Why has the all-conquering ByteDance failed to crack the paid online literature market?

ByteDance has suffered another setback in the paid online fiction market.

A few days ago, "Red Candle Stories", ByteDance's paid online fiction product, released a service shutdown announcement, declaring that the APP will cease operations in phases from July 9, 2026 to August 17: paid services such as membership top-ups and book coin purchases will be suspended starting July 9, content updates will stop and automatic refunds for user assets will be initiated on July 10, and the servers will be officially shut down on August 17.

Launched at the end of 2025, Red Candle Stories was originally named "Red Candle Novels", focusing on the paid reading model. Users paying a monthly fee of 25 yuan can enjoy ad-free access to content in the member exclusive zone, along with the exclusive benefit of a 20% discount on subscriptions to paid full-length online novels. It forms strategic synergy and complementarity with ByteDance's free fiction product, Fanqie Novels.

However, after no more than half a year of operation, Red Candle Stories announced its closure.

It is worth noting that Red Candle Stories is not ByteDance's first foray into the paid online fiction market. Since 2021, ByteDance has successively launched more than 10 paid fiction products including Cuiguo Novels, Jiudu Novels, Douwen Novels, Bingke Novels, Xin Cao Novels, and Zui Kan Novels, but all these products have now been removed from shelves. Even after making Fanqie Novels the top player in the free reading market, there are still markets that ByteDance finds hard to break into.

From paid reading to free reading, what is the current survival situation of the online fiction market?

01

ByteDance's Setback Amid a Shrinking Paid Market

ByteDance's difficulty in succeeding with paid online fiction may be largely related to the company's strategic priorities.

The operating entity of Red Candle Stories is Jiangxi Bi Hui Mo Ying Technology Co., Ltd. According to Tianyancha, the company was established in May 2025, with Le Li as its legal representative. Le Li also serves as the chief editor of Red Fruit Short Drama at ByteDance. Between Red Candle and Red Fruit, the latter clearly has higher strategic priority.

Fanqie Novels and Red Fruit Short Drama follow exactly the same development path, both adopting the free model. But free online fiction and paid online fiction operate on two completely different logics and mindsets.

Xia Yu, an online fiction industry practitioner, told Tech Planet that traffic from paid promotion has been snatched away by short dramas and comic dramas, making it very difficult to expand the user base in the online fiction market. ByteDance lacks the capability and patience to produce paid content; its strategic focus lies in high-traffic monetization businesses such as short dramas and comic dramas, and it cannot commit long-term energy to paid online fiction products that require content cultivation and time accumulation.

The most crucial element for paid online fiction is authors, while for free online fiction it is works, which are determined by algorithms. Moreover, ByteDance entered the market at the wrong time. According to Xia Yu, the paid online fiction market is already dominated by established platforms such as China Literature and Jinjiang, with high industry barriers and entry thresholds. In terms of business models, free online fiction monetizes through advertising + copyright, while paid online fiction generates revenue from C-end user payments + copyright. Free online fiction relies on advertising monetization, where user behavior is based on "works" rather than "authors", and platforms drive growth through algorithmic recommendations and traffic distribution. Paid online fiction is the exact opposite: its core barrier lies in the integration of "authors" and "fan economy", with authors being the top priority.

"ByteDance will never use a human-centric mindset to produce online fiction content. Even the editors at Fanqie Novels hold a negligible position. They only consider signing a book after it gains good traffic data, and will not follow the paid online fiction logic of having human editors first invite authors, then review manuscripts and launch the content," Xia Yu explained.

Differences in priorities, operational logic, and strategic determination have doomed the outcome of ByteDance's attempt at the paid online fiction business.

In fact, it is not just ByteDance that struggles to succeed in paid reading—the entire paid online fiction market is shrinking. According to China Literature's 2025 financial report released in March, the company's 2025 revenue reached 7.366 billion yuan, a nearly 10% year-on-year decrease, with an operating loss (IFRS) of 805 million yuan, a new high in nearly five years. Gross profit declined by 13.4%; the average monthly active users stood at 138 million, a drop of nearly 30 million compared to 167 million in the second half of 2024. The number of monthly paying users decreased by 100,000 compared to 2024.

China Literature is the leading player in paid online fiction, while Fanqie Novels represents the ceiling of free online fiction. In both market size of monthly active users and revenue, the latter has overtaken the former. China Literature had 138 million monthly active users in 2025. According to QuestMobile data, as of September 2025, Fanqie Novels had 245 million monthly active users. In terms of revenue, China Literature's 2025 revenue was 7.366 billion yuan, while Fanqie Novels' revenue may exceed 450 billion yuan. A previous 36Kr report stated that in 2024, ByteDance's Fanqie ecosystem businesses (including Fanqie Novels, Red Fruit Short Drama, Fanqie Audiobooks, and Wukong Search, among others) generated revenue exceeding 300 billion yuan, with an overall profit of approximately 30 billion to 50 billion yuan, and Fanqie Novels contributed the majority of that revenue. In 2025, the total revenue of the Fanqie ecosystem is expected to surpass 600 billion yuan.

02

Online Fiction Platforms Aggressively Expand into Short Dramas and Cinematic Adaptations

Users are not unwilling to pay for online fiction.

One data point disclosed in China Literature's 2025 financial report shows that, amid declines in monthly active users, number of paying users, and gross profit, the revenue per monthly paying user on the platform increased by 2.8% to 32.9 yuan. Nine million users are willing to spend 32.9 yuan per month on paid online fiction. At a time when free online fiction is prevalent, the user stickiness of paid online fiction is higher than expected.

The profitability certainty of paid online fiction is higher than that of other models, which is why many online fiction platforms will not abandon this track even as they undergo transformation.

An employee at Chinese Online told Tech Planet that the online fiction department is the company's core foundation. While all other businesses might be discontinued one day, this one absolutely will not. It is one of the few businesses that can maintain profitability, and the company's core advantage lies in its previously accumulated digital resources and continuous new content flow. Its business model is not just C-end; a very important part is B-end business, supplying books to platforms like Fanqie and Qimao, and selling copyrights. Nowadays, all online fiction platforms need to rely on traffic from external channels, especially ByteDance. They do not have the funds to invest in promoting their own platforms, nor can they outspend competitors.

However, this group of paying users is still too small, and their churn rate is increasingly severe. Both paid and free online fiction platforms face their own growth bottlenecks, with the challenge of plateauing user growth, forcing platforms to monetize their massive IP libraries as quickly as possible.

Almost all platforms are now collectively shifting to short dramas. Fanqie is vigorously developing Red Fruit and comic dramas, while China Literature recently launched its own short drama platform, "Qidian Theater". Many hit short dramas from Red Fruit are adapted from IPs of online fiction platforms. Fanqie has even launched theatrical film projects for *What a Good Girl* and *Summer Fendela*.

Cinematic monetization has always been an important way for online fiction to generate revenue. Compared to payments from C-end users, the more profitable way for online fiction is through copyright and IP development—adapting novels into short dramas, comic dramas, and cinematic works for monetization. Data from the Chinese Academy of Social Sciences' *2025 Research Report on the Development of Chinese Online Literature* shows that the market size for online fiction IP adaptations has reached 3676.1 billion yuan, a year-on-year increase of 23.13%.

A single online fiction novel, *The End of Ten Days*, would have only limited and single-source revenue if relying on ad revenue sharing or fan payments. But by licensing its IP to a film and television company for cinematic adaptation, its copyright fee was driven up to 3 million yuan. An industry insider revealed that the copyright fee for *The End of Ten Days* is around 3 million yuan.

03

The Inescapable Traffic Dilemma

Through Fanqie Novels + Red Fruit Short Drama, ByteDance has connected the upstream and downstream of the industry chain—forming a complete commercial closed loop from IP reserve, production and distribution to commercial monetization; China Literature has built its own commercial closed loop through Qidian + Qidian Theater + Tencent ecosystem channels.

IP is the starting point of the entire industry chain. In the peak period of the past, the copyright fee for a single online fiction IP could reach tens of millions of yuan.

Now, the situation is completely different from the past. Xia Yu, the online fiction industry practitioner, stated that 2015 to 2017 was roughly the golden age of online fiction. Copyrights sold to long-form drama companies could fetch up to tens of millions of yuan. Starting from 2018, the tax turmoil in the film and television industry pushed the entire sector into a harsh winter, leading to a sharp decline in online fiction IP copyright prices.

After that, mid-length dramas and short dramas successively rose, expanding the buyers of online fiction IPs from traditional long-form drama film and television companies to short drama platforms, video platforms (iQiyi, Youku, Tencent Video), and even offline theater and musical companies. The core major clients are still film and television companies and video platforms with production capabilities.

However, film and television companies have drastically reduced the number of projects they start up, and video platforms have cut back on procurement, making copyright sales extremely difficult. The online fiction market has completely collapsed. Nowadays, IP licensing to long-form drama companies is roughly around one million yuan, usually as an exclusive license; for licensing to short drama and comic drama companies as non-exclusive rights, copyright prices range from 10,000 to 100,000 yuan.

Authors are no longer the core of online fiction; traffic algorithms have replaced authors as the decisive factor. An online fiction author told Tech Planet that established websites have very low traffic and can only rely on ByteDance's traffic. Xia Yu noted that Fanqie Novels has an unparalleled advantage in traffic costs. As a product under the ByteDance ecosystem, it has the internal advantage of "moving traffic from one pocket to another" in traffic promotion, without the need to pay high external traffic costs, while other platforms have to invest real money.

For online fiction authors, traffic levels are directly tied to their income. Authors on free platforms mainly rely on ad revenue sharing, usually a 50-50 split, where higher traffic brings higher returns; authors on paid platforms depend on reader subscriptions and tips, with only a few outstanding authors enjoying contract guarantees (hundreds to thousands of yuan per thousand characters) and full attendance bonuses provided by the platform. For ordinary authors, the royalty income from free platforms is generally higher than that from paid platforms.

Many online fiction authors said that Fanqie has a relatively lower entry barrier, with all revenue based on sharing, making it the first choice for writing. However, even Fanqie's traffic has decreased now. Wu Yue, an online fiction author, told Tech Planet that there are only 3 websites that sign contracts with authors: Jinjiang, Douban, and Changpei, while all others only sign contracts for individual books. Fanqie uses traffic testing; if a book gets no traffic, it is effectively abandoned, making it hard to finish writing a full novel. Xiao Bao, another online fiction author, said that Fanqie is now a bit unpredictable. New authors need courage to submit their works there, as the element of gamble has become larger. Books go through an 80,000-word validation phase before getting 100,000-word traffic push, and many get zero traffic during the validation period with no readers at all.

Online fiction authors also have many complaints about the Fanqie Novels platform. Many believe that Fanqie's "Enlightenment Plan" is designed to create star works, where traffic is insufficient to go around, and the traffic of mid- and lower-tier authors is all siphoned off and concentrated on top-tier works to create hits. In addition, AI-generated novels are rampant on the platform, and algorithmic recommendations have collapsed, resulting in many excellent works failing to get recommended, the traffic of mid-tier authors plummeting, and many people's incomes being cut in half.

In short, the online fiction market has become increasingly competitive. With massive numbers of authors and novels, platforms can only select top-tier works with better data, strive to maximize their IP value, and optimize profits.

This article is from the WeChat public account "Tech Planet" (ID: tech618), written by Zhai Yuanyuan, and published with authorization from 36Kr.