[A2k] Wall Street Journal: Outlook for electronic boo ks in China appears bright— once big hurdles are cleared

Tue Jan 5 08:48:01 2010

http://online.wsj.com/article/SB10001424052748704350304574637950431792192.h=
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     * JANUARY 5, 2010

Outlook for electronic books in China appears bright— once big hurdles
are cleared
Publishing firms are wary of providing content when piracy is rampant,
device prices remain high

By JULIET YE
[CEREADER.1] Associated Press

E-readers were on display at in the Chinese pavilion at the Book Fair
in Frankfurt last October. China is forecast to see e-reader sales
jump to three million in 2010 from 800,000 in 2009.

HONG KONG—As makers of electronic-book readers jockey for position in
the U.S., Japan and Europe, a similar but more challenging effort is
unfolding in China.

World-wide, about four million electronic-book reading devices were
sold last year. The number is expected to jump to 12 million in 2010
and 18 million in 2012, predicts the U.S.-based market intelligence
firm iSuppli Corp.

China is forecast to see e-reader sales jump from 800,000 in 2009 to
three million in 2010, making up of 20% of the global market,
according to a recent report by research firm DisplaySearch. The
company goes on to forecast that China will surpass the U.S. to become
the world's largest e-reader market before 2015, by virtue of its
large population.

"It's still too early to talk about the market scale, but the China
market is a highly potential one due to the large user base," said
Zhang Yanan, an analyst from Beijing-based research firm Analysys
International.

But the China market faces considerable challenges. Most e-readers
there—manufactured mainly by local players—can get expensive for the
average Chinese consumer. While bare-bones models can be had for less
than 1,000 yuan (about $150), in some cases more-advanced models with
handwriting recognition, card readers, WiFi access and greater access
to online libraries can cost as much as 3,000 yuan.

By contrast, in the U.S., Amazon.com Inc.'s Kindle reader and Barnes &
Noble Inc.'s Nook are $260, while Sony Corp.''s smallest e-book reader
is $200.

Amazon sells books in China through its Amazon.cn site but it doesn't
offer its Kindle reader in China. Nor does Sony sell its device there.
Piracy and revenue-sharing issues make China a daunting market for
outside companies in the industry. Also, Beijing has strict
regulations and licensing process on e-businesses, said You Yunting, a
copyright lawyer in Shanghai.

A lack of content plagues China's e-reader makers. The rampant piracy
makes providing content a difficult business. According to the China E-
Book Market Development Report, jointly released by Chinese e-book
portal du8.com and industry tracker CBBR, 95% of China's digital
readers download unauthorized works from the Web.

"Publishers are reluctant to work with [makers of e-book readers] due
to the current situation of intellectual-property protection in China,
and the online payment awareness level among Chinese digital readers
is still pretty low," said Ms. Zhang of Analysys International.

With content still lacking in China, some manufacturers load up the
devices with books, at added cost. E-book content sales in China
remains small—totaling just 226 million yuan, or about $33 million, as
of the end of 2008, according to the China E-Book Market Development
Report.

Amazon and Barnes & Noble boast of having hundreds of thousands of e-
book titles available to download in the U.S., most for $9.99, but the
companies don't disclose their e-book sales.

In China, local manufacturers dominate the market for e-book readers
and more are expected to pile in.

Beijing-based Hanwang Science & Technology Co. is No. 1 by sales,
according to Analysys, and sold 200,000 e-readers since its September
2008 debut. It sold about 500,000 units last year and expects to sell
more than two million in 2010.

In September, Hanwang Science released a 3G e-reader capable of
connecting with China Mobile Ltd.'s network, a feature that enables
users to access the Internet to download books. Users can write
Chinese characters on the e-reader screen with an electronic stylus,
said Liu Yingjian, founder and chairman on Hanwang.

"More competitors are going to the e-reader market, and I figure that
there will be 50 to 100 players competing in 2010. But we are very
confident of being No.1 in the market," Mr. Liu said.

China Mobile is also working with contract manufacturers including
Datang Telecom Technology Co. and Hon Hai Precision Industry Co. to
produce e-readers devices.

Hanwang pre-installs a number of books into its e-readers, mostly
classics and booklets of historical works. The company also runs its
own online library, Hanwang Library, but it has only 30,000 books
available for download at present. To broaden its base, Hanwang gives
its e-readers the ability to support a large number of e-book formats,
so users can buy books from a range of suppliers.

Hanwang is also working closely with publishers at home and abroad to
expand its online library. In November, Hanwang said its plan to offer
80% of revenue to content providers to attract copyright owners.

In October, Beijing's Founder Group Inc., which offers Chinese e-books
online, launched its branded e-reader product called WeFound.

The Kindle-like reader includes a cellular connection and incorporates
Founder's own e-book software. Company officials, who say they
developed their reader independently of the Kindle, expect to sell up
to one million of the devices in 2010. Founder Group also says it
plans to expand its online store.

Founder Group's Apabi e-book subsidiary launched an e-book site
together with search site Zhongsou.com, aiming to build world's
largest online library of Chinese books. Founder's WeFound reader, at
4,800 yuan, is expensive even by Western standards, but the price
includes a three-year service package with Internet access and access
to its Apabi's library of 600,000 book titles, plus daily news updates.

Write to Juliet Ye at juliet.ye@wsj.com

------------------------------------------------------------

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
thiru@keionline.org

Tel: +41 22 791 6727
Mobile: +41 76 508 0997