题，请郝总来回答。

Maggie Zhou: 以上是IP运营在下半年的一些相关情况。关于新丽的问题，请曹总来回答。好，我来回答。关于行业低迷的问题，我们认为当前行业低迷的本质是视频平台的采购预算的收缩与短剧对用户时长的分流。但用户对好内容付费的意愿并未消失。这轮调整出清的是中庸的内容，头部精品长剧集反而会更加稀缺，其稀缺的溢价也会进一步地凸显。

Cao Huayi: [Foreign language]

Speaker #2: 好，我来回答。关于行业低迷的问题，我们认为当前行业低迷的本质是视频平台的采购的预算的收缩与短剧对用户时长的分流。但用户对好内容、付费的意愿并未消失。这轮调整出清的是中庸的内容，头部精品长剧集反而会更加稀缺，其稀缺的溢价也会进一步的凸显。

Maggie Zhou: The above are my comments on our IP business outlook. Next, Mr. Cao from Xinli will answer your question regarding media production. We believe the current industry downturn reflects two underlying dynamics: platforms tightening content budgets, and short dramas increasingly capturing users' attention. However, consumers' willingness to pay for high quality content remains intact. This adjustment cycle will accelerate the market's curation, weeding out mediocre offerings. Premium long-form dramas will become scarcer, and their scarcity premium will grow.

Speaker #3: So the above are my comments on our IP business outlook, and next Mr. Tao from NCN will answer your questions regarding media production. We believe the current industry downturn reflects two underlying dynamics.

[Translator]: The above are my comments on our IP business outlook. Next, Mr. Cao from Xinli will answer your question regarding media production. We believe the current industry downturn reflects two underlying dynamics: platforms tightening content budgets, and short dramas increasingly capturing users' attention. However, consumers' willingness to pay for high quality content remains intact. This adjustment cycle will accelerate the market's curation, weeding out mediocre offerings. Premium long-form dramas will become scarcer, and their scarcity premium will grow.

Speaker #3: Platforms tightening content budgets and short dramas increasingly capturing users' attention. However, consumers' willingness to pay for high-quality content remains intact. This adjustment cycle will accelerate the market's curation, weeding out mediocre offerings.

Speaker #3: Premium long-form dramas will become scarcer, and. Their scarcity premium will grow.

Speaker #2: 当下的长剧市场，用户对内容的要求越来越高。我们的判断是，电视剧的公司应当回归内容本身，专注于打造高质量、有深度的精品剧集。一部精品剧沉淀下来的 IP 价值与情感连接是公司内容生态的基石，而持续产出这样的精品正是我们心力的核心优势。

Cao Huayi: 当下的长剧市场，用户对内容的要求越来越高。我们的判断是，电视剧的公司应当回归内容本身，专注于打造高质量有深度的精品剧集。一部精品剧沉淀下来的IP价值与情感连接，是公司内容生态的基石，而持续产出这样的精品，正是我们新丽的核心优势。

Cao Huayi: [Foreign language]

Maggie Zhou: In the current long-form drama market, consumer expectations for content are higher than ever. We believe that drama studios should refocus on the fundamentals of content creation with a dedicated emphasis on producing premium series of superior quality and depth. The IP value and emotional connection built up by a premium drama forms the bedrock of our content ecosystem, and the ability to consistently produce such premium content is exactly New Classics Media's core competitive advantage.

Speaker #3: So in the current long-form drama market, consumer expectations for content are higher than ever. We believe that drama studios should refocus on the fundamentals of content creation, with a dedicated emphasis on producing premium series of superior quality and depth.

[Translator]: In the current long-form drama market, consumer expectations for content are higher than ever. We believe that drama studios should refocus on the fundamentals of content creation with a dedicated emphasis on producing premium series of superior quality and depth. The IP value and emotional connection built up by a premium drama forms the bedrock of our content ecosystem, and the ability to consistently produce such premium content is exactly New Classics Media's core competitive advantage.

Speaker #3: The IP value and emotional connection built up by a premium drama form the bedrock of our content ecosystem, and the ability to consistently produce such premium content is exactly why.

Speaker #3: New classics media's core competitive advantage.

Speaker #2: 关于 AI 技术部分，我们的看法是 AI 视频模型会改变影视项目的生产流程，成本结构与生产速度，但是无法替代好故事、好表演加好审美这一核心价值。当下我们正尝试将最新的 AI 视频技术应用于制作环节，重构和升级工作流。例如在剧本评估与结构拆解、美术概念与数字资产设计、虚拟场景与硬性拍摄各类特效合成等方面，但我们始终以专业人才的审美与判断为基准，故事是否有情感深度，剧本质量是否过硬，仍由创作者来把控。说到底，专业的创作人才才是项目成功的关键。

Cao Huayi: 关于AI技术部分，我们的看法是AI视频模型会改变影视项目的生产流程、成本结构与生产速度，但是无法替代好故事、好表演加好审美这一核心价值。当下，我们正尝试将最新的AI视频技术应用于制作环节，重构和升级工作流，例如在剧本评估与结构拆解、美术概念与数字资产设计、虚拟场景与运镜拍摄、各类特效合成等方面。但我们始终以专业人才的审美与判断为基准。故事是否有情感深度，剧本质量是否过硬，仍由创作者来把控。说到底，专业的创造人才才是项目成功的关键。

Cao Huayi: [Foreign language]

Speaker #3: Regarding AI technology, we believe that while AI video models will fundamentally reshape the production workflows, cost structure, and the delivery speed of film and television projects, they cannot substitute for core value of compelling storytelling outstanding performance and the refined aesthetics.

Maggie Zhou: Regarding AI technology, we believe that while AI video models will fundamentally reshape the production workflows, cost structure, and the delivery speed of film and television projects, they cannot substitute for core value of compelling storytelling, outstanding performance, and refined aesthetics. Currently, we are exploring the application of the latest AI video technologies into our production process to reconstruct and upgrade our workflows, spanning script assessment and structural deconstruction, concept art and digital asset design, virtual scene design and cinematography, and visual special effects, among others. That said, all of these efforts are anchored by the aesthetic judgment and creative instincts of our professional talents. Whether a story carries emotional depth and whether a script meets the highest standards ultimately rests with our creators. Ultimately, professional creative talent is what makes a project succeed.

[Translator]: Regarding AI technology, we believe that while AI video models will fundamentally reshape the production workflows, cost structure, and the delivery speed of film and television projects, they cannot substitute for core value of compelling storytelling, outstanding performance, and refined aesthetics. Currently, we are exploring the application of the latest AI video technologies into our production process to reconstruct and upgrade our workflows, spanning script assessment and structural deconstruction, concept art and digital asset design, virtual scene design and cinematography, and visual special effects, among others. That said, all of these efforts are anchored by the aesthetic judgment and creative instincts of our professional talents. Whether a story carries emotional depth and whether a script meets the highest standards ultimately rests with our creators. Ultimately, professional creative talent is what makes a project succeed.

Speaker #3: Currently, we are exploring the application of the latest AI video technologies in our production process to reconstruct and upgrade our workflows, spanning script assessment, structural deconstruction, concept art, and digital asset design.

Speaker #3: Virtual scene design and cinematography and the visual special effects, among others, that said, all of these efforts are anchored by the aesthetic judgment and the creative instincts of our professional talent.

Speaker #3: Whether a story carries emotional depth, and whether a script meets the highest standards, ultimately rests with our creators. Ultimately, professional creative talent is what makes a project succeed.

Speaker #2: 趣闻集团与上海浦东新区合作共建了人工智能文创产业基地，引入了文化创作者入驻，并落地了一系列的 AI 工业化设施。目标是搭建 AI 精品文创的工业化体系，其中 AI 影视制作是重要的组成部分。心力也将深度参与。

Cao Huayi: 7月份，阅文集团与上海浦东新区合作共建了人工智能文创产业基地，引入了文化创作者入驻，并落地了一系列的AI工业化设施，目标是搭建AI精品文创的工业化体系。其中AI影视制作是重要的组成部分，新丽也将深度参与。

Cao Huayi: [Foreign language]

Maggie Zhou: In July, China Literature entered into a partnership with Shanghai Pudong New Area to co-establish the AI cultural and creative industry base, which has already attracted cultural creators and rolled out a series of AI industrial facilities. The initiative aims to establish an industrialized framework for high-quality AI-powered cultural and creative content, with AI-powered film and television production serving as an important part, and New Classics Media will also be deeply involved.

[Translator]: In July, China Literature entered into a partnership with Shanghai Pudong New Area to co-establish the AI cultural and creative industry base, which has already attracted cultural creators and rolled out a series of AI industrial facilities. The initiative aims to establish an industrialized framework for high-quality AI-powered cultural and creative content, with AI-powered film and television production serving as an important part, and New Classics Media will also be deeply involved.

Speaker #3: In July, China Literature entered into a partnership with Shanghai Pudong area to co-establish the AI cultural and creative industry base, which has already attracted cultural creators and rolled out a series of AI industrial facilities.

Speaker #3: The initiative aims to establish an industrialized framework for high-quality AI-powered cultural and creative content, with AI-powered film and television production serving as an important part and new classics media will also be deeply involved.

Speaker #2: 面向未来，心力将坚守头部内容创作者的定位。在剧本孵化、前期筹备、拍摄到后期制作的每一个环节，精益求精，力求为观众带来更多高品质的作品，同时我们也会把把握科技创新带来的红利，用 AI 重塑生产力，包括控制成本、提升效率、扩大产能等的，进一步巩固我们在精品剧集市场的领先地位。

Cao Huayi: 面向未来，新丽将坚守头部内容创作者的定位，在剧本孵化、前期筹备、拍摄到后期制作的每一个环节精益求精，力求为观众带来更多高品质的作品。同时，我们也会把握科技创新带来的红利，用AI重塑生产力，包括控制成本、提升效率、扩大产能等等，进一步巩固我们在新品剧集市场的领先地位。

Cao Huayi: [Foreign language]

Speaker #3: Looking into the future, new classics media will stay true to its identity as a top-tier content creator, with relentless focus on excellence across the entire production process, from script incubation and pre-production planning to filming and post-production, in order to bring more high-quality work to our audience.

Maggie Zhou: Looking into the future, New Classics Media will stay true to its identity as a top-tier content creator with a relentless focus on excellence across the entire production process, from script incubation and pre-production planning to filming and post-production, in order to bring more high-quality work to our audience. At the same time, we will capitalize on the dividends of technological innovation, deploying AI to reshape our productivity, including cost control, efficiency improvement, and capacity expansion, thereby further strengthening our market leadership in the premium drama segment. Thank you.

[Translator]: Looking into the future, New Classics Media will stay true to its identity as a top-tier content creator with a relentless focus on excellence across the entire production process, from script incubation and pre-production planning to filming and post-production, in order to bring more high-quality work to our audience. At the same time, we will capitalize on the dividends of technological innovation, deploying AI to reshape our productivity, including cost control, efficiency improvement, and capacity expansion, thereby further strengthening our market leadership in the premium drama segment. Thank you.

Speaker #3: At the same time, we will capitalize on the dividends of technological innovation deploying AI to reshape our productivity, including cost control, efficiency improvement, and the capacity expansion.

Speaker #3: Thereby further strengthening our market leadership in the premium drama segment. Thank you.

Speaker #1: There are no further phone questions at this time. I'll now hand back to Maggie Zou for closing remarks.

Operator 2: There are no further phone questions at this time. I will now hand back to Maggie Zhou for closing remarks.

Operator: There are no further phone questions at this time. I will now hand back to Maggie Zhou for closing remarks.

Speaker #3: Thank you, operator. I will now conclude today's call. On behalf of the entire China Literature management team, I would like to thank you for your participation in today's conference call.

Maggie Zhou: Thank you, operator. I will now conclude today's call. On behalf of the entire China Literature management team, I would like to thank you for your participation in today's conference call. If you have further questions about the company, please feel free to contact us. Thank you and goodbye.

Speaker #3: If you have further questions about the company, please feel free to contact us. Thank you, and goodbye.

Operator 2: That does conclude our conference for today. Thank you for participating. You may now disconnect.

Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.

Browse all earnings call transcripts

Q2 2026 China Literature Ltd Earnings Call

Request TrialDemo

China Literature

Earnings