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Why Cell Phones Will Dominate the E-Book Market in China

• In 2009, China ran up $1bn in sales of digital content, and the market is growing at an estimated 40% annually. In response China Publishing Group (CPG) -– China’s largest state-sponsored publishing conglomerate — has launched Digital Media Co. Ltd., a new digital media and technology subsidiary.

• From August 24-27, the German Book Office Beijing is hosting a trip for international publishers to Shanghai to visit some of the biggest players in this burgeoning market, including Shanda Literature, Byread, Shanghai EDO Technologies, Dookbook, and others.

• Yesterday, Liu Chengyong of China Publishing Group (CPG) he spoke about how Digital Media Co. Ltd — the digital subsidiary of CPG — aims to make the most of China’s booming digital marketplace. Today, Liu Chengyong talks about the future of e-reading on cell phones and dedicated readers, and how publishers can deal with the dominance of China Mobile.

Interview by Lei Ren, German Book Office, Beijing

Publishing Perspectives: Which consumer groups in China are currently using digital readers?

Liu Chengyong: It is hard to determine who is reading e-books. We can only determine the people likely to have received an e-reader as a gift, people such as proprietors, government officials, white collars and scientific personnel. But are they using it? It could be their children who read with it, or maybe their wives. It could also be them, of course, but there is no way to know.

PP: Before, traditional publishers and foreign publishers would mainly work together in the area of copyright trade. With the advent of digital publishing, in which fields do Chinese and foreign companies cooperate now?

Chengyong: The head of Australia’s RP company, which specializes in tourism, has asked us to cooperate with them, for example.

The cooperation between Chinese and foreign businesses in digital publishing is beginning to grow. The CNPIEC (Chinese National Publishing Import and Export Corporation) has created a wonderful internet platform, called cnpLINKer, which offers the possibility to search through foreign books and publications for libraries, teachers and other organizations. This platform is not open to the public though, since foreign books have to undergo a censorship process before they can be published in China. Making them accessible to the public would cause trouble. Springer and CNKI (China National Knowledge Infrastructure), for instance, are already working together. On the Internet platform of CNKI you not only find links, but in-depth database exchanges.

For a successful integration of foreign companies into the Chinese market, I think a union between East and West would be the best solution. Why was Baidu able to beat Google? How could Dangdang and Zhuoyue drive out eBay? On the world wide web there is no foreign company that can yet outdo local companies.

The largest global search engine is Google, but even their success came to a halt in China. Why is that? Because western companies cannot let go of their pride and are constantly trying to impose themselves and their products on China. Foreign companies would have a much larger chance for success in China if they cooperate with other companies. Purely foreign or purely local businesses lack the required flexibility.

PP: Do you think that two or three years mobile phones might dominate the market for e-books? Are e-readers a dead end?

Chengyong: I really hope it will not come to this situation, but it is very, very likely. The e-reader is a medium that is still very immature. In the last year Hanvon announced they sold 500,000 units of their e-readers. In comparison to the total population of China (1.3 billion) and the number of people who own a cellphone (between 700 to 800 million), the sales of e-readers is not even worth considering. China Mobile has already more than 600 million subscribers. That is almost half of the Chinese population.

The wireless music industry, for example, started in 2005 and by 2009 they sold 220 billion RMB worth of content — 50 times more than the revenue of the entire conventional Chinese music industry. Looking at these numbers one can imagine how mobile phones can magnify the industry market potential. China Mobile is hoping to achieve the same results with their new Mobile Reader platform, and I hope it will be a success. Mobile publishing has the potential to be able to distribute sophisticated publications and books to the public. It has enormous prospects.

For the purpose of publishing, the cellphone is a more powerful medium than paper, e-readers, magazines and even the Internet.

We are not the only ones aware of this problem. The government and the News Department have realized this as well. The News Department and China Telecom have already concluded a strategic cooperation agreement, they are determined to tighten the regulations around mobile operators.

The regulations will influence content management, dictating who is allowed to publish and who is not.

Only a couple of digital publishers now have the right to freely manage their publications. These are usually state owned and not privatized publishers and foreign investments are not allowed. Mobile publications will receive more intensive examination and the work flow will be split and divided onto two parties: The party that publishes the books and the party that focuses on the marketing and distribution, which includes China Mobile, China Unicom, China Telecom and Hanvon. These companies are not allowed to enter the publishing business and are restricted to their field.

Publishers and content providers have had a difficult time establishing themselves in the field of mobile publishing at the beginning. There seems to be no means of establishing oneself without cooperation with China Mobile. It was different on the Internet, where no monopolies exist. In China, there are only three mobile companies controlling the market, but as long as there remains competition between those three, there’s a way to move around. The publishing industry should not be intimidated by China Mobile and should move forward with more self-confidence.

DISCUSS: Will Cell Phones Prevail over Dedicated Devices for Mass Market E-reading?

READ: More information about the launch of China Mobile’s e-reading platform for cell phones

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