PA GPI Reports: Korea

Rob Francis • 07 June 2012

Executive summary
Korea has become a wealthy and well-organised country over the last few decades but is still very dependent on exports for economic success. Therefore, the current (February 2012) economic crisis in Europe and the US is causing a degree of gloom in business circles in Korea and there is less optimism than before. This mood, taken together with a falling birthrate and government interjection in the huge private tuition market, has led to a book market that is static at best, and declining in some parts. Ironically, the low birthrate is at least partly due to the amount Korean parents invest in their children's education - they can only afford to educate one child, or at most two children, to the standard expected in present day Korean society. Therefore, although Korea is now a rich, sophisticated country in many respects, the publishing business has a bias towards educational products which is more similar to a third world country. However, the Koreans always have their own approach to any situation and they have developed a unique and powerful educational services market with perhaps only Brazil following a similar pattern.

Value of Korean publishing market
There are no clear figures for the size of the book market in Korea; the Korean Publishers Association (KPA) only collects information on new titles published, so estimates need to be made from a number of local sources, the KPA new book statistics and guesswork. Korea is one of the top 10 publishing markets in the world with a minimum retail market size of US$4 billion (£2.5 billion) and possibly 50 per cent more than this. The reason for this uncertainty is that many of Korea's largest educational publishers bundle materials together with education services to add value to their content and exploit the fact that Korea enjoys the highest per household spending on afterschool education of any other country in the world. Local publishers' receipts on trade sales (adult fiction and non-fiction, general children's books) are worth around US$1.4 billion (£0.9 billion).

Korean language rights royalties to foreign publishers are currently worth some US$348m (£218m). Imported books across children's trade, ELT, higher education and STM segments have a local value of US$260m (£160m) if journals and other academic electronic subscription content are added in. The government publishes required textbooks for primary education and some subject areas in lower and upper secondary with a retail value of some US$100m (£62m). Publishers' receipts on supplementary school books and after-school education materials of all kinds are worth another US$1.1 billion (£0.69 billion) with many of the materials bundled together with such tutoring subscription services as over-the-phone tutoring, online help, marking and correcting of test materials etc.

Book market characteristics
Korea has a very demanding work ethic (which starts with the commitment to achieving the highest possible results in education from a very young age). The business culture is polite and the basis on which decisions are made is reasonably transparent to a non-Korean doing business with a partner organisation or company there. Publishing is highly dynamic with most publishers having a can-do, informed risk-taking culture. Decisions usually require the involvement or approval of the company president and many publishing houses and distributors have fairly formal, hierarchical structures. Companies (and individuals) care a great deal about their reputation and so organisations and managers tend to do what they say or implement what they commit to. The market is subject to change (in curriculum in the education segment and in consumer trends and fashions in the trade) and this creates new opportunity on a regular basis. The nature of the market means that the largest publishers tend to be active in every segment, and many operate as distributors and retailers as well as publishers.

Korean publishing is also benefiting from overseas opportunities as the so-called Hallyu or 'Korean Wave' has swept over many countries in Asia and beyond. This has been driven by an appreciation of many popular entertainment forms that originate in Korea (from TV soaps based on Korean history and epics to comic formats that mix a recognizably Korean graphic style (known as 'Manawa') with educational content. Exploring sales and rights opportunities overseas has had an impact on the thinking of the largest Korean publishers. They have become more global in outlook and are willing to explore wide-ranging, long-term, mutually beneficial relationships with overseas partners.

The recent economic crises have engendered a more conservative attitude towards publishing and bookselling in the last few years. Small booksellers have closed and most publishers have reduced their new title output. Official figures show that there were over 35,000 publishers registering new titles in 2010 but there are probably some 300 publishing houses that are of any interest to foreign publishers in terms of selling rights. There were 10,852 registered printers in 2010 and 1,825 bookshops. There were 759 public libraries in 2010 and also 10,937 school libraries, 426 university libraries and 587 specialist libraries. The number of public libraries is increasing!

The trade market
Korea has a large trade consumer segment and a massive children's education segment. Translation rights from the two are worth over US$300m (£190m) a year. Works originally published in English account for at least 40 per cent of the total rights value in Korea, about the same as titles originally published in Japanese and then by works originally published in French, German and Chinese. In the trade consumer segment, works in translation account for a good proportion of bestsellers, Bestsellers are influenced by Amazon.com and the New York Times bestseller lists in particular. However, Korean opinion formers are also very influential, especially in the business arena and in terms of Hallyustyle popular culture (especially important for any author, book or cultural style mentioned in mass market TV shows). But the Korean market is very dynamic and marketing of books by such viral communications as online blogs, SMS texting and e-retailing access to content and email social network facilities are all becoming much more important channels for driving high volume sales.

Even though overseas bestseller lists have an influence on Korean sales, it is still hard to predict which titles in particular will sweep the market. Overseas business gurus are of perennial interest, with US authors tending to predominate. Bestsellers in the US and European markets do not automatically transfer to the Korean market in translation or in English however and there are some examples of titles which have not earned their advances (e.g. The Lost Symbol). Success in Korea also depends on the quality of the translation and translations from Japanese are said to be usually better than those from European languages. Other areas of interest are translated works of children's authors, and this is one area where the UK publishers perform well. Within the children's segment the emerging demand for books and materials for very young children (aged 0-3) seems set to grow as spending on this age group continues to rise. However, the statistics show that very few rights were purchased for educational supplementary materials, though there is clearly potential here still.

There are four key rights agencies in Korea with a large number of others, including one-man (and woman) bands. The larger agencies have a good track record of predicting solid-selling trade and education titles (in the 10,000-20,000 copy sales category), but they speak of the difficulty of predicting the absolute topsellers with accuracy. There are around 300 very active rights buyers among the Korean publishers with a dozen or so dominating in both the consumer trade and children's education segments. These dominant publishers account for the majority of rights remittances (because they are able to fully exploit their market power and achieve high volume scale). Interestingly, it is these same publishers who are benefiting from exporting Hallyu rights to other countries in Asia and beyond - and because of this, many are now more interested in selling rights than in buying.

Royalties start at around 6 per cent of the retail cover price with titles with a proven bestseller provenance rising to 10-12 per cent. Only very exceptional titles achieve higher royalty rates than this, and usually on high volume break points. Advances start at US$1,500 to US$2,500 (£950-£1,500) depending on the segment - usually at the lower end in consumer trade and at the higher end in children's education. Rights agencies typically take a 10 per cent commission (based on total royalties received). The Withholding Tax for UK publishers is 10 per cent.

Ebooks are taking off at last; Kyobo reckons they constitute 2 per cent of their sales at present. KPA estimates that ebook sales in 2010 were US$170m (£110m) and are expected to triple in three years. Therefore, UK publishers, UK ebook suppliers and literary agents need to be prepared to sell in ebooks in English, either direct or through a local online bookstore, or to sell rights for Korean translations in ebook format. For the lighter end of the market, smartphone 'iBooks' are very popular, so this channel should also be considered where relevant.

Imported trade
The value of imports in the general consumer trade market (adult fiction and non-fiction, children's, reference and fiction) was around US$20m (£12m) at retail value in 2010 and should remain at roughly this level. Children's books make up a good proportion of this, though it is very difficult to ascertain whether such titles are imported for the retail market or for the school library market.

There are two key national trade wholesalers: Yong Poon Book Centre, which is also known as YP Book Centre; and Kyobo Book Centre. Of these two, Kyobo Book Centre is the most important importer and is the largest account by some way for most UK publishers. Other importers apart from Young Poon (YP) Books are Tongbang Books, JY (children's), and for the education market, MoonjinMedia, and Language World. About 80 per cent of imported trade books in English are of US origin. This is for the usual reasons: US pocketbooks (paperbacks) are cheaper than the UK editions, and book-buying Koreans were usually educated in the US. American culture dominates, but there are pockets of UK success: children's - especially picture books (Anthony Browne), art and design, literary fiction, abridged classics and religion. Online retailers now have a major share of the market and UK publishers need to ensure that they have access to the main local players: Kyobo, Yes 24, Aladdin and Interpark.

As stated above, ebooks are finally starting to take off and have averaged over 25 per cent annual growth from 2006 to 2010. Now that customers are free to download ebooks from Apple, and now that the Samsung Galaxy tablet is launched, this market is bound to increase rapidly (the local forecast is a tripling in three years) and publishers and rights agents should be ready. They need to ensure that Korean customers can easily download UK titles in English, perhaps through a local web site. They also need to ensure good IP security of course! Most of the general trade importers seek high discounts off list price from UK publishers (with the argument that this is the only way they can be competitive with their US counterparts) and extended payment terms of up to 180 days.

Children's book market
This is an excellent market segment for UK publishers, but as stated above it is often difficult to know where imported titles are going: to retail or to schools, or to parents. Especially where titles have an educational or reference value, they can be distributed either through door-to-door and subscription service channels to the after-school segment, or through the trade. For trade titles, author visits to Korea can make a major difference, as exemplified by Anthony Browne. UK picture books are very popular, though there is plenty of competition in the rights market from European publishers. The door-to-door publishers are looking for large packs of materials to sell to parents for their children at around US$800 (£500), so they might be interested in a reading scheme, a phonics series, graded readers and content materials such as mathematics, science and environmental studies. The largest door-to-door and subscription services publishers have a regular requirement to update and refresh their content across their whole range of products and are very willing buyers of Korean language rights for the right kind of materials. The four key publishers in this arena are Kyowon, Woongjin ThinkBig, Hansol and Daekyo, all of whom have long experience of successful collaborations of one type or another with overseas publishers.

This is an extract from Rob Francis's executive summary. The full report is available to PA members and GPI subscribers at the PA website.

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