TLDR: Chinese video AI startups are demonstrating significant success in generating revenue, a stark contrast to many Large Language Model (LLM) companies that are still struggling with monetization. Companies like Kuaishou’s Kling AI and MiniMax’s Hailuo AI are reporting substantial annual recurring revenues, shifting investor sentiment towards the commercial viability of video generation technology.
While the spotlight often shines on agentic AI and AI hardware, a quieter yet more financially successful trend is emerging in China: video generation models are driving a new wave of profitable AI startups. These companies are achieving significant revenue streams, a feat that many Large Language Model (LLM) firms have yet to accomplish at scale.
Leading the charge is Kuaishou’s Kling AI, which in June reached an impressive annual recurring revenue (ARR) of USD 100 million across its app and web platforms. Similarly, startups MiniMax, with its Hailuo AI, and Shengshu Technology, with Vidu, have each surpassed USD 10 million in ARR through their web-only offerings. Industry insiders suggest that the actual subscription revenues for these products might be even higher than publicly reported figures.
This monetization success is particularly notable given the previous skepticism surrounding video generation technology. Just a year ago, models akin to OpenAI’s Sora were largely considered too expensive to operate and too uncertain in their commercial payoff to be viable in China. However, companies like AIsphere have defied these expectations; its video model, PixVerse, now generates enough subscription revenue to cover the majority of its operating costs, bringing the company close to breakeven.
Projections from key industry figures further underscore this burgeoning market. Huang Weilin, head of image and video generation at ByteDance’s Seed division, stated at this year’s Beijing Academy of Artificial Intelligence (BAAI) Conference that top video generation products could collectively generate USD 100 million in ARR this year. He further projected a substantial growth to between USD 500 million and USD 1 billion by 2026.
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Despite their revenue success, video AI startups typically attract significantly less funding compared to their LLM-focused counterparts. An investor, who previously passed on a video AI venture, recalled the prevailing mood: video models were not expected to deliver timely returns, and most startups were anticipated to be squeezed out by dominant incumbents, mirroring trends seen in the LLM space. Indeed, 2024 saw many Chinese video AI startups grappling with funding challenges and failing to achieve product-market fit, exemplified by the acquisition of Luying Technology in December of that year. However, the rapid revenue generation demonstrated by companies like AIsphere has swiftly reversed this cautious investor sentiment, highlighting a promising and profitable niche within China’s dynamic AI landscape.
