[Note: below is Chapter 2 from Great Wall of Numbers]
In the Spring of 2009, a young freshman named Cena asked me a question (as in WWE John Cena – many men in China enjoy the drama of World Wresting Entertainment).
Cena said, “Mr. Swanson, what do American college students do with their textbooks after the semester is over?”
I replied, “If the class is offered again, we can usually sell them back to bookstores near campus or to online buyers, though sometimes students simply throw them in the recycling bin too.”
Cena thought for a moment and then said, “Why don’t you sell them to China? Our books are sometimes of lower quality and outdated.”
He raises a good point, what are the logistical and legal challenges of gathering and exporting used American textbooks to mainland China? Is there any profitable business model that we can use to compare the potential market opportunity?
Founded in 1972, Half-Price book store is a Dallas-based company that buys and sells used books. Yet despite this seemingly simple business model – buying used books and selling them – the company has grown to operate more than 100 stores in 15 states.
Could you sell used books like Cena suggested? While establishing a brick-and-mortar store front in an increasingly digital age probably may not be financially justified, there are also regulatory hurdles worth considering (e.g., obtaining permission from the former General Administration of Press and Publication now called State Administration of News, Broadcasting, Film and Television).
In fact, there has been an ongoing trade dispute between the US and China regarding China’s barriers that limit the importation of books and other media. In addition to regulating the distribution of foreign material, Chinese policies require that foreign media and books must be channeled through state-owned enterprises (like Xinhua and China Film Group). In 2009 the WTO ruled that China had “violated international rules” by these limitations.1 After appealing, five months later the WTO appeals board once again ruled that China was “unjustified” in such limitations.23 While this dispute continues to simmer, despite these challenges the domestic book market has grown. For example, “just 7-8 years ago,” Jo Lusby of Penguin China says that “there wouldn’t have been the market to sustain what we’re doing. Today it’s a challenging business, but it’s commercially as well as literarily worthwhile for us.”45
And while there could be a case either way – depending on future import regulations and oil prices for transportation – perhaps you could find a Chinese partner to create the equivalent of Half-Price on mainland China. Perhaps one relatively sanguine route would be to source the used books in areas that are non-political like the STEM subjects: science, technology, engineering and math text books in the US to sell through your joint-venture (JV) partnership. Or while this trade dispute remains ongoing, perhaps foreign content creators could attempt to ‘go digital’ in the interim. I discuss some other relevant challenges in Chapter’s 10 and 14.
A large demand for content
With 370,000 titles, in 2011 the Chinese domestic book market was valued at $10 billion, displacing Germany and making it the second largest book publishing market in the world (after the US).67 All told, according to the Chinese Academy of Press and Publication “the revenue from publishing, printing and distribution reached 1.46 trillion yuan (US$228.62 billion), up nearly 18 percent from the year before.”8
How are they reading these books? According to a 2011 Publishers Weekly report, the “preferred platform” for Chinese readers is now the digital ebook, such as those found on smartphones.11 And despite relatively tight government regulations on all forms of communication and publication, the book publishing industry and in particular the ebook industry continues to grow.
For example, Baidu, China Mobile, Hanvon and Cloudary operate the top ebook platforms and distributors; platforms whose usage rates have grown at double digits each of the past several years. And because Amazon’s Kindle is currently not being sold in China, many other domestic e-readers have gathered large marketshare. Hanvon has roughly 50% of the e-reader marketshare and Shanda’s Bambook has captured 28%.12 In fact, Shanda-owned ebook platform Cloudary alone has published 5.2 million titles by mid-2011 whereupon it was spun off into a successful $200 million February 2012 IPO.13 Shanda is now China’s 5th largest tech company by revenue.14
Do you or your company have books or content currently published in the US? Do you create and provide content for science, technology, engineering or math books or periodicals? If so, then mainland companies like CLS Communication (the largest in China), Sinophone, Yuyi and Berlo may be able to provide translations of your material so that you can upload and sell the content on platforms like Cloudary.15
Translating your content
If you would prefer to use US-based translation services, there are a number of providers. According to a 2012 report from Common Sense Advisory, in terms of revenue, the largest language service providers in the US are: Mission Essential Personnel, Lionbridge Technologies, TransPerfect and ManpowerGroup.16 Together they generated more than $1.5 billion in revenue last year.
Dean Stamatis, author of over fifty books on statistics, quantitative finance and Six Sigma, has been in the process of locating an English-to-Chinese translation service in China for translating his latest 900 page technical book. 17 In November 2012 he explained to me that on the one hand “you have excellent, yet expensive translation service providers in the US and on the other you have relatively cheaper (though still expensive) translators in China who may be a little more difficult to communicate with across the time zone differences.” Furthermore locating the Chinese providers can be a laborious task at times as well and as a consequence he personally has traveled to China to discuss the services face-to-face. This is something that all businesses should take into consideration.
A content plan of action
In Chapter 12 I discuss the social media industry in China and how foreign firms can build and maintain a brand through the numerous social media sites. Again, while it is important in the long-run to understand the culture and language of your potential customers in China, with a few minutes of Google searches you can start rolling out both your brand and your content to the Chinese public right now, without even knowing any Mandarin.
Just as there was a virtual land rush with the opening of Facebook Pages and other unique domain names in the 1990s, so too is there a land rush for social media positioning in China. And irrespective of whether or not your local competition in the US acquires brand names before you do in these new Chinese platforms, you have another competitor you do not even know about: hundreds of start-up companies in China that are discussed later in Chapter 12.
Thus without needing to hire a strategic consulting firm, you and your company can and should already establish a beachhead in China by registering and creating a QQ and Sina Weibo account (look at Chapter 12 for more details) and by assessing e-tailers like Cloudary for your digital content.
One last word of warning, if you are looking to get involved with an ebook platform, be sure to study the guidelines and regulations permitted by the former General Administration of Press and Publication (中华人民共和国新闻出版总署).18 Amazon China is currently under investigation for possible violations related to obtaining the proper approvals and licenses for its new Kindle Store on the mainland.19 In fact, as an aside, despite its 8-year endeavors Amazon China has only captured 1% of the $196 billion e-commerce market.20 While the case is ongoing be sure to consult with an attorney (see Chapter 10) before making any substantial investments first.
Takeaway: Looking around at your existing content, you and your company may find China as a new market for revenue generation. This includes both older and new content ranging from science and technology books to reports your company published in periodicals. China is the 2nd largest book market and has a number of well-funded, well-developed ebook platforms that your company may be able to sell into. There are also a number of well-established industry leaders on both sides of the Pacific capable of translating your English content into Chinese and vice-versa. This move towards online selling also presents an opportunity to establish a brand through Chinese social media sites such as QQ and Sina Weibo that are discussed at length in Chapter 12. Failure to quickly move into the Chinese market not only presents an opportunity for your domestic US competition but also for your competitors in China with whom you probably are unfamiliar.
- W.T.O. Rules Against China’s Limits on Imports from The New York Times [↩]
- China Appeals WTO Ruling on Book, Film, Music Imports from Bloomberg [↩]
- China loses WTO media imports appeal from BBC [↩]
- Chinese Fiction Is Hot from BusinessWeek [↩]
- Other genres that are currently maturing on the mainland include fantasy and science fiction which was recently a focus of special issue the Science Fiction Studies at DePauw University. See “Great Wall Planet”: Introducing Chinese Science Fiction by Yan Wu [↩]
- IPA’s Global Ranking of Publishing Markets—US, China on Top from Publishing Perspectives [↩]
- Slightly older data (2006) lists the largest book markets as: the US, Germany, China, Japan and the UK. See The Global 2011 eBook Market: Current Conditions & Future Projections by Rüdiger Wischenbart and Sabine Kaldonek [↩]
- What Chinese want to read from People’s Daily [↩]
- Ibid [↩]
- Mo Yan won the 2012 Nobel Prize in Literature and in doing so brought modern Chinese literature into the spotlight. Sales of his English-translated works rose to best-seller status on Amazon.com. Similarly, sales of Yan Lianke works also increased following the announcement of being a finalist for the Man Booker Prize in 2013. See Man Booker International Prize 2013 Finalists Announced from The Man Booker Prizes, The world has yet to see the best of Chinese literature from The Spectator and Stealing Books for the Poor from The New York Times [↩]
- The Global 2011 eBook Market: Current Conditions & Future Projections by Rüdiger Wischenbart and Sabine Kaldonek [↩]
- Bezos’ Kindle-Less Amazon Mashed in China by Ma’s Alibaba from Bloomberg [↩]
- Shanda Cloudary US IPO is Finally Taking Off from Tech In Asia [↩]
- China’s Top 10 Tech Companies by Revenue from Tech In Asia [↩]
- Some of the top China-based translation firms are CLS Communication, Sinophone, Yuyi and Berlo [↩]
- The Top 100 Language Service Providers from Common Sense Advisory [↩]
- Dean Stamatis is the President of Contemporary Consultants in Michigan. [↩]
- Stealing Books for the Poor from The New York Times [↩]
- GAPP: Amazon China’s Kindle Store Violates Regulations from Marbridge Consulting [↩]
- Bezos’ Kindle-Less Amazon Mashed in China by Ma’s Alibaba from Bloomberg [↩]