Popular genres include mystery and fantasy, court dramas -- especially those involving political struggles, office romance, time travel and tomb-raiding adventure.
Whereas online literature websites survived in the past on the money users pay to read long stories, they are now trying to become a licenser for works with potential to be adapted into movies and games.
Understandably, the readers of the original source material are the core consumers of its multiple adaptations later.
iResearch predicts that more than 2 billion yuan (about 309 million U.S. dollars) could be made at the box office from an adaptation of one of the biggest online literature hits in the fantasy and mystery genres.
China's box office revenue record stands at 3.39 billion yuan. "Mojin: The Lost Legend" has generated 1.6 billion since its debut in December, making it the highest-grossing movie adapted from an online novel.
TAPPING THE POTENTIAL
Companies have begun scrambling for the rights to popular online literature. Price tags have risen from hundreds of thousands of yuan to millions in the past few years.
Chinese Internet giants Tencent and Alibaba have both begun signing up novelists to their own online literature divisions.
Hoping to dominate every stage of the literature licensing, adaptation, production and distribution process, Alibaba has also been investing in movie production and distribution companies including ChinaVision, Huayi Brothers, Enlight Media and online video site Youku Tudou over the years.
Last year, Tencent founded the country's largest online literature platform China Reading Limited. It has more than 60 million readers via its websites and mobile apps, data from iResearch shows.
Most of China's high-grossing movies and TV series released last year were adapted from novels published by Tencent's online literature division.
HYPE AND SPECULATION
But with licensing and copyright fees having been pushed up to exorbitant levels, many observers fear those involved are losing sight of the original reason for the adaptations -- producing quality movies.
"There's a lot of money chasing very few worthwhile literary works. Speculators are buying up novels at a high price, with little concern over the quality of the adaptations" said Alibaba Literature's Zhou.
It takes time to craft a good story and breed the die-hard fans needed to sustain a franchise.
"Companies will soon realize that marketing gimmicks and hyping sensations can only get them so far, because consumers will have the final say," Zhou said.
