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The Digital Publishing Business Model of China The London Book Fair 2013 Digital Minds Conference Lisa Liping Zhang Director, Intl. Dept., Cloudary Corp.

Overview of China Book Market in 2012      

Print books sales: RMB46 billion (US$7.3 billion) Sales by online orders: RMB12-13 billion (US$2 billion) Kinds of new different titles sold: 200,000 Total kinds of titles sold: 1.25 million Growth of annual sales by traditional bookstores: -1.05% Online orders (e-commerce):  RMB4-5 billion in 2010  RMB8-9 billion in 2011  RMB12-13 billion in 2012

Overview of China Book Market in 2012 

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Large or strong publishers: 15% sales are from online orders Middle performance publishers: 30% sales from online orders Small publishers: 50% sales from online orders Mostly due to the online orders, total sales of print books increased by 8% to 10%

P-Book vs E-Book 

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E-book industry has taken a different route in China from the rest of the world Direct publishing/Self publishing is taking the lead in the digital publishing transition E-Book sales players: Cloudary, Hanvon, Chineseall, Dangdang, 360buy, taobao, Suning, Amazon, douban, 3 mobile phone operators, etc. So far, no platform has established yet in China as what Amazon has done in the rest of the world Online literature is a unique term from China

User Analysis of Online Literature in China 203 million of online literature users in China more than the number of E-commerce 2011.12—2012.6 Utilization Ratio of Different Internet Applications in China

Online Literature Users in China1 and Market Size2 (RMB Million) 2011-2014E Compound Annual Growth Rate of Online Literature Market Size:

72.3%

469

359 265

201

3,070 1,920

1,060 600

2011 Paid Reading (Online)

Instant Messaging Search Engines Online Music Online News Online Videos Online Gaming Blogs / Spaces Weibo (Twitter) Emails Social Network Websites

User Size （Million） 415.098 407.401 385.851 366.867 325.305 324.279 318.635 249.88 245.775 244.236

Online Literature

202.675

39.50%

Online Shopping Online Paying Online Banking Forums / BBS Group-go Travel Bookings Online Stock Trading

193.952 166.758 166.244 144.694 64.651 42.074 40.022

37.80% 32.50% 32.40% 28.20% 12.60% 8.20% 7.80%

Application

2012E Mobile Reading

1.Data based on iresearch 2.Data based on iresearch 3.Baidu search ranking (2011) 4.Baidu search ranking (2011) 5.As on 31 Dec 2011

2013E Advertising

2014E

Copyright Authorization

Total

Utilization Ratio

80.90% 79.40% 75.20% 71.50% 63.40% 63.20% 62.10% 48.70% 47.90% 47.60%

Data based on the 30th CNNIC China Internet Growth Statistics Report（2012.7）

Mobile Internet Carrier Operators

 3 mobile phone companies: China Mobile, China Unicom, China Telecom  China Mobile is the largest one Mobile Devices and Apps

 The cloud bookstore and Client Apps in Android and Apple Apps are widely adopted in China.  Reading devices: Smart phones, eReaders like Bambook, Kindle, and other local brands. WAP

 WAP sites are also widely available in China.

* Data based on China Internet Growth Report

Mobile Internet Users in China* (Million) 2008-2011 Compound Annual Growth Rate of Mobile Internet Users:

44.5%

Print Book Publishing The first 5 private book publishers in China have increased their market shares

Revenue of the first 5 private book publishers in China2

2009-2011 Revenue Compound Growth Rate

31%

20% 69% 80%

2009

2011

Cloudary The other 4 privately operated book publishers 1. 2.

Data based on OpenBook report Data based on OpenBook report

 Published 2 of the 3 most popular literary works in 20101  The most popular book that had been published by private publishers in 20111

(RMB million)

28.3%

 Based on retail sales in 2011, Cloudary is the largest private book publisher in China1

Case Analysis: Cloudary 

The LARGEST community driven online literature platform in China

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72.1% market share of Chinese online literature market1

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Parent company: Shanda Interactive Entertainment Ltd. (SNDA)

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Founded in July 2008

1.6 Million

Writers2 1. 2. 3. 4.

6 Million

Titles2

66.9 Million

Average Users per Month3

68 Million

Mobile

Data based on iresearch《China online literature industry growth analysis 2011-2012》 As on 31 Dec 2011 Data based on iresearch 2011 Monthly user access statistics Data based on China Mobile Reading Base 2011 Independent Access Users

Readers4

￥700 Million

Revenue in 2011

128%

09-11 Yearly Revenue Compound Growth Rate

Cloudary Platform Our Community-Generated Content

Content from Partners

Community-driven platform for storage and discovery, analysis / recommendation, and distribution of content

Multiple Revenue Channels

Online Paid Reading

Mobile Reading

Online Advertising

Copyright Licensing

Offline Publishing

Analysis of the Largest Direct Publishing Website Qidian (www.qidian.com)

Largest online original Chinese literature website Mainly focuses on fantasy, sci-fi, martial-arts & military genres Targets male readers  The top 10 novels have collectively got 680 million page views and 1640 comments

Analysis of Another Direct Publishing Website Hongxiu (www.hongxiu.com)

Mainly focuses on feminine literature Especially influential in romance & career genres Targets female readers Writers are also mostly women

Business Model and Payment Tools

Using Shanda virtual currency Supporting different payment tools: Alipay, PayPal Online banking (international bank cards supported) Mobile phone bill/top up cards Etc.

Payment System Micro-payment policy: ￥0.05 per 1,000 characters (Non-members) ￥0.04 per 1,000 characters (Basic members) ￥0.03 per 1,000 characters (Intermediate members) ￥0.02 per 1,000 characters (Supreme members) (Membership requirements vary slightly among different websites)

Payment System Other pricing policies: Monthly subscription:

Complete eBook purchase:

(available in Hongxiu, Xiaoxiang Shuyuan and Jinjiang)

(available for some completed books)

1 Month

￥15.00

3 Months

￥36.00

6 Months

￥63.00

12 Months

￥108.00

24 Months

￥180.00

(Subscribers may read all chapters of the ‘monthly subscribed books’. Prices vary slightly among different websites.)

From ￥1.00 to ￥10.00, depending on the titles

Webpage Snapshot (Yuncheng Homepage)

Categories

Supports all types of reading devices

Micro-payment

Complete eBook purchase

Business in Adaptation Rights In 2011，Cloudary has sold 651 copyrighted works. Nearly 100 movies/TV series adapted from Cloudary works are being made or launched Among the 10 most popular TV episodes in 2011, 4 are related to online literature. Among the adapted online original literary works, most of them are from Cloudary1 Box Office Revenue of Metropolitan Cinemas in China2 (RMB Billion) 2009-2012E Yearly Revenue Compound Growth Rate:

50.2%

1. Data based on iresearch 2. Data based on Yi En Advisory 3. Data based on Screen Digest 4. Data based on IDC

Authorization & Advertisements Revenue of Television Market in China3 (RMB Billion) 2010-2015E Yearly Revenue Compound Growth Rate of TV:

13.3%

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