The Legal Risks and Countermeasures throughout the Entire Process of Micro-Drama Investment

I. Introduction

Micro-dramas refer to short episodic works with relatively short duration and mainly played in portrait mode. They have now become one of the entertainment choices for an increasing number of people. The "White Paper on the Development of China's Micro-Dramas (2025)" shows that in 2025, the user base of micro-dramas in China was 696 million, and it is estimated that the number of independently produced and released vertical-screen dramas throughout the year would be approximately 40,000.

In terms of industry scale, the "2025 Shanghai Report on the Development of Micro-Dramas Industry" indicates that in 2025, the domestic market size of micro-dramas accelerated growth, and the annual output value approached 90 billion yuan. The "2025-2029 China Micro-Drama Market Research Report" predicts that the market size of micro-dramas in China might exceed 150 billion yuan by 2030.

With the rise of the micro-drama industry, related investment disputes have also become increasingly frequent. This article will analyze the main legal risks and response strategies involved in micro-drama investment from the perspective of investors, combined with relevant judicial cases, covering investment methods, income distribution, production and distribution, regulatory rules, etc.

II. Investment Methods

The investment methods for micro-drama projects mainly include project investment, equity investment, and debt investment, etc. The investor can conduct preliminary due diligence to gain a comprehensive understanding of the main creative team's past works, performance ability, credit status, as well as the project's basic information such as script content, ownership registration, authorization information, and infringement risks. This allows for a reasonable assessment of the project value and the determination of an appropriate investment method.

(I) Project Investment

Project investment is the most common investment method for micro-drama projects, which is suitable for their short production cycle and low investment amount. It is typically divided into impulse projects ranging from 100,000 to 400,000 yuan, ordinary projects ranging from 400,000 to 800,000 yuan, premium projects ranging from 800,000 to 1.5 million yuan, and S-level projects ranging from 1.5 million to 3 million yuan.

If a micro-drama project meets the characteristics of a common business purpose, joint investment, joint operation, sharing of profits, and sharing of risks, regardless of whether a written agreement is signed, it may be recognized as a partnership contract relationship, and the relevant provisions of "Partnership Contract" in the Civil Code can be applied. The usual exit methods for investors are to transfer shares or terminate the contract. If the conditions for legal termination due to fundamental breach that prevent the realization of the contract purpose are met, or if the conditions for agreed termination are met, the investor can terminate the contract and request the return of the investment funds. For example, in case (2024) Jing 0112 Civil Initial 32478, the involved micro-drama did not eventually be released. According to the eighth article of the "Guaranteed Minimum Agreement", the defendant should return the full investment funds and compensate the plaintiff with 5% of the investment funds as a penalty.

If the contract termination cannot be determined, investors generally cannot achieve exit through the division of partnership property. For example, in case (2025) Liaoning 0411 Civil Initial 546, the plaintiff and the defendant signed the "Short Drama Investment and Shareholding Contract Agreement", and the plaintiff invested 174,000 yuan to obtain 20% of the equity in the involved short drama. Both parties were in a partnership contract relationship and the defendant did not constitute a breach of contract. Before the termination of the partnership contract, partners are not entitled to request the division of partnership property. Due to the non-termination of the involved contract, it is difficult to support the plaintiff's lawsuit claim for the defendant to return the investment funds.

For producers who fail to truthfully disclose important information, if it constitutes fraud, the investor can exercise the right of revocation within one year from the date of knowing or should have known the circumstances for revocation. For example, in case (2024) Zhejiang 0783 Civil Initial 10270, whether from the production cost of the short drama or the entity responsible for the production and shooting of the short drama, the defendant did not truthfully disclose to the plaintiff, and there was a fraudulent act. The defendant's fraudulent act caused the plaintiff to sign the agreement against his true will. The plaintiff has the right to request the revocation of the agreement signed by both parties.

(II) Equity Investment

Equity investment exits are relatively difficult, so they are typically applicable to micro-short drama projects with higher budgets and long-term cooperation nature. The investor takes a stake in the production company or jointly establishes a project company with the production company to conduct business activities, enjoying shareholder rights such as dividend rights, voting rights, and the right to know.

After the investment funds are converted into the company's registered capital, they generally need to exit through methods such as股权转让 (share transfer)， equity repurchase， or company liquidation， unless there are special agreements or the production company has harmed the company's interests. In disputes over shareholder damage to the company， the investor needs to bear a higher burden of proof than in contract disputes. For example， in (2024) Zhejiang 07 Civil Appellate Case No. 4347， Company A claimed that Shi Mou used the funds involved in the case for personal business expenses， damaging the company's interests， but Company A did not have sufficient evidence to prove that Shi Mou committed an act that harmed the company's interests. Therefore， its request for Shi Mou to return the funds involved in the case was not upheld. Another example is in (2023) Zhejiang 0784 Civil Case No. 14， where the defendant's actions related to the production of the case-related network drama were not based on his shareholder or executive position， but rather the performance of general employee duties. Therefore， the plaintiff's request for the defendant to bear liability based on the duty of loyalty of shareholders and executives was without legal basis and was not supported.

(III) Debt Investment

If the micro-short drama investment contract stipulates a fixed return and the investor does not participate in project management or bear investment risks， it may be recognized as a private lending relationship. If the contract terms do not violate mandatory legal provisions， they are generally regarded as valid， but interest exceeding four times the LPR at the time of contract formation is not protected. For example， in (2025) Fujian 0181 Civil Case No. 3766， since the principal of the case-related investment was derived from the principal and interest of the two "Film and Television Income Rights Transfer Agreements" signed by the plaintiff with Company B successively， and the two agreements were named "Film and Television Income Rights Transfer Agreements"， but stipulated to return the principal and pay interest upon maturity， the actual nature of the agreement should be a loan of 200，000 yuan， so the interest income cannot exceed the judicial protection limit， which is four times the LPR at the time of contract formation.

III. Revenue Distribution

In terms of revenue distribution for micro-drama projects, due to unclear contractual terms, non-standard financial control systems, and the fact that the investors do not actually participate in the production and distribution of the projects, disputes are prone to arise among all parties regarding the revenue model, revenue distribution base, cost recognition, and revenue settlement.

(1) Revenue Model

Micro-dramas are mainly divided into paid dramas, customized dramas, and share-based dramas. Among them, paid dramas are the most common. They are relatively dependent on the distribution of the distribution party's investment flow, and the revenue generally includes platform revenue, e-commerce revenue, and other derivative revenues. The revenue model of the investors mainly includes the following types:

1. Net profit sharing model, where the revenue distribution base is the net profit after deducting all production, investment flow, and promotion and distribution costs. Under this model, it is recommended to prepare a project budget detail sheet in advance to determine the cost types and limits. When generating revenue and costs, corresponding settlement forms and invoices should be obtained and regular reconciliation should be conducted to avoid the production party abusing funds, inflating costs, or demanding additional investment.

2. Total profit sharing model, where the revenue distribution base is the total revenue without deducting costs. Under this model, as long as the project generates revenue, the investor can receive a corresponding proportion of the share. For example, in the case of (2024) Hubei 01 Intellectual Property Civil Final 455, the agreement stipulated that Company A should pay 5% of its total platform revenue to Company B as a share fee. Company A argued that its advertising promotion and flow expenses were greater than the total revenue amount, and did not meet the conditions for paying the share fee. The two parties did not agree on the preconditions for the payment of the share fee, and did not accept Company A's argument.

3. Guarantee plus share model, where a guarantee clause is added to the contract. Even if the expected revenue is not achieved, the investor has the right to require the production party to make up the difference in the guaranteed revenue, and the additional revenue can be distributed proportionally. For example, in the case of (2025) Beijing 03 Civil Final 14578, the "Network Short Drama Guaranteed Investment Cooperation Contract" stipulated that the plaintiff has guaranteed investment and a 50/50 profit sharing, and if the plaintiff's 5% profit does not reach the guaranteed amount, the remaining part shall be made up by the defendant. The defendant did exist a breach of contract by not completing the production and release as per the contract, and should return the remaining investment principal to the plaintiff and pay related interest and penalty.

(II) Financial Internal Control

The production cycle of short drama projects is generally short, the personnel composition is temporary, and sometimes cash settlement is used, which makes it easy to encounter problems such as unclear business accounts and missing financial vouchers. It is recommended to ensure the rational use of funds by improving financial internal control, making installment payments for investment funds, setting acceptance checkpoints, and conducting regular reconciliations. For example, in case (2024) Zhejiang 0702 Civil Initial 7780, after the partnership contract was terminated, it should have been liquidated based on various aspects such as capital contribution, production costs, asset depreciation, operating income, creditor-debtor relations, and taxes, according to the business accounts. However, due to the lack of financial vouchers or statements to reflect the specific business situation, the use of capital contribution, the inflow and outflow of funds, whether the partner in charge was diligent and responsible, and the specific operation methods could not be reflected. The defendant, as the party holding the financial books in the relevant partnership contract, has not provided the income and expenditure accounts as requested and informed of the adverse consequences, and has not provided them up to now. Therefore, the defendant should bear the adverse consequences. Moreover, as the partner, the plaintiff, since choosing to participate in the investment, should also pay timely and necessary attention to the operation status of the partnership project. Currently, the accounts of the partnership matters, the operation of funds, and the specific profits and losses cannot be ascertained. The plaintiff also bears certain responsibility. Based on the above analysis and considering that the short drama project is still in the revenue process at present, it is appropriately determined that the defendant shall bear the responsibility for returning the investment funds at 70% of the plaintiff's capital contribution value.

To prevent the production party from misappropriating funds, it is recommended that the investor consider setting up a joint account, regularly checking the fund flow, or appointing staff to supervise the use of funds. For example, in case (2025) Zhejiang 0783 Civil Initial 2418, the short drama project has been completed and has been released on relevant platforms. The defendant has fulfilled the obligations under the main contract, and whether the plaintiff's investment funds have been fully or actually used for film production does not affect the fact of the plaintiff's investment and the right to obtain investment income based on it. Even if there is a situation where the employees of the defendant company misappropriate the investment funds, it does not affect the realization of the contract purpose. Now, the plaintiff claims that the defendant company has committed a breach of contract based on the claim that the defendant company's employees misappropriated the investment funds and that the plaintiff's investment funds were not used for the short drama production, lacking basis.

IV. Production and Distribution

In terms of production and distribution, it is recommended that the investors strive to obtain the participation rights and information rights of the project, and set specific requirements and termination conditions for timeframes, content review, distribution and streaming, etc., in order to ensure the smooth progress of the project and avoid incurring additional risks due to unclear contractual provisions. The production party should also bear the corresponding production responsibility.

(1) The delay of the production cycle for micro-drama projects is one of the frequently disputed issues. It is suggested that the investors include the production schedule in the contract, determine the latest deadlines for key stages such as shooting, completed film, filing, and online release. If a delay is necessary, it should obtain the written consent of the investors. Avoid including clauses such as "The final theme, specifications, content, and release time of the micro-drama may be adjusted according to review, market prospects, etc.".

In practice, if the production party delays performance, it is recommended to issue a written notice and retain relevant evidence. If the production party still fails to perform within a reasonable period, then consider filing a lawsuit. For example, in case (2025) Zhejiang 0402 Civil Initial 1795, the delay in the post-production time was not a reason for terminating the contract as stipulated in the contract. The post-production delay did not prevent the other party from achieving the contractual purpose, and the contract did not stipulate that the other party had the right to immediately terminate the contract. At this time, Party C should first urge Party A, and if Party A still fails to perform within a reasonable period, then Party C can terminate the contract.

In addition to terminating the contract, the investors can also agree on corresponding liability for breach of contract regarding the project delay to encourage the production party to perform in a timely manner. For example, in case (2025) Sichuan 0802 Civil Initial 3719, the post-production delay did not lead to the failure of the other party's contractual purpose. The contract did not stipulate that the other party had the right to immediately terminate the contract. Therefore, the plaintiff's claim to terminate the "Micro-Drama Shooting Cooperation Contract" and request the defendant to return the filming fee of 200,000 yuan was not supported. However, because the "Supplementary Agreement" clearly stipulated the delivery time of the completed micro-drama and the liability for breach of contract for delayed delivery, the defendant was supported to pay a penalty of 40,000 yuan to the plaintiff.

(2) Subcontracting and Transferring Contracts

In some micro-drama projects, the production company may unilaterally subcontract or subcontract the production work to a third party, resulting in a decline in the quality of the final product. Therefore, it is recommended that the investor include in the contract that without the mutual consent of both parties, neither party may transfer the rights and obligations under the contract to a third party, in order to ensure the commercial benefits of the project. For example, in the case of (2024) Zhejiang 0702 Civil Initial 7780, before the shooting of the involved short drama, the defendant and the Zhejiang company had already signed relevant agreements regarding the production, distribution, etc. of the short drama. The plaintiff also recognized the cooperation method with this company. However, later the defendant terminated the relationship with this company and instead entrusted it to the Beijing company. Moreover, from the content of the agreements signed between the defendant and these two companies, it can be seen that the rights and obligations enjoyed by the defendant were quite different, such as the production costs, profit distribution, distribution platform, etc. Without submitting corresponding evidence to prove that the defendant's act of entrusting the production and distribution of the short drama to the Beijing company had been agreed upon by the plaintiff, this act of the defendant has constituted a breach of contract.

(3) Distribution Method

The distribution model of micro-dramas is different from that of traditional long dramas. Due to lower production costs and reliance on streaming, the producers usually choose to collaborate with multiple distributors and conduct streaming promotion simultaneously on multiple platforms to achieve rapid capital recovery. The distributors will segment and edit the micro-dramas and attract users to watch and make payment through video platforms, mini-programs, etc. In terms of distribution, it is recommended that the investors clearly specify the distribution platforms, distribution dates, and liability for breach of contract in the contract. In case the producer fails to fulfill the contractual obligations actively, the investors can recover their losses. For example, in the case of (2025) Zhejiang 0604 Civil Initial Case No. 4813, the defendant failed to broadcast the involved short drama on the platforms of iQIYI, Tencent, Youku, and Mango Video before the agreed date, constituting a breach of contract. According to the agreement in the Supplementary Agreement, the defendant is required to return the entire investment amount to the plaintiff and pay the plaintiff the agreed breach of contract penalty.

In addition, it is recommended that the investors strive for the copyright registration and distribution rights of micro-dramas to protect their own economic interests in case the production of the drama does not achieve the expected results. For example, in the case of (2025) Zhejiang 0783 Civil Initial Case No. 2838, the involved contract did not require the defendant to release the involved short drama on all cooperating platforms, and the two agreements did not make any agreements on the streaming promotion of the short drama. Therefore, the plaintiff's claim that the defendant did not play it on all platforms or did not promote it across the entire network, constituting fundamental breach of contract, was not accepted.

V. Regulatory Rules

With the rapid development of the micro-drama industry, regulatory authorities are continuously refining regulatory rules, covering aspects such as qualification licensing, filing management, content review, and incentive policies. For investors, in addition to understanding local regulatory requirements and the qualifications of partners, they can also clearly stipulate in the contract that the production entity shall bear the relevant responsibilities for micro-dramas that fail to be broadcast or are removed due to regulatory reasons.

(1) Qualification Licensing

According to the "Notice on Matters Concerning the Management of Domestic Network Drama and Feature Film Distribution Services", the distribution of micro-dramas adopts a licensing system. Network micro-dramas that meet the following conditions must obtain the "Network Drama and Feature Film Distribution License": (1) with a large investment; (2) promoted by the main investors of online audio-visual programs; (3) recommended for broadcast on the homepage, main screen, or special sections; (4) providing viewing services through membership or payment; (5) voluntarily applying as a key network drama and feature film.

On November 14, 2022, the National Radio and Television Administration issued the "Notice on Further Strengthening the Management of Network Micro-Dramas and Implementing the Creation Enhancement Plan", further stipulating that all micro-dramas uploaded online must undergo content review by the administrative department of radio and television and obtain the "Network Drama and Feature Film Distribution License" or complete the filing of online audio-visual programs in accordance with the relevant regulations for network dramas and feature films.

(2) Filing Management

According to the "Notice on Further Coordinating Development and Security to Promote the Healthy and Prosperous Development of the Network Micro-Drama Industry", the filing of micro-dramas adopts a "classified and hierarchical review" system, dividing them into three levels: key, ordinary, and others.

Key micro-dramas refer to those that meet one of the following conditions: special themes, with a total investment of over 1 million yuan, promoted by the main investors of online audio-visual programs or recommended for broadcast on the homepage, main screen, or special sections, and voluntarily applying as key micro-dramas. They should be submitted for review to the "Key Network Drama and Feature Film Information Filing System", and undergo preliminary review by the provincial-level or above radio and television administrative department, followed by unified filing and public announcement by the National Radio and Television Administration.

Ordinary micro-dramas refer to those with a total investment between 300,000 yuan and 1 million yuan and not recommended as key. They should be submitted for review to the "Online Audio-Visual Program Filing System", and undergo planning filing and full-length review by the provincial-level or above radio and television administrative department.

Other micro-dramas refer to those with a total investment of less than 300,000 yuan and not recommended as key. They should be subject to content review and copyright verification by the platform for upload, distribution, or promotion, and submit the review information of the reviewed dramas to the provincial-level radio and television administrative department for filing.

(3) Content Review

To strengthen the management of micro-drama content review, on December 15, 2021, the China Network Audio-Visual Program Service Association issued the "Detailed Rules for Network Short Video Content Review (2021)", clearly stipulating the review standards for network short videos and specifying 21 types of content that are prohibited. On November 14, 2022, the National Radio and Television Administration issued the "Notice on Further Strengthening the Management of Network Micro-Dramas and Implementing the Creation Enhancement Plan", conducting special rectification for "app" type network short dramas with pornographic, vulgar, low taste, and aesthetically inappropriate content.

To establish a good image for the micro-drama industry, for various common content issues, the National Radio and Television Administration has issued "Management Tips" multiple times since October 2024. The key review focuses of each inspection are: elderly themes, "boss" themes, AI modification, title review, "exciting" but moderate, "anti-intellectual, ridiculous, and outrageous", war themes, etc., setting basic standards for micro-drama content creation.

In addition to the content review by the regulatory authorities and industry associations, each platform is also releasing platform content review details and filing procedures based on its own characteristics. For example, when uploading micro-dramas to the Douyin platform, a report form on cost allocation ratio and a commitment letter on remuneration should be filled out.

(4) Incentive Policies While strengthening supervision, incentive policies for the micro-drama industry are also being gradually introduced. On January 4, 2025, the National Radio and Television Administration issued the "Notice on Implementing the 'Micro-Drama Plus' Action Plan to Empower Various Industries", advocating the integration of micro-dramas with other industries and fields to create new application scenarios, business models and economic forms, and to produce high-quality works with profound ideas, exquisite artistry and excellent production.

On July 15, 2025, the Shanghai Municipal Committee of Propaganda and the Municipal Cyberspace Affairs Bureau jointly issued the "Several Measures on Supporting High-Quality Internet Content Creation in Shanghai", providing support for the creation of high-quality content, including micro-drama projects. The main measures include:

(1) For those who tell good stories about Shanghai and China and have a significant influence, the municipal level will provide a maximum reward of 100,000 yuan for a single piece of content, and will give priority to recommending for national and municipal honors;

(2) For entities that carry out the construction of application scenarios for internet high-quality content creation with the empowerment of technologies such as artificial intelligence, a maximum support of up to 30% of the total investment will be provided;

(3) Special funds will be promoted to be established, the bank loan green channel will be opened, and a 50% interest subsidy support will be given to bank loans up to the current loan market quoted rate.

VI. Conclusion

In the field of micro-drama investment, investors, based on a thorough understanding of the industry characteristics, can effectively prevent potential legal risks by conducting preliminary due diligence, choosing appropriate investment methods, formulating standardized contract terms, improving financial internal control, and participating in production and distribution. This will safeguard their legitimate rights and expected returns. At the same time, as the regulation and compliance in the micro-drama industry strengthen, it is also entering a healthier and higher-quality development path.