The London Book Fair 2013Digital Minds Conference

Lisa Liping Zhang

Director, Intl. Dept., Cloudary Corp.

The Digital Publishing Business

Model of China

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

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

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, Chinese-all, 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

6001,060

1,920

3,070201

265359

469

2011 2012E 2013E 2014E

Paid Reading (Online) Mobile Reading Advertising Copyright Authorization Total

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

(RMB Million)

Online Literature Users in China1 and Market Size2

2011-2014E Compound Annual Growth Rate of Online Literature Market Size:

72.3%

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

2011.12—2012.6 Utilization Ratio of Different Internet Applications in China

203 million of online literature users in China

more than the number of E-commerce

ApplicationUser

Size （ Million ）

Utilization Ratio

Instant Messaging 415.098 80.90%Search Engines 407.401 79.40%

Online Music 385.851 75.20%Online News 366.867 71.50%

Online Videos 325.305 63.40%Online Gaming 324.279 63.20%Blogs / Spaces 318.635 62.10%Weibo (Twitter) 249.88 48.70%

Emails 245.775 47.90%Social Network

Websites 244.236 47.60%

Online Literature

202.675 39.50%

Online Shopping 193.952 37.80%Online Paying 166.758 32.50%

Online Banking 166.244 32.40%Forums / BBS 144.694 28.20%

Group-go 64.651 12.60%Travel Bookings 42.074 8.20%

Online Stock Trading 40.022 7.80%

User Analysis of Online Literature in China

Carrier OperatorsMobile Internet Users in China*

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, e-Readers like Bambook, Kindle, and other local brands.

(Million)

2008-2011 Compound Annual Growth Rate of Mobile Internet Users:

44.5%

WAP

WAP sites are also widely available in China.

* Data based on China Internet Growth Report

Mobile Internet

1. Data based on OpenBook report2. Data based on OpenBook report

The first 5 private book publishers in China have increased their market shares Based on retail sales in 2011, Cloudary is the

largest private book publisher in China1

Published 2 of the 3 most popular literary works in 20101

The most popular book that had been published by private publishers in 20111

80%69%

20%

31%

2009 2011

Revenue of the first 5 privatebook

publishers in China2

CloudaryThe other 4 privately operated book publishers

(RMB million)

2009-2011 Revenue Compound Growth Rate

28.3%

Print Book Publishing

The LARGEST community driven online literature platform in China

72.1% market share of Chinese online literature market1

Parent company: Shanda Interactive Entertainment Ltd. (SNDA)

Founded in July 2008

128%

09-11 Yearly Revenue Compound

Growth Rate

1.6 Million

Writers2

6 Million

Titles2

66.9 Million

Average Users per Month3

68 Million

Mobile Readers4

￥ 700 Million

Revenue in 2011

1. Data based on iresearch 《 China online literature industry growth analysis 2011-2012 》2. As on 31 Dec 2011 3. Data based on iresearch 2011 Monthly user access statistics4. Data based on China Mobile Reading Base 2011 Independent Access Users

Case Analysis: Cloudary

Online Paid Reading

Our Community-Generated Content Content from Partners

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

Multiple Revenue ChannelsMultiple Revenue Channels

Mobile Reading

Online Advertising

Copyright Licensing

Offline Publishing

Cloudary Platform

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 the LargestDirect 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

Analysis of AnotherDirect Publishing Website

Using Shanda virtual currency

Supporting different payment tools:

Alipay, PayPal

Online banking (international bank cards supported)

Mobile phone bill/top up cards

Etc.

Business Model and Payment Tools

￥ 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)

Micro-payment policy:

Payment System

Other pricing policies:

Payment System

Categories

Micro-payment Complete eBook purchase

Supports all types

of reading devices

Webpage Snapshot (Yuncheng Homepage)

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

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%

Authorization & Advertisements Revenue of Television Market in China3

2010-2015E Yearly Revenue Compound Growth Rate of TV:

13.3%

(RMB Billion)

Business in Adaptation Rights

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