Publishing with Chinese characteristics
Once it was the Chinese who copied the Westerners, today it is the Westerners who have to be inspired by the inventions and innovations of the Chinese. China is the country ahead in the elimination of cash and mobile payments (we are talking about 700 million people who use them). China is the country with the most ambitious program to phase out fossil fuels and activate renewable energies. The Chinese relate and live online like no other population is able to do.
China is now "the e-commerce nation". It is a community completely projected into the future. All the things that we want to do, they are already doing. One should also be amazed by the Chinese paradoxes, generally seen and labeled as such with the categories of judgment of Westerners. A country where freedom of expression and of the press is heavily regulated and the Internet placed under government control, writing and fiction are experiencing an amazing flowering at all levels. This phenomenon takes place entirely on the new media in completely, it is appropriate to say, unprecedented modalities. It is publishing with Chinese characteristics, to paraphrase the famous maxim of the founder of modern China, Deng Xiaoping.
Chinese publishing is like Chinese cuisine: anything is published and anything is consumed on any medium available at any time of day. We read almost exclusively on video, especially on large format mobile phones, after discovering the content through one of the pervasive Chinese social networks that are not called Facebook, Twitter, Snapchat, YouTube but have names that are unfamiliar to us, but which will soon become so. We have already dedicated a post to publishing with Chinese characteristics, to which we refer. Here we want to deal with the China Literature phenomenon.
The China Literature Phenomenon
Faced with this state of affairs, one wonders: who said that publishing is a bad investment? Who said investors shy away from publishing houses? This is undoubtedly the thought of the shareholders of Pearson or some other western publishing group. If you move to China, the matter changes completely. Book publishing is one of the hottest and most promising new media sectors. We are not talking about traditional publishing (books, magazines, newspapers) but about online publishing, that of literary blogs, content sites and apps and above all ebooks.
The champion of this purely Chinese phenomenon is China Literature. A publisher, part of the Tencent conglomerate, which, while not publishing a line on paper, has achieved an incredible valuation for its public offering of shares on the Hong Kong stock exchange, such as to transform it into the most highly capitalized publishing house in the world. Shares of China Literature received 600 times oversubscription and rose 100% in the first three hours of trading. China Literature's listing turned into the largest public stock offering in 10 years on the Hong Kong Stock Exchange. For a company that has its core business in ebooks, this is truly extraordinary.
In fact, China Literature is a sort of Kindle Store with nearly ten million titles and six and a half million authors who contribute their content to the platform. Readers can purchase pieces of content according to specific metrics or subscribe to it. China Literature has only been profitable since 2017. So what's so special about China Literature? We ask the "Economist" to tell us about it, which has published a report on this case. Below is the Italian translation of the article "China's largest online publisher enchants investors and readers alike". Happy reading and let's get inspired!
The strategic synergy with Tencent
Every time Xu Jie goes to the cinema to see a thriller or horror film, she is disappointed: the Chinese censorship, to fight superstition, cuts all the scenes of zombies and ghosts from the film. So his passion for the fantastic turns towards the burgeoning online literary scene. Here, authors can take liberties that state-owned publishing houses would recoil at. Homophones are used instead of forbidden words. Danmei, a new narrative genre of homoerotic stories, is very popular among young women. Readers can choose from over two hundred established genres such as xianxia, a fantasy world of gods and martial athletes.
The main company behind this virtual realm is China Literature, a spin-off of Tencent, the Chinese gaming and social media giant. On November 8, 2017, China Literature, born just four years ago, went public on the Hong-Kong stock exchange, raising over one billion dollars. The offer was a huge success; By the end of the first day of trading, China Literature had a market capitalization of $12 billion, roughly 2700 times its earnings of $4,5 million in 2016 (it was still a loss in 2015).
Investors were particularly attracted by China Literature's link with Tencent, which became the first Asian company to exceed $500 billion in capitalization and owns, even after the takeover bid, 50% of China Literature. Retail investors — particularly those who lost Tencent's 2004 listing — expect China Literature to be the next Tencent. To the extent that the latter extends its business into film, television, the China Literature content library offers a huge reservoir of intellectual property. It is no coincidence that analysts have dubbed China Literature "The natural child of Tencent".
Online reading from Chinese numbers
The book market in China (fiction and nonfiction) is the largest in the world by number of new titles published. Of the total number of novelties in fiction, online narratives, which are mostly read on smartphones, account for 11%. Furthermore, it is estimated that this share will double in the next three years. To captivate new reading enthusiasts, Tencent combines its strong user reach — over 950 million monthly users on WeChat alone, its instant messaging application — with a large number of algorithms that push users towards narrative content . China Literature's dominance has helped attract 6 million authors to its platform, making up 88 percent of all online book writers according to a study by consulting firm Frost & Sullivan. Six of the top ten bestselling authors are online literature writers.
Many of these authors write for passion, although two out of five report doing it full time. The average age is 28 years. The titles published on China Literature are close to 10 million and span many genres, from fantasy to science fiction, from mystery to romance novels. There are 200 million readers who access the website or mobile application every month. These are half of the readers active in China on online reading platforms. Alibaba Literature and Baidu Literature, owned by the other two giants of the Chinese web, come very close with 5% of the original content produced for online. China Literature has a 72% share
Content monetization
Almost all of China Literature's revenues come from a small fee charged to certain books once the reading goes beyond the free-accessible sample chapters (the proceeds are shared with the authors). Many of these books are serialized. Readers can pay as they go, per 1000 Chinese characters, or subscribe to a monthly subscription of 18 yuan ($2.70). Until now only 5% of its customers are paying customers. But Morgan Stanley expects the stake to rise to 8% over the next two years. As incomes rise, Chinese youth are spending more and more money on quality entertainment.
There's a lot of room to grow. For example, Xu says he is spending less on online books than on smartphone games. The rise of mobile payments, including WeChatPay which is owned by Tencent, has made paying a breeze. The remaining part of the revenues comes from the ownership of the rights to the stories that can be adapted for cinema, television, games through licensing agreements with other producers. Investors expect this revenue stream to grow rapidly, says Nelson Cheung of Formula Growth, a Canadian investment firm, which owns a stake in China Literature.
Chinese Marvel?
Wu Wenhui, one of the bosses of China Literature, says his aspiration is to become the Chinese version of Marvel Comics, the studio that created Spider-Man and X-Men. Tencent is the perfect incubator for these kinds of ambitions, says Wang Chen of TF Securities, a brokerage firm. Indeed, China Literature is already cooperating with Tencent Penguin Pictures, the new film production arm, and Tencent Games, the world's largest video game company. In 2016, 15 of the 20 most popular book series were licensed by China Literature. Surprises are, however, possible. Copyright protection in China is weak. China Literature itself reported that pirated content resulted in a loss of revenue of 11 billion yuan in 2016.
Stricter regulation or new directives for censorship could lead to an upheaval of the current arrangements. Manuscripts are reviewed, prior to publication, by China Literature editors with an understanding of the value of the relative creative freedom that the digital space allows. Its own history is proof of this.
