Business Models

by Glyn Moody


Filed Under:
business models, china, publishing, scale

Companies:
tencent



China's Tencent Proves You Can Make A Decent Profit From Online Publishing -- If You Have A Platform With A Billion Users

from the blame-the-innovation-gap,-not-the-value-gap dept

A constant refrain from the publishing industry is that it's impossible to make a decent profit from online publishing because of all those people downloading and sharing digital stuff for free. An interesting article in Caixin reporting on the Chinese digital giant Tencent offers an interesting perspective on that issue. It provides an update to a story we wrote last year about Tencent moving into online publishing, with evident success:

Net profit for Tencent's online publishing unit China Literature was 15 times greater in 2017 compared to 2016, according to the company's first annual results released after its blockbuster initial public offering (IPO).

Revenue grew by 60% to 4.1 billion yuan ($648 million), from 2016's 2.6 billion yuan. Profit attributable to shareholders jumped by a staggering 1,416% from last year's 36.7 million yuan [$5.8 million] to 556.1 million yuan [$88 million] in 2017.

As the article explains, revenues came mostly from payments by readers of the company's online offerings, which cater for a wide range of tastes -- from comics to romance. In total, works are supplied by 6.9 million writers, most of whom are contracted to produce original material for the company. The scale of the operation is similarly large: last year around 11.1 million people paid to use China Literature's services, up from 8.3 million in 2016.

Although those are all impressive figures, it's worth noting one of the key factors driving this business. Tencent is the company behind the WeChat messaging app. Last year, there were 963 million users, so it's likely that more a billion people now use WeChat's powerful and wide-ranging platform. That naturally makes selling China Literature's services much easier.

Traditional publishers will doubtless claim this means they are unable to compete with this kind of platform power, and that they can never generate significant profits online. Their conclusion seems to be that companies like Google and Facebook should be punished for their success. Indeed, this demand has been crystallized into a slogan -- the so-called "value gap", which supposedly represents the money that publishers would have received had it not been for the online giants.

In truth, this "value gap" is more of an "innovation gap": if the publishing companies had embraced the Internet fully in the early days, there is no reason why they could not have turned into Google and Tencent themselves. Instead, publishers have fought the Internet from its first appearance, as they still do. They hanker for the more profitable days of analog publishing, when they were the undisputed gatekeepers. And in their heart of hearts, they secretly hope one day those times might return if only they can persuade politicians to bring in enough retrogressive copyright laws to hobble innovative online companies.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+


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  • This comment has been flagged by the community. Click here to show it
    identicon
    Anonymous Coward, 29 Mar 2018 @ 8:01pm

    FIRST, "people paid"! But $88 million profit off 11.1M people?

    It's not a loss, but Western "shareholders" wouldn't bother.

    Besides that, you just don't mention that pirates get the death penalty, imprisoned waiting until some rich Westerner matches their blood type, then they're parted out. So there's "draconian" that limits piracy.

    In short, in every way, it's just not relevant to the US.

    reply to this | link to this | view in chronology ]

  • This comment has been flagged by the community. Click here to show it
    identicon
    Anonymous Coward, 29 Mar 2018 @ 8:02pm

    Because using products that other people pay for, "Google and

    Facebook should be punished for their [criminal] success."

    FTFY.

    reply to this | link to this | view in chronology ]

  • This comment has been flagged by the community. Click here to show it
    identicon
    Anonymous Coward, 29 Mar 2018 @ 8:02pm

    Seeing the rise of theft with VCR-copying, "publishers have

    fought the Internet from its first appearance".

    FTFY.

    This "if only publishers had followed the advice of pirates they'd be rich beyond dreams of avarice" claim is just STUPID.

    In fact, without fighting piracy every step (and that most people are decent and PAY), publishers would have all folded.

    reply to this | link to this | view in chronology ]

  • This comment has been flagged by the community. Click here to show it
    identicon
    Anonymous Coward, 29 Mar 2018 @ 8:03pm

    Copyright prohibits taking a person's WORK without paying.

    It's not a "granted privilege": it's a statement of common law: "I made it, therefore I own it". Applies to ALL work, even "intellectual".

    The RIGHT TO CONTROL COPIES is in the US Constitution because it's always been easier to copy than to create.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 30 Mar 2018 @ 3:49am

      Re: Copyright prohibits taking a person's WORK without paying.

      The RIGHT TO CONTROL COPIES is in the US Constitution because it's always been easier to copy than to create.

      Wrong, the constitutions allows congress to enact to grant copyright and patent, but it does not require them.

      Also, as many creators on the Internet have learnt, the ability to produce new and interesting works is a skill that people will pay them for. It is called patronage, and is the way that creators have been supported for most of human history. The modern form, using the services of companies like Patreon, allows many people to come together to support an artist.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 29 Mar 2018 @ 8:17pm

    Saying that they could've become Tencent is quite absurd. The only way a company could have turned into Tencent before Tencent is with a healthy dose of Chinese state cronyism and protectionism. Oh, and adding social credit monitoring systems to your services so that your sugar daddy government can further control people.

    https://gizmodo.com/chinese-citizens-with-bad-social-credit-to-be-blocked-f-1823845648

    reply to this | link to this | view in chronology ]

    • icon
      NaBUru38 (profile), 31 Mar 2018 @ 12:02pm

      Re:

      Penguin Random House could have done the same as Amazon with online books.

      Disney could have done the same as Netflix with films.

      Warner Music could have done the same as Spotify with music.

      reply to this | link to this | view in chronology ]

  • identicon
    Yes, I know I'm commenting anonymously, 30 Mar 2018 @ 4:00am

    It looks like Tencent is offering a wide variety of titles in a convenient way and at an affordable pricepoint.
    Exactly what Apple did with Itunes.

    Each publisher making their own private salespoint (like the TV industry is doing with streaming) would not have been viable and will not become the solution.

    Getting multiple *competing* intermediaries that all offer all the titles is.

    reply to this | link to this | view in chronology ]


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