Overview and Outlook of China’s Literature Market
China’s literature market currently comprises three sectors: online literature, e-books, and physical books (of a literary nature). Online literature is defined as literary works originally created for general public interest and distributed over the Internet. E-books refer to digital versions of physical books of a literary nature. The key difference between online literature and e-books is that online literature works are originally created on and initially distributed through online literature platforms, typically in serial manner, while e-books are considered as one of the subsequent carrying forms of licensed literature content and are published only after they are completed. The size of the literature market in China, measured by revenue, grew from CNY 29.7 billion in 2013 to CNY 40.3 billion in 2016, representing a CAGR of 10.7%, and is expected to further increase to CNY 59.1 billion in 2020, representing a CAGR of 10.1% from 2016. Within China’s literature market, online literature has grown the fastest, at a CAGR of 44.9% from 2013 to 2016, and is projected to continue to grow at a CAGR of 30.9% from 2016 to 2020. In 2016, the size of online literature market in China was CNY 4.6 billion, representing 11.4% of the total literature market in China, and such percentage is expected to grow to 22.7% in 2020. For the online literature market as defined in the Frost & Sullivan report, revenues are “narrowly” defined as sales primarily generated from online reading activities by readers through purchases of online premium content via three main methods: pay-per-chapter, monthly subscription packages, and other bundled packages. The following chart illustrates the historical and projected online literature market size in China as measured by revenue.
Drivers of Online Literature Market Growth in China
Online literature enjoys significant creative freedom and is increasingly preferred by Chinese readers who are looking for depth and diversity in literary content. Unlike traditional literature, which is typically classic or contemporary novels by well-known authors, online literature is more diverse and caters to broad content demands of Chinese readers. Online literature includes genres such as fantasy, wuxia, science fiction, mystery, romance and cosmopolitan, as well as a wide spectrum of other refined literary interests. With the increasing Internet penetration particularly on mobile, which reached 52.9% and 50.3% respectively in 2016, online literary works have become easily accessible to internet users on their PC and mobile devices. In particular, due to the convenience of reading on mobile devices and the engaging nature of literature content, reading through mobile apps has become an increasingly popular way of content consumption among mobile users to take advantage of their fragmented free time. According to the Survey, 25.2% of the survey respondents ranked online literature reading as one of the top favorable activities in terms of daily time spent on mobile devices. The large growing reader base, together with the increasing user engagement level, will continue to boost the growth of online literature market in China. In addition, the environment for intellectual property protection in China has significantly improved in recent years. The existence of pirated online literature content has led to an estimated loss in revenue of CNY 11.4 billion in 2016, which is more than double the size of the online literature market revenue in 2016. With increasing focus on intellectual property protection and effective anti-piracy efforts undertaken by governmental agencies and industry players, China’s anti-piracy environment has been steadily improving. In the meantime, readers’ willingness to pay for premium online literature content has increased significantly in recent years. Out of the survey respondents who have read online literary content in the first quarter of 2017, 43.8% indicated that they were willing to pay for copyrighted content online. The paying ratio of online reading (in terms of the number of paying users of online literary content as a percentage of all DAUs on online literature platforms in a period) on PC platform and mobile platform increased from 1.3% and 3.3% in 2013 to 2.0% and 7.0% in 2016, respectively, and is expected to further increase to 4.8% and 14.5% in 2020, respectively.
Online Literature Users in China
The number of online literature readers in China totaled 333.2 million as of December 31, 2016, of which 303.8 million read on mobile devices. The total is expected to reach 421.4 million by December 31, 2020, of which 408.8 million will be on mobile. Online literature users comprise those who read on either PC or mobile platforms and those who read on both. Amongst these three groups, the size of mobile-only readers is currently the largest and is also expected to grow the fastest. Online literature readers in China are active, engaged, and typically younger than the average Internet user. According to the Survey, the majority of China’s online literature readers spent over one hour reading online literature per day, and the majority of China’s online literature readers accessed online literature content three or more times per week. According to the Survey, 70.7% of China’s online literature readers were below the age of 30, 20.7% were between the age of 30 and 39, and 8.6% were of or above the age of 40. Among the online literature readers that participated in the Frost & Sullivan Survey, 10.3% of them have been reading online literature works for less than one year, 22.3% have been reading online literature works for one to three years, while over 60% have been reading online literature works for more than three years.
Online Literature Writers in China
As of December 31, 2016, there were an estimated 6.0 million writers of original online literature in China. This is expected to reach approximately 8.5 million as of December 31, 2020, representing a CAGR of 9.2%. The top five online literature companies in China in 2016, as ranked by total number of writers who had published online literary works on the respective platforms as of December 31, 2016, were our Company, Chinese All Digital Publishing Group, iReader, Baidu Literature, and Alibaba Literature, each with a share of total writers (in terms of the number of writers on the respective platforms as a percentage of the total number of online literature writers in China) of 88.3%, 41.6%, 33.3%, 8.3%, and 5.0% respectively.