Terminal: Who Will Succeed on the Beachhead

2010/11/01,Doris Li, China IP,[Copyright]

Over the past two years, there has been an on-going debate over whether e-reading will replace traditional reading. Looking at the current situation, it is clear that the booming availability of broadband, multi-media, Internet and digitization have all posed threats to the traditional publishing industry. This phenomenon is very common in western countries, and many Chinese enterprises regard the industrial development of their foreign counterparts as a weather vane of what to expect.
According to the Sixth National Reading Survey, e-book reading in China has entered into a phase of rapid development. Currently the reading rate of various digital media is 24.5%. The China E-book Development Tendency Report shows that by the end of 2008 the number of e-book resource websites had exceeded 1,400. The market research company DisplaySearch predicted that e-reader sales in China will rise from 800,000 sets in 2009 to 3 million in 2010, which will account for 2% of the global market.
As reported in China’s First Financial Daily, the largest online book retailer, Amazon, claimed that its sales volume of e-books has exceeded traditional printed books for the first time. According to its statistic data from Christmas 2009, and its e-reader Kindle also became the best selling gift. “When we talk about books today we are no longer referring exclusively to traditionally printed books,” said Juergen Boos, the director of the Frankfurt Book Fair.
Some insiders deem the Chinese e-reader market to be, “A New World” with the potential for huge market shares that has led many enterprises to closely watch this opportunity. However, who will be the first to land this opportunity will probably be determined by the end of this year.
Hanvon counts on e-book
During the E-paper Technology Conference held in Shenzhen on March 16, the deputy director of the China Institute of Publishing Science, which is part of the General Administration of Press and Publication, stated that, “2010 will be the year e-readers fully enter the wireless network market and the year for makers to ambitiously grab the lower-end market.”
This meeting is honored as, “currently the exclusive top professional e-reader conference worldwide.” Many renowned enterprises from the Asian-Pacific region could not wait from showcasing their latest e-book technologies, e-reader products, contents and services. The conference has built a great stage for these firms to PK, which in return heats up the e-reader market.
As things stand presently, three e-book readers have become the major focus of potential e-reader consumers: The e-book reader made by Hanwang Technology Co., Ltd. (hereinafter referred to as Hanvon); The Wefound, made by the Peking University Founder Group Corporation (hereinafter referred to as Founder); and the e-doctor, which is made by Guangzhou Kingsun Software R&D Center Co., Ltd. (hereinafter referred to as Kingsun)
In 2010, Hanvon group will budget 100 million Yuan in total on pushing Hanvon e-book advertisement, and the advertisement was highlighted in a prime-time broadcast on CCTV. Based on the results, it appears Hanvon got its money’s worth. Mr. Ying Jian Liu, Hanwang chairman and CEO, has the satisfaction of taking the initiative and gaining the upper hand.
The Hanvon e-book product has become synonymous with e-book among some e-book readers; however the limits on content are commonly viewed as the “Achilles’ Heal” of Hanvon’s e-reader. The company has been eager to supplement more resource to address this issue, and build itself as the King of Chinese e-reader market.
China IP reporters found that at present, the latest Hanvon product is around 3,000 Yuan, which is pre-installed with 1,600 books, but it only supports downloads from the existing books in its website, www.hwebook.cn. Currently the site has over 100,000 books available for download, and they are exclusively published in China; some of which are free of charge and some priced between 2 to 10 Yuan.
The General Manager of the resources operation department at Hanvon, Mr. Chen Shaoqiang, stated, “Hanvon has signed up approximately 40,000 to 50,000 books. The investment this year is large, but the working staff is too small and the digital processing progress is slow. It is expected that there will be 100,000 books available on Hwbok.cn by August or September of this year.”
Based on the data provided by GM Chen, it seems that Hanvon has cast off the weakness in resources. Besides, Hanvon is actively in contact with Shanda Literature Limited, wishing to cooperate with enterprises and publishing houses with rich publishing rights to thoroughly avoid its Achilles’ heel.
Hanvon is obtaining more and more resources, but the main focus is to increase the revenue from distribution to be gained by collaboration with publishing houses and other resource partners. Mr. Chen told us that Hanvon has adopted a four-part business model: free digital processing and resources sharing with publishing houses; all the selling prices set by copyright; revenues distributed by the publishing house; and dividing the profits generated by sales into two parts, with 80% going to the publishing house and 20% for Hanvon. Another important feature is that each book has its own lock to prevent misuse; when users buy an e-book, they can only read it on their own e-reader. This helps ensure that every book on the Hanvon e-book reader was properly purchased.
The resources side is suspicious and some consumers are taking a wait and see attitude. Interviews reveal that many potential consumers are very interested in the e-reader, but they are not likely to buy an e-reader which is the same price as an entire computer.
Reports indicate that the American E-ink company (which was jointly invested in by Lucent Technologies, Motorola Inc. and multiple venture capital firms in 1997 to develop e-paper) made use of the electrophoretic technique to invent electrophoretic ink (E-ink) at the end of the 20th century, which has greatly promoted the development of this technology. At present, over 90% of e-books have adopted E-ink technology. Prime View International (hereinafter referred to as PVI for short), out of Taiwan, became the first manufacturer to master the key technology of e-book mass production after it merged with CHIMEI in 2009.
GM Chen also stated that the parts, including the drive, software and other components, were developed by Hanvon e-book; with the exception of the display screen which was purchased from E-ink. The cost of screen accounts for at least 50% of total e-reader cost, but the price will naturally reduce when the sales volume increases. It will be very tough for domestic companies to develop E-ink technology independently within the next 1-2 years.
The over 50% dependence on E-ink technology purchase and its current high monopoly phase has continued to keep prices high.
However, whether the company can hold on and compete for big market shares by purchasing key technologies is also an important factor for the people who are waiting to see what happens in the market.
Strong background of Wefounder
It is kind of like déjà vu when seeing a picture of Wefound for the first time on the webpage. It looks a little bit similar to the Kindle 2; featuring an ivory machine body, back color Metallic Grey and 6 inch screen.
Let’s put aside the appearance of Wefound, because on April 17, the “inner beauty” of Wefound was further enhanced by news that the e-book display giant PVI announced that they would invest USD 500 million to build an e-paper center in Yangzhou, a manufacturing center with other associated industries. In addition, the company also stated that they would collaborate with fanshu.com of the Founder Group. PVI will help fanshu.com promote its e-book platform, and at the same time provide customers a digital book database with close to a million books. According to the news from PVI, any e-reader maker using E-ink paper will be authorized to download copyrighted books from fanshu.com.
According to official figures from Founder fanshu.com, it currently has covered 1.8 million varieties of published bibliographic information, of which 600,000 are copyrighted books with full text, with an annual growth of 100,000 copyrighted resources.
Wefound is provided by Beijing Founder Forehead Media Tech. Co., Ltd and Aspire Information Technologies (Beijing) Ltd, which are respectively owned by Founder Group and China Mobile. One reason for its superiority over other e-readers is that it enables China Mobile’s 3G (TDSCDMA) and GSM (EDGE) by its in-built wireless communication module. Users just need to insert a SIM card and they can surf the Internet to browse news, view the stock market, read online, download copyrighted books, etc.
The resources for Wefound are not as big of a concern compared to the Hanvon product. The Apabi Company specializing in digital book publishing, which is under Founder group, is a powerhouse in the Chinese digital book and newspaper resource market. It is reported that over 80% of the publishing houses in China utilize their platform to publish e-books, with more than 60,000 types of e-books published annually and over 300 newspapers from 150 newspaper offices also adopting the Apabi technology to publish newspapers. If Wefound could integrate a majority of these e-books and e-newspaper resources, they are probably to become the champion in content resources.

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