Shifts in Investment Patterns

According to a public report issued in 2024, the number of passive “joint presentation” investors per film declined from 2019 to 2024, while the number of more engaged “presenting” investors has grown slightly. This shift reflects a more cautious investment climate, particularly for mid- and lower-budget productions. Investors are placing increased emphasis on the commercial viability of projects, with greater focus on market positioning, target audience, and return potential. As a result, producers are under growing pressure to present financing proposals that demonstrate not only creative value but also clear strategic planning and long-term sustainability.

Strengthened Influence of Internet and Public Companies

Recent data shows that internet platforms and publicly listed companies have significantly increased their presence in the film market in the PRC. According to a 2024 public report, internet-based studios accounted for 19% of presentation credits, 68% of total film releases, and contributed 90% of total box office revenue. This reflects a continued consolidation of market power among capitalised, data-driven entities.

Short-Form Content Centralisation and Ecosystem Growth

A notable trend in 2025 has been the centralisation of IP management in the PRC’s fast-growing micro-drama sector. In May 2025, Douyin Group established a Short-Drama Copyright Centre under its micro-drama platform, Hongguo, to streamline content licensing, IP sourcing, and platform distribution. This “one-window, multi-platform” model responds to heightened regulatory pressure on copyright compliance and reflects a broader shift from traffic-driven to rights-driven growth. The move also aligns with new enforcement initiatives from the National Copyright Administration and supports more efficient, platform-led deal flow in the short-form content market.

Live-Streaming Platforms

The interactive live-streaming sector in the PRC is expected to continue showing robust growth, with revenues projected to reach USD6.6 billion by 2030. Major M&A transactions support this upward trend, most notably Baidu’s RMB2.1 billion acquisition of YY Live in February 2025, demonstrating strong market confidence in monetisation prospects. Established platforms such as Huya and DouYu (in the gaming space), Douyin (with its diversified live commerce and entertainment streams), and Bilibili (leveraging VTuber content) maintain large and monetisable user bases. In the meantime, geopolitical shifts have also opened unexpected avenues for growth – following the U.S. restrictions on TikTok effective 19 January 2025, a significant portion of the American user base migrated to RedNote, which rose to the top of Apple’s U.S. App Store rankings within 48 hours.

Live Performances (Concerts & Festivals)

Recent data suggest robust growth in the PRC’s live entertainment sector, particularly in the areas of concerts and music festivals. According to the China Association of Performing Arts, the number of medium-to-large concerts and festivals (with attendance of 2,000 or more) doubled from 2019 to 2023, reaching approximately 5,600 events, with ticket revenue totalling RMB20.17 billion. Mass-market music festivals also experienced a surge, especially during public holidays. In parallel, online music concerts – initially popularised during the pandemic – have evolved into a stable supplementary format, attracting large digital audiences through platforms such as Tencent Music, NetEase Cloud Music, and Bilibili. Together, these channels contributed to a broader expansion of the sector, which generated an estimated RMB58 billion in ticket revenue across nearly 490,000 events in 2024.

Micro–Dramas and Short–Form Serialised Video

The PRC’s “duanju” (micro drama) sector was expected to exceed RMB50 billion in market size by 2024, reflecting approximately 35% year-over-year growth. Leading platforms such as Douyin, Kuaishou, and Hongguo are leading in both in-house production and third-party licensing, often leveraging algorithmic distribution and user data to optimise viewer retention and monetisation. Common revenue streams include pay-per-episode models, subscription bundles, and integrated e-commerce.

Podcasts and Digital Audio

The digital audio market, spanning podcasts, audiobooks, and online radio, continued its growth in the PRC in 2024, with total sector revenue exceeding RMB560 billion, and podcasts alone contributing over RMB12 billion, according to industry estimates. Leading platforms, such as Ximalaya, NetEase Cloud Music, and QingTing FM, are actively expanding their original and branded podcast content. Ximalaya, for example, hosts over 240,000 monetisable programmes across diverse genres and reports a user base exceeding 220 million accounts.

Online Gaming and Esports

The PRC remains one of the world’s largest and most dynamic gaming markets, with industry revenue reaching RMB303 billion in 2024. The esports segment, in particular, is maturing as a standalone industry, generating RMB27.57 billion in 2024 – an increase of 4.62% year-on-year. According to an industry survey, livestreamed esports content accounted for over 80% of total esports revenue, underscoring the sector’s tight integration with digital platforms such as Douyu, Huya, and Bilibili. Competitive events and club operations contributed smaller but growing portions (8.75% and 6.37% respectively), reflecting broader diversification in monetisation models. In parallel, mobile and cloud gaming continue to expand, enabled by 5G infrastructure and integration with platforms like WeChat.

IP Consolidation

Content platforms have continued to pursue upstream acquisitions of production companies and IP libraries to secure supply and increase control over monetisation. For example, Tencent and iQIYI have expanded in-house studio capabilities, while Bytedance has acquired smaller script and rights holders to fuel its short-drama ecosystem.

Strategic Financing of Virtual IP and AI-Driven Content

Investments in AI-generated content, VTuber studios, and virtual performance IP have accelerated. Companies such as Bilibili and Tencent Music have backed emerging creators through convertible note structures or minority equity deals, aligning financial risk with innovation potential.

Platform–Creator Strategic Alliances

Rather than outright acquisitions, platforms like Douyin, Kuaishou, and Bilibili are entering into multi-project strategic cooperation agreements with high-performing creators and mini studios. These often include minimum guarantee structures, priority option rights, or tiered incentive payments based on metrics such as episode completion rate or audience engagement metrics.

Emerging Back-End Participation

Over the past year, the PRC has seen significant innovation in back-end participation structures, particularly driven by major streaming platforms. Below are a few examples.

• On 13 May 2025, iQIYI introduced a revenue-sharing model for theatrical films made available on the platform within 90 days of release. Revenues are linked to effective viewing time, with tiered rates and flexible exclusivity, offering a performance-based alternative to flat-fee licensing.
• In early 2025, iQIYI also launched the so-called Wildfire Initiative (in Chinese, “燎原计划”), a commercial web film initiative that recruits scripts and production teams from the market. Scriptwriters may receive up to RMB100,000 upfront and 5% of net profits. Production teams are eligible for budgets of up to RMB6 million and a 47.5% profit share, strengthening alignment between platforms and creators.
• On 1 May 2025, Youku upgraded its web film revenue-sharing scheme, introducing a 100% membership revenue split and extending the exclusive sharing period to 730 days. The model incentivises long-term content value and quality by tying high-revenue potential to exclusivity and compliance thresholds.

These recent changes mark a growing industry shift toward performance-based, profit-sharing models that more closely align platform success with content performance and creator participation.

Dispute Triggers in Back-End Participation

In recent experience, several recurring issues have led to disputes over back-end participation in film and television deals in the PRC.

Validity and applicability of agreements

Disputes frequently arise when multiple agreements exist and parties disagree on which governs revenue sharing, particularly where formal execution (eg, stamping or signing) is incomplete but the parties proceed with performance. For example, in a dispute concerning the film Never Say Never (in Chinese,《八角笼中》), a dispute emerged over two conflicting agreements: one unsigned version included a 5% box office share, while the final signed version excluded any profit-sharing clause.

Unclear deduction standards

Conflicts arise when cost deductions, such as marketing expenses or platform fees, are not clearly defined, resulting in disputes over net profits.

Force majeure and project delays

Delays due to external events (eg, the pandemic, talent issues) and subsequent additional costs may give rise to disagreements over whether such costs should affect the profit pool. In a 2024 case, a series was delayed due to actor Kris Wu’s legal issues, prompting a dispute over who should bear the additional post-production expenses.

Non-payment or delayed payment

Some disputes involve platforms or partners failing to pay their agreed-upon shares or withholding payments without reasonable cause.

In response to a slower box office recovery, rising uncertainty in theatrical performance, and the increasing difficulty mid- and small-scale productions face in securing financing, we have seen some trends in how film projects are being financed in the PRC over the past year.

Regional and Institutional Initiatives

In April 2025, the Chengdu Film Investment Action Plan was launched to establish a comprehensive ecosystem that combines capital, content incubation, production infrastructure, and research. Similarly, the Beijing Film Industry Investment Fund, announced during the 2024 Beijing International Film Festival, brings together state-backed entities and financial institutions to professionalise and scale film investment.

Thematic and Demographic-Focused Funding

New funds have emerged targeting under-represented voices and genres. For instance, the 2025 “Bloom Plan” Female Film Fund, backed by industry and academic stakeholders in Sichuan, supports female-led narratives and creators, with a hybrid “public welfare + industry” funding structure.

In international co-productions, several recurring considerations have proven critical to ensuring smooth cross-border collaboration.

Understanding Legal Frameworks

It is essential to conduct early-stage mapping of regulatory requirements in each relevant jurisdiction. This includes, among others, identifying necessary permits and approvals, assessing tax and withholding implications, and ensuring compliance with local content regulations. Particular attention should be paid to the regulatory regime governing Sino-foreign co-productions in the PRC, including project registration with the National Radio and Television Administration (NRTA), content review requirements, and compliance with quotas on foreign talent.

Clarifying Terminology

Key contractual terms, such as “producer”, “net profits”, or “recoupment”, may vary significantly in meaning across jurisdictions. Clarifying these terms at the outset is important to avoid future misunderstandings or conflicting interpretations.

Managing Language Risk

Translation issues can lead to significant ambiguity, particularly in legal drafting. Bilingual counsel should be engaged, and dual-language contracts should be carefully reviewed to ensure that legal concepts are accurately and consistently conveyed.

Establishing a Clear Deal Roadmap

Sino-foreign co-production projects would greatly benefit from a well-structured roadmap that defines key milestones, decision-making responsibilities, rights allocation, and dispute resolution mechanisms.

Allowing for Timing Contingencies

Sino-foreign co-production projects frequently require longer lead times due to local regulatory procedures, cultural differences in negotiation styles, and extended internal review processes. Timelines should be structured with adequate buffers to account for these variables.

In the post-pandemic environment, while force majeure clauses have long been standard, their scope is now being materially expanded in major productions to incorporate lessons from COVID-19. In recent international co-productions, force majeure definitions often extend beyond general references to “epidemics” or “government actions” to expressly include communicable diseases, both actual and perceived, along with quarantines, travel restrictions, and public health declarations (eg, those issued by the WHO). Depending on the negotiation outcome, clauses may further specify the operational thresholds required to trigger force majeure, such as isolation of key personnel, site closures, or disruption to delivery or post-production schedules.

Meanwhile, negotiations increasingly focus on detailed risk allocation – specifying which delays or costs are excused, under what conditions, and whether additional insurance or mitigation measures are required. 

While the 2023 SAG-AFTRA and WGA strikes have prompted major contractual shifts in Hollywood, particularly around the use of AI and protections for creative labour, these developments have not yet had a direct impact on the PRC market. This is largely due to the absence of an equivalent unionised system for writers, actors, or directors, and therefore lacks the collective bargaining mechanisms through which such contractual changes are typically negotiated.

That said, the underlying issues are increasingly relevant. The application of AI technologies in content production is accelerating in the PRC, with the first use of a fully digital actor in a live-action series (I Am Nobody (in Chinese, “异人之下”), August 2023) drawing industry attention. While some major productions have started to incorporate AI-related provisions into talent agreements, addressing the use of AI-generated likenesses or digital replicas, such practices are not yet widely adopted across the industry.

As AI adoption expands, there is growing recognition that contractual frameworks will need to evolve to address rights, attribution, and consent, balancing the interests of talent, producers, and technology providers. For now, however, the impact of international union actions remains indirect (if any), serving more as a reference point for future domestic policy and industry standard-setting.

While recent strikes in Hollywood have led to significant contractual and structural changes in the relationship between talent and studios, such labour actions are unlikely to serve as a model for the PRC entertainment industry. The PRC does not have an established system of collective bargaining for actors, writers, or directors, and industrial strike is not supported under existing regulatory frameworks.

Nevertheless, the core issues raised by these strikes – such as fair compensation, rights over digital likeness and data, and the evolving role of creative contributors – are increasingly relevant. In the PRC, any rebalancing is more likely to emerge through policy interventions, administrative regulation, and market-driven best practices rather than labour-led initiatives.

As the use of emerging technologies such as AI intensifies, regulatory authorities may intervene to address questions of image rights, data use, and creative attribution. These top-down initiatives could reshape the contractual and economic standing of talent.

As mentioned above, in the PRC market, traditional guilds or unions for content creators, such as those found in the U.S. do not exist in a comparable form. As such, non-traditional creators, including vloggers, live streamers, podcasters, and short video producers, generally do not encounter guild- or union-related issues in the conventional sense.

However, this absence of collective structures does not mean the sector is unregulated. Instead, content creators often face oversight through platform governance, administrative regulations, and, increasingly, compliance requirements related to content standards, advertising, taxation, and the use of personal data. For example, live streamers and multi-channel networks (MCNs) are now subject to industry-specific guidelines issued by regulators such as the NRTA and the Cyberspace Administration of China (CAC).

Tax incentives in the PRC have impacted productions through multi-dimensional tax policies, contributing to domestic industry growth and international cultural exports. For example:

VAT Exemptions for Qualified Film Industry Activities (Valid Until 31 December 2027)

The PRC has implemented full VAT exemptions for qualified film enterprises on income from film copy sales (digital/physical), film copyright transfers or licenses, film distribution revenue and rural distribution. For urban theatrical distribution, a simplified VAT calculation method (3% rate) is available instead of the standard 6-13% rate.

Zero-Rated VAT for Global Cultural Exports

Domestic entities providing broadcast, TV, and film production and distribution services that are consumed entirely overseas qualify for a 0% VAT rate.

Corporate Income Tax (“CIT”) Incentives

To incentivise market-oriented reforms, public cultural institutions (eg, state-owned studios) that transition to corporate structures by 31 December 2022 enjoy full CIT exemptions until 2027. Companies qualified as high-tech companies (eg, AI-driven visual effects studios) will also receive a reduced CIT rate of 15% and weighted deductions for innovation costs. Small and micro enterprises also benefit from CIT reductions and exemptions on minor taxes.

In recent years, jurisdictions across the PRC have adopted a more regulated approach to tax incentives for productions, striking a balance between regional economic goals and the central government’s emphasis on policy uniformity and fair competition. While overtly aggressive tax schemes like the “Five-Year Exemptions plus Five-Year 50% Reductions “ in Huoerguosi (a border town in Xinjiang, briefly became a popular registration hub for entertainment companies due to its preferential tax policies) back in 2010s are no longer prevalent, localised incentives exist in subtler forms, creating both opportunities and legal complexities for producers.

The PRC has strengthened oversight of regional tax policies targeting entertainment enterprises. A notable example is the Hainan Free Trade Port, which, while offering an attention-grabbing “dual 15% cap” on corporate and individual income taxes, enforces substantive operational requirements, including a physical office presence, local workforce employment, and substantial business activities, to deter shell company formations. Nevertheless, local governments continue to leverage tax incentives to attract cultural enterprises, increasingly channelling these measures through specialised cultural industry parks and film hubs. This strategic shift involves embedding preferential policies within park-specific operational frameworks, rather than relying on public tax codes. These initiatives incorporate multidimensional fiscal mechanisms and are negotiated on a case-by-case basis, which may include:

• targeted incentives administered within the park;
• conditional rebates of locally retained tax revenues;
• strategic refunds of incremental VAT credits to offset upfront infrastructure costs;
• VAT credit/refund to studios investing in technology upgrades; and
• rent reductions and utility bill rebates.

To benefit from these incentives, producers must navigate key risks, including compliance ambiguity and policy instability. Producers should prioritise verifying the legal validity and enforcement track records of incentives and integrate milestone-tied safeguards into contracts.

Based on our observations, international film projects typically adopt a holistic approach to leveraging tax incentives by favouring policies across multiple jurisdictions.

For foreign productions filming in the PRC, structuring projects as official co-productions remains a key strategy to bypass import quota restrictions and qualify as “domestic films” for theatrical release, thereby accessing preferential tax incentives outlined in Section 4.1 of the PRC’s tax incentives.

Regarding emerging challenges in international relations, we maintain active monitoring of potential trade barriers such as the proposed tariffs on foreign-produced films by certain countries. While current market dynamics prioritise incentive-driven location decisions, geopolitical tensions could necessitate contingency planning for scenarios involving retaliatory tariffs or content distribution restrictions.

The PRC’s government-supported funding system for entertainment projects demonstrates broad coverage and diversified implementation models. Key programmes span film production, performing arts, TV and digital content creation, with both national and local governments offering fiscal incentives to boost cultural innovation.

National Funding

At the national level, the PRC has long maintained a National Film Industry Development Special Fund, which imposes a levy on film box office revenue. The collected funds are allocated between national and local governments at a 4:6 ratio, with priority given to supporting cinema construction and equipment upgrades, minority-language film dubbing and accessibility initiatives, key film studio bases and production hubs, funding and rewarding the production and distribution of outstanding domestic films and artistically experimental or culturally distinctive films.

Local Funding

At the local level, Beijing exemplifies targeted funding through programmes such as the Beijing Cultural Arts Fund, the Performing Arts Platform Subsidy Program, and the Broadcasting and Online Audiovisual Development Fund – all dedicated to distinct entertainment sectors. Separately, Sichuan Province operates an annual RMB300 million provincial fund to support major cultural projects spanning film, television, stage productions, and literary works, with priority given to high-quality and heritage-focused initiatives. Support at the municipal level is also common. For example, Haikou City in Hainan Province implements a tiered incentive system that offers cash rewards for qualifying film and TV productions, stage performances, diverse arts venues, international sports events, and music festivals.

The Copyright Law of the PRC explicitly limits authorship to natural persons and legal entities or unincorporated organisations (only in limited scenarios inapplicable here), thereby excluding artificial intelligence systems from qualifying as “authors”. Multiple judicial cases establish human authorship for AI-generated pictures under certain criteria, specifically whether they demonstrate human intellectual contribution and originality.

A representative 2023 Beijing Internet Court ruling notably affirmed that the deliberate design of visual elements, the strategic selection and sequencing of text prompts, the calibration of technical parameters and the curatorial judgment exercised in selecting final outputs from multiple AI-generated alternatives all demonstrate the plaintiff’s intellectual contribution.

For originality assessment, a 2024 case demonstrates that the court will examine the uniqueness of expression and the demonstrable connection between human creative decisions and the final output, providing evidence that shows the creator’s ability to exercise control over and reasonably predict the creative outcomes. The court holds that when users engage in refinement of keywords, deliberate parameter adjustments, and selective approval of outputs, such activities render the AIGC “foreseeable and under the user’s control”.

Challenges in enforcing copyright for AI-generated content in the absence of human authorship may include:

• an AIGC may fail to qualify as “work” for copyright protection under current PRC laws;
• if AI-generated content is not protected by copyright, third parties could freely reproduce or commercialise it without legal consequences; and
• if the AI-generated content is protected, companies may claim copyright over mass-generated content, stifling competition.

Copyrightability of AI-Generated Pictures

Courts have recognised human authorship and copyright protection for AI-generated pictures when they demonstrate human intellectual contribution and originality. 

A court also holds that in the absence of original records to substantiate the plaintiff’s creative process, the choices and modifications of prompts lack evidentiary support, making it difficult to demonstrate the intellectual effort invested. Moreover, the plaintiff was not able to reproduce the same generation process as the disputed image. Therefore, the court finds it difficult to conclude that the plaintiff made personalised selections and modifications reflecting originality in the process of generating the disputed image. 

Infringement Claims Over Training Data

In a notable Hangzhou case involving the copyrighted character Ultraman, the plaintiff demanded the deletion of all related training data from the defendant’s AI model. The court ruled that since there is no evidence proving the AI’s use of the training data:

• is aimed at exploiting the original expression of the copyrighted work;
• impairs the normal exploitation of the copyrighted work; or
• unreasonably harms the rights holder’s legitimate interests,

such use may be deemed fair use, and the court rejected the plaintiff’s deletion request. This ruling has sparked intense debate in both academic and industry circles, as the PRC’s fair use doctrine, structured as a restrictive list under the Copyright Law, does not explicitly recognise AI model training as a permitted scenario. Several similar cases regarding unauthorised use of training data are still pending.

Infringement by AI-Generated Content

In another Ultraman-related dispute, the court ruled that an AI service provider had infringed the plaintiff’s reproduction and adaptation rights by generating images that were substantially similar to the copyrighted character.

Digital Likeness Violations

Courts have consistently ruled that unauthorised use of a person’s voice, name, portrait, or likeness to create AI-generated content (eg, synthetic voices or chatbots) infringes upon their legitimate rights.

Important Note on Legal Precedent in the PRC

Unlike common law jurisdictions, the PRC follows a civil law system, where court rulings do not establish binding precedents. Judges retain discretion to conduct case-by-case analyses, meaning outcomes may vary even in similar disputes.

While detailed public disclosures on footage licensing deals remain limited, the PRC’s media industry is undergoing a paradigm shift as major content holders strategically leverage and monetise their archives for AI advancements. Leading studios and platforms are licensing their curated film and TV clips to AI developers under structured agreements. IQiyi, a major streaming platform, aggressively litigated against unauthorised use of its footage by an AI firm for alleged model training in 2024, which case is pending a court ruling. The legal framework remains fiercely debated, as scholars and tech leaders grapple with whether the PRC’s restrictive fair use provisions and even the mandatory licensing mechanism should be reinterpreted or legislatively amended to address the unique demands of AI training.

In the PRC market, the concept of residuals, particularly as defined through collective bargaining agreements, is not commonly applied. This is largely due to the absence of formal guilds or unions that represent creative professionals, such as writers, directors, or actors. As a result, compensation models for streaming content in the PRC are primarily structured as buyouts, tiered minimum-guarantee purchase agreements, or flat-rate revenue shares negotiated on a case-by-case basis.

Digital-first formats in the PRC market include web series and online films, short-form videos and dramas, and livestreaming. Short “micro-dramas” alone generated about RMB47 billion in the PRC in 2024. Major streaming platforms (iQIYI, Tencent Video, Youku, Bilibili, etc) employ hybrid business models that combine subscription (membership fees), advertising, and pay-per-view (PPV) to monetise content. Similarly, social apps like Douyin (TikTok China) and Kuaishou use ad sales and live gifting, while e-commerce livestreaming (Taobao Live) adds product sales.

Their revenue-sharing models involve several unique challenges.

Evolving Revenue Models

The rapid evolution of digital business models in the PRC has made revenue-sharing terms increasingly complex. Hybrid monetisation schemes, which blend subscriptions, pay-per-view, ads, and e-commerce, are now common. For instance, in late 2024, major VOD platforms overhauled short-drama deals to prioritise user growth and content quality. iQIYI introduced watch-time-based pricing and higher base payouts, Tencent Video bonuses for subscriber conversions and high-performing series, and Youku launched tiered per-episode pricing with dynamic “novelty” multipliers. Such frequent rule changes mean contracts can become outdated within a year.

Data Access and Verification

Reports have noted that platform-side data and monetisation algorithms are treated as proprietary and commercially sensitive, which may limit content partners’ ability to verify revenue figures independently. While audit and reporting rights can be negotiated, their scope and enforceability often depend on the relative bargaining position of the parties and the commercial framework of the collaboration.

Regulatory Compliance

The PRC’s strict and fast-evolving content and platform regulations heavily influence revenue-sharing deals. All content must pass Chinese censorship (no pornography, excessive violence, unapproved history, etc), and platforms usually conduct a “second review” before publication, delaying or blocking monetisation if issues arise. As such, relevant agreements usually obligate the producer to deliver legally compliant material and allow the platform to remove or modify content if a competent authority demands, with clear implications for revenue allocation if content is taken down.

There is often a misalignment between traditional content producers and platform-driven business models. Platforms prioritise engagement-driven monetisation, such as tip-based models, traffic-based bonuses, or algorithm-driven advertising, rather than fixed licensing fees, which can complicate revenue projections and create uncertainty for investors.

The premise of “in-season stacking” for open-ended series is fundamentally incompatible with PRC regulatory frameworks. Unlike jurisdictions permitting episodic rollouts during production, the PRC mandates full pre-release censorship under the NRTA. All episodes of a series must undergo rigorous content review and secure an Internet Audiovisual Program License (网络视听节目许可证) prior to any public release.

Consequently, licensors and platforms mostly negotiate distribution rights for complete, pre-approved series. “Stacking” mid-season would be operationally impossible and legally untenable – no license implicitly permits bypassing censorship. Platform terms generally prohibit unauthorised content modification or staggered releases not explicitly greenlit by regulators.

As such, practitioners should structure deals around finalised content and treat “stacking” as a jurisdictionally irrelevant concept.

For reasons introduced above, labour unions and guilds do not materially impact the cost of distribution for streamers in the PRC market. Distribution costs are instead shaped by market-driven factors such as licensing models (eg, buyout vs revenue sharing), content exclusivity, talent pricing, and regulatory compliance. While some platforms adopt internal guidelines for talent compensation, there is no union-imposed cost structure affecting digital exploitation. As a result, the cost of distribution remains primarily influenced by platform strategy and content demand rather than labour representation.

Certain legal issues commonly encountered in M&A transactions involving entertainment companies in the PRC, particularly in the sale of film and TV content libraries, have been outlined below.

Foreign Investment Restrictions & Negative List Compliance

The PRC regulates foreign investment through the Special Administrative Measures for Foreign Investment Access (Negative List), which restricts or prohibits foreign ownership in sectors such as film and television production and distribution, streaming platforms, and artistic performing groups. As a result, foreign investors often adopt variable interest entity (VIE) structures to indirectly control domestic entities. However, VIE arrangements face legal uncertainties, including potential invalidation by Chinese courts due to regulatory ambiguity.

Chain of Title Verification

Film/TV library transactions require extensive chain-of-title due diligence to confirm ownership and the status of underlying rights (eg, scripts, music scores). Existing third-party licensing arrangements may reduce content exclusivity, thereby lowering valuation.

Content Censorship

All acquired content libraries must comply with PRC censorship laws and regulations. Content previously distributed overseas often requires post-acquisition edits to remove sensitive materials or unapproved depictions before domestic distribution. Failure to pass regulatory reviews may result in the distribution being halted in the PRC.

The combination of cable companies (distribution networks), studios (content producers), and streaming platforms will likely raise antitrust concerns under the PRC regulatory regime. Key issues include:

Competition Concerns in Vertical Mergers

Such combinations risk creating unilateral effects through combined control over both upstream content creation and downstream distribution channels. Regulatory authorities may examine whether this could eliminate or restrict competition.

Mandatory Filing Thresholds

An acquisition of control or joint control requires mandatory antitrust filing with the State Administration for Market Regulation (SAMR) if the relevant parties meet the following thresholds for the last fiscal year:

• at least two parties’ PRC turnover each exceeds RMB 800 million; and
• the parties’ combined turnover exceeds RMB 12 billion globally, or exceeds RMB 4 billion within the PRC.

In M&A transactions involving talents, representations and warranties are customised to address potential liabilities.

Off-Screen Conducts

Investors increasingly demand comprehensive off-screen conduct clauses (or so-called “moral provisions”) that extend beyond legal compliance. These provisions typically prohibit not only criminal offences but also public behaviour contradicting socialist core values (eg, discriminatory statements, marital infidelity, or politically sensitive remarks) and other events that may adversely affect the talent’s reputation.

Intellectual Property Safeguards

Investors typically require representations and warranties in transaction documents to confirm that:

• all IP originally developed by talents has been duly vested in the target company;
• such IP is freely transferable and licensable; and
• no disputes exist between the talents and the company regarding IP ownership and usage.

Enforceability of Restrictive Arrangements

In M&A transactions involving talent, representations and warranties often include verification that non-compete and confidentiality provisions comply with applicable local laws, ensuring they are legally binding and enforceable.

When advising on entertainment M&A transactions involving talents and IP rights in the PRC, we pay special attention to the aspects outlined below.

Talent Contract Due Diligence

Verify exclusivity clauses, non-compete obligations, profit-sharing arrangements, and assess whether contracts comply with the PRC laws (such as the PRC Labour Law and the PRC Civil Code). M&A deals may trigger a need to renegotiate contracts or obtain waivers from key talent because many talent contracts in the PRC prohibit unilateral assignment to third parties without consent. Assess the termination rights and evaluate whether mergers or changes in control entitle talent to terminate contracts prematurely.

Legacy IP Clearance

Legacy intellectual property in the PRC’s entertainment sector frequently entails intricate ownership histories. To mitigate risks, the following steps are critical:

• conduct comprehensive chain-of-title verification and resolve ambiguities in ownership or usage rights;
• assess the adequacy of moral rights waivers under the PRC law;
• audit existing licensing agreements to identify exclusivity terms, sublicensing restrictions, or third-party rights that could impede post-transaction exploitation; and
• investigate historical IP disputes, pending litigation, or unresolved piracy claims, which may trigger liabilities or expose gaps in IP enforcement.

Audit and transparency provisions are critically negotiated in entertainment contracts, particularly where revenue-sharing is involved, such as AVOD licensing, film co-productions, music royalties, or franchising. Such audit and transparency provisions typically cover aspects such as the right to audit, audit frequency, scope of accessible records, cost allocation, definition of the revenue pool, regular reporting, and establishment of an escrow account.

Under the Labour Contract Law of the PRC, post-termination non-compete clauses are enforceable only for senior management, advanced technical personnel, and employees with access to confidential information. Such restrictions cannot exceed a maximum duration of two years, and employers must provide financial compensation to the restricted personnel throughout the non-compete period.

In the entertainment sector, particularly in the influencer and livestreaming industries, MCN agencies commonly impose non-compete obligations on their streaming hosts after the termination of their agreements. This practice persists even when the legal relationship between parties usually constitutes a service or agency arrangement rather than employment. Most Chinese courts have demonstrated a general willingness to uphold the reasonableness of such restrictions in this highly competitive, capital-intensive sector of talent development, not necessarily mandating the existence of an employment relationship as a prerequisite for enforcement.

The enforceability of non-compete obligations in the PRC’s livestreaming industry demonstrates significant regional variation in judicial interpretation. Our analysis of judicial cases reveals inconsistent rulings even among major digital entertainment hubs such as Beijing, Hangzhou, and Guangzhou. Based on our case review from public resources, it appears to us that courts are more likely to conduct a comprehensive review of relevant factors, such as:

• whether the personnel fall under legally recognised categories of non-compete obligors;
• whether the company offers fair financial compensation during the non-compete period;
• whether the non-compete period exceeds the two-year limit; and
• whether the clause is an unfair standard term that disproportionately restricts the individual’s rights while favouring the company.

Notably, Chinese courts are reluctant to order specific performance (eg, compelling an individual to leave a competitor) and instead prefer to award monetary damages for breaches.

As cutting-edge technologies like AI, VR and AR are revolutionising the entertainment industry, contracts are evolving to keep pace. Key changes include:

AIGC Ownership and Commercialisation Exploration

In rapidly evolving AI platform-user agreements, platforms are actively exploring AIGC ownership attribution – whether rights should vest with users, the platform itself, or through shared ownership models.

Licensing for New Media

Licensing agreements are increasingly specifying whether AI, VR, or AR adaptations (eg, turning a film into an AI-driven game or VR experience) are permitted or prohibited, and defining the scope of “emerging media” as exploitation channels with intentional breadth or limitation, depending on the rights holder’s strategic objectives.

AI Model Training

Talent and copyright holders tend to demand clauses prohibiting unauthorised use of their likeness, voice, or copyrighted material for AI training.

AI Disclosure & Control

In light of AI’s expanding role in entertainment content creation (eg, AI-powered editing, voice synthesis, and script generation), creative services contracts may prohibit the use of AI tools, mandate transparency, or require documentation of workflow integration if AI tools are permitted, while maintaining quality control protocols.

Privacy & Data Compliance

Given these technologies’ inherent data collection capabilities, particularly regarding personal information and biometric data, privacy provisions now command greater contractual attention than ever.

RC laws prohibit foreign entities from establishing or holding equity in entertainment production companies that engage in content production (eg, film, TV programs, web series, games) in the PRC. The primary legal avenue for foreign involvement remains the project-based co-production mechanism, which requires a partnership with qualified PRC entities. Many foreign investors consider adopting the VIE structure to exercise control over and receive the economic benefits generated from the domestic operating entity in the PRC.

Notwithstanding the foregoing, recently, Hong Kong and Macao “service suppliers” qualified under their respective Closer Economic Partnership Arrangement (CEPA) signed with the PRC government are allowed to establish film production companies in PRC, and invest in co-productions or domestic film productions as local investors. Foreign investors can leverage Hong Kong or Macao subsidiaries that meet CEPA requirements to enter the PRC’s film production sector.

The entertainment labour market in the PRC operates without Western-style collective bargaining systems. Employment relationships are generally governed by the PRC’s labour laws. 

The limited liability company (LLC) structure provides foundational legal protection, limiting shareholder liability to the company’s registered capital. Companies typically supplement this protection through comprehensive insurance coverage. Notably, Errors & Omissions (E&O) insurance is gaining traction for project-specific risk mitigation, particularly in co-productions, to address potential copyright infringement claims and other intellectual property-related liabilities.

In the streaming landscape in the PRC, platforms are increasingly blending FAST, AVOD, and SVOD models to deliver diverse content offerings. However, the FAST model is notably represented by state-owned broadcasters’ FAST channels, which primarily distribute programming originally aired on traditional TV. To highlight the distinctives, we will limit our discussion about FAST models to state-owned FAST channels.

Regulatory Perspective

state-owned FAST platforms tend to adhere to content censorship standards that mirror those of state-run broadcasters, typically requiring licensors to secure traditional broadcast licenses such as the Domestic TV Drama Distribution Permit or Film Public Exhibition Permit. AVOD and SVOD platforms operate under the Online Audiovisual Content Distribution Permit framework, provided that foreign content imported and distributed through these platforms must still obtain the more stringent broadcast licenses, ie, the TV Drama Distribution Permit or Film Public Exhibition Permit, a requirement that reflects the PRC’s most rigorous censorship standards.

Content Strategy

FAST channels are optimised for serious, state-aligned, evergreen programming with high rerun potential (eg, domestic historical dramas). AVOD services excel with niche categories like anime, documentaries and micro web series that leverage targeted ad monetisation. SVOD services are the primary avenue for premium content, such as internationally popular films and high-budget series, typically under exclusive licensing arrangements.

Revenue Potential

AVOD and SVOD platforms offer more lucrative options, including ad revenue splits, subscription revenue sharing, as applicable, or even minimum guarantee and performance bonuses, albeit FAST platforms generally offer licensors more modest returns, typically structured as a fixed fee or alternatively a fixed percentage of ad revenue.

Leading Chinese streaming platforms are experimenting with interactive formats, albeit compensation models for talent remain in development. Currently, actors in the PRC primarily receive a fixed fee for a specified period of shooting days, with negotiated overtime fees, while royalties are uncommon, except for top-tier performers.

There may be room to explore performance-based incentives, such as bonuses tied to when an actor’s story path achieves exceptional user engagement, for instance, if a particular branch were to be selected by over a certain percentage of viewers, as verified by platform analytics. These concepts require careful negotiation and adaptation to the PRC’s unique production ecosystem.