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.

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Filed Under: business models, china, publishing, scale
Companies: tencent

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  1. This comment has been flagged by the community. Click here to show it
    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.

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