Chinese ebooks - waiting for convergence
Jo Lusby looks at the prospects for a consumer ebook market in ChinaThe Chinese people have entered the digital age with arms wide open. China is home to more than 500 million internet users, and Chinese surfers spend a total of 472 billion hours online each year. There are more than 100 million subscribers to mobile reading services, and an even greater number are signed up to online literature sites offering VIP memberships and books by the chapter. Online bookstores are responsible for more than 40% of trade book sales. More than 50 local ereading devices are on the market, and of the near one billion mobile users, a quarter own a smartphone. All of which sounds very dynamic and healthy.
So why, in such a highly connected country, are we still awaiting the arrival of the consumer ebook market?
Over the last 10 years, China's publishers have been forced to confront change on two fronts. First, they have embarked on a major restructuring effort to transform the publishing sector from a staid organ of the state into a robust, commercial industry operating independently of government subsidies. As the warm blanket of financial support was withdrawn, they were also faced with the challenge of entertaining and enlightening people whose own lives, perspectives and tastes were being transformed by China's economic boom.
Then, just as the new publishing economy began to find its rhythm, the impending ebook revolution appeared on the horizon, threatening to turn fragile margins and newly established companies on their heads.
In a centrally managed economy like China's, when a strategic priority is decided upon, government departments must then oversee its delivery. China has a solid track record in securing the hardware (infrastructure and systems) of economic development before the software (inventors and creators) - something possibly explained by the dominance of trained engineers in positions of political power.
Readiness for a digital revolution has been at the centre of conversations with Chinese policy makers and publishers for some time now. And as any visitor to the Beijing International Book Fair over the last five years can testify, there has been much technological action, not just talk. Handsets, systems, formats and standards are all in place. But the softer side of the equation - how to regulate something so intangible, and specifically, how to control what is published when the digital door has been opened - has yet to be addressed. A list of 21 companies authorised to engage in the publication, production and sale of ebooks in China was released in 2010; two years on, however, what that authorisation (or lack of ) actually means for players is still unclear.
Usually, a regulatory vacuum in China creates opportunity for savvy Chinese entrepreneurs. And yet, we are still waiting for the convergence of the market. Recommendations have been made by central government on pricing and revenue splits along similar lines to agency agreements. And although it would be fair to say that Chinese publishers are not entirely "ready" for ebooks, should the right commercial opportunity present itself, things would be made to happen at very short notice.
It seems that, in this situation, a lack of actual policy has presented just too much risk for consumer platforms to be willing to take the plunge. The logistical challenge of setting up an ebookstore - the tie-up with a device, the availability of a wide range of quality ebooks, contractual agreements with publishers and authors - means that the investment of time and reputation to launch, without concrete official permissions, is a risky leap in the dark. The poor reputation for enforcement of international property rights (IPR) on the Chinese internet also means that publishers and authors need firm guarantees on security before they would be willing to entrust their top titles to an online platform.
Penguin ebooks in China
For Penguin in China, an agreement was signed with ebook distributor Founder Apabi in 2009 to make its full list of English-language titles from the UK available to Chinese customers. As well as providing straight ebook distribution services, Founder Apabi and others are also developing cloud-based services for third parties wishing to sell ebooks, and Penguin is in detailed discussions, independently and through Apabi, with the main players.
The government in China sets the rules - and businesses work within and around those regulations. With no pre-existing structures, and no established working model for China to import from the West, how consumer platforms, publishers and authors will come together is still unclear. And yet, this is China, and the overriding sense is still "when" and "how", rather than "if". Central government still wants the nation to be in the vanguard of the digital revolution, and that includes ebooks.
Chinese consumers have tended to prefer one device for all their reading, music and connectivity needs. Whether the standalone ereader will take hold against the tablet PC or Smartphone is one part of the debate in publishing circles. Control is another; it seems likely ebooks would be monitored along similar lines to the internet, via sophisticated search engines and firewalls blocking undesirable content, rather than through book-by-book permission to publish under e-ISBNs. And there are discussions underway as to whether authorities will insist on local ebook formats, such as CEBX, as a way to track the trade, rather than support other international file formats.
Online retailer Dangdang has already taken its first steps into the ebook market, and Scarlet He from Founder Apabi confidently says that within the year there will be eight to 10 consumer platforms offering ebooks. Admittedly, many people (myself included) confidently predicted the same for 2011. And yet, here we are, in the Year of the Dragon, with the pieces in place, still poised on the edge of a revolution - and still believing that the distant rumblings continue to get closer to being a commercial reality.
Jo Lusby is Managing Director, Penguin China and General Manager, Penguin N Asia