Internet & Tech

Turning the page

Will the e-book captivate Chinese consumers?

Turning the page

Write on: Hanwang's e-reader

Knowledge, rather famously, is power. And in ancient China, book ownership was also a prerequisite for prestige and political authority. Qin Shi Huangdi, the first emperor, ordered the burning of all ancient books and records for fear that they might pave the way for private individuals to challenge his own absolute power.

Twenty-two centuries later, books are again at risk – at least of the printed variety – this time from electronic reading devices called e-readers that display digital text on a screen.

Amazon’s e-reader (the Kindle) hit the palms of international consumers this month. Notably it was not made available in China. No matter: Chinese e-book manufacturers have not dithered in staking a claim to their own market.

Hanwang Technology, for example, began selling its first batch of e-readers in July 2008, and saw sales of 150,000 units in the first half of this year. Its goal: to sell a half million units in 2009.

And while Amazon’s Kindle has been around since late 2007, there is even evidence of some technology leapfrogging going on in China: the latest model introduced by Hanwang carries handwriting functionality that allows readers to make notes on their e-books. That is a feature the Kindle doesn’t have.

But perhaps the most significant entrant is China Mobile. Last month Hanwang – as well as Datang Telecom – began selling an e-reader customised for China Mobile’s 3G network.

“The e-book reader will become one of the most important products in China as the country embraces the 3G era,” Datang’s vice-president, Liu Xin told the China Daily.

China Mobile – which has a 70% share of the country’s mobile phone market – has already had some success in the e-reading market.

According to the Financial Times, 2 million of China Mobile’s subscribers already read digital publications on their phones.

Now its ambition is to be the Amazon of the Chinese e-book market i.e. the main digital distributor.

The telecoms firm will face two major challenges as it seeks to grow this new business. The first is price. Chinese publishers are wary of cannibalising the market for printed books by lowering the price of digital versions. China Mobile will have to persuade them to drop prices a lot further if more readers are to be tempted to pay for e-books.

Then there’s the hardware: both Hanwang and Datang’s e-readers cost around Rmb3,000 ($438). Industry publication Communications Weekly reckons this is “too high” and will “limit the size of the e-reader user base”.

Newer models that China Mobile plans to order from Taiwan’s Foxconn might help get the price down.

But the second major challenge is more thorny: piracy. A study released this year by an alliance of local publishing and internet companies found that 95% of Chinese users of e-books are reading pirated versions. So the telecom firm’s big pitch to the publishing industry is that it has the clout and technology to prevent piracy.

It is offering its own self-developed digital rights management system to ensure that books can only be viewed on the e-reader that downloaded (and paid for) it.

Sounds good. And indeed it has to since China Mobile needs the publishers onside. Without their backing it can’t assemble a large digital library of books and emulate Amazon’s approach (the Kindle has access to 350,000 titles).

But the telco has some charming to do. Publishers worry they could end up in its thrall – in much the same way that record companies now fear iTunes growing dominance in distributing music.

The stakes are high for all parties. There are currently 79 million Chinese that read books electronically – although 93% do so on computer screens not e-readers. The market’s potential size is huge.

As for China Mobile it wants to shift more of its 508 million customers onto its new 3G network (see related article on page 9). Netbooks have proven a popular way to sign up 3G customers. China Mobile will hope that e-books may provide another.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.