Who Can Translate Kindle into Chinese?
Amazon's successful e-book reader Kindle has sparked a worldwide craze. Now major Taiwanese companies are hoping to get in on the action. Will any succeed in this fierce contest to create a Kindle for the Chinese-speaking world?
Who Can Translate Kindle into Chinese?By Elaine Huang
From CommonWealth Magazine (vol. 432 )
On September 30, executives of Taiwan's Prime View International (PVI), the world's largest supplier of electronic paper display modules, announced at the monthly investor's conference that the merger agreement with its longtime technology partner E Ink, a U.S.-based leader in electronic display materials, had been amended.
To sweeten the marriage between the two companies, PVI would present E Ink shareholders with a "betrothal gift" of PVI convertible preferred stocks worth US$120 million to be issued in four stages, on top of the $215 million cash consideration announced June 1.
PVI chairman and CEO Scott Liu remained low-key about the deal, but left no doubt that the merger would take place. "Regardless of whether someone tries to kidnap the bride, E Ink shareholders have already signed a written letter of consent, so the merger will be closed in the fourth quarter."
Market rumors earlier had it that South Korean consumer electronics giant Samsung was also interested in acquiring E Ink. PVI used a mutual benefit agreement based on the combined company's share price performance to nail the deal with E Ink. Liu's mention of bride kidnapping only shows how fierce competition is in the fast-growing market for electronic book devices, following the huge success of the Amazon Kindle. Around the globe the consumer electronics industry is scrambling to get a piece of this huge pie.
Taiwan's electronics companies are among those adding fuel to the e-book fire.
At investor conferences or results conferences in late August, Taiwanese electronics brands and ODM manufacturers ranging from Asus to Quanta Computer, Compal Electronics, Wistron and Qisda were all pursued with questions about their strategy for the burgeoning e-book market. As growth in the PC market is plateauing, computer makers are all too eager to give new emerging electronic devices a try.
Taiwan's Hon Hai Precision Industry is already manufacturing more than 80 percent of all Kindles. A short while ago CMO teamed up with PVI to provide the latter with greater production capacity. AUO bought California-based SiPix Imaging, a leader in color electrophoretic display technology, in a bid to take on E Ink, the black-and-white e-paper specialist.
Harrison Po, optoelectronics analyst with the Taipei-based Topology Research Institute (TRI), notes that from the hardware side Taiwan's electronics giants have good reasons to bet on e-books. "From the perspective of hardware makers, such products are marketable worldwide. But more importantly, e-books are an industry that Taiwan can control independently, from the most upstream key materials to downstream manufacturing and assembly," Po points out.
Who Will Become Asia's Amazon?
But despite the spiraling e-book mania, there remains a paradox that is often overlooked.
E-books are not a novelty at all. Around the year 2000, Japanese electronics firms NEC, Matsushita and Sony released e-book reading devices that were all market flops. "Consumers had electronic reading devices in their hands, but they couldn't find downloadable digital content, so having e-reading devices was useless," says Po.
Amazon's Kindle, however, has given e-reading a new lease on life.
With the Kindle, a wireless handheld electronic paper display roughly the size of a paperback, Amazon first of all targets those among its customers who are habitual readers. Amazon cooperates with U.S.-based communications service provider Sprint. Kindle users can access Amazon's "cloud bookshelf" via Sprint's G3 mobile network to buy and download e-books. Users do not have to pay monthly bills for network access. Instead, Amazon includes costs for data transfer in the content price, while also guaranteeing e-copyrights, to prevent copyrighted material from being illicitly copied and distributed.
Amazon's business model is different in that it uses a closed system.
Assuming that the book purchasing pattern of Amazon customers does not change, the online bookstore provides another convenient service with its e-book downloads that helps it retain a loyal customer base. "More importantly, the more books you buy on Amazon.com, the more books they will put on their cloud bookshelf, which means it will become harder to get away from Amazon," says Abel S.H. Wang, an analyst at the Market Intelligence and Consulting Institute (MIC) under the Institute for Information Industry.
The Amazon experience reveals that e-books cannot rely on electronic hardware alone to be successful. It is equally important that companies target the right customers and control content and distribution channels. Integrating hardware devices is only the final step in establishing an all-round e-book service.
Presently, all eyes are waiting to see who has what it takes to become the Amazon of the Chinese-speaking market. Yet uncertainties are gradually emerging that transplanting the Amazon experience to the world of Chinese readers might not be that easy.
Problem No. 1: Reaching the Right Customers
Amazon's biggest advantage is the niche market it already possesses as a large online book distributor with access to customers that are ready to pay for books they want to read. These readers are exactly the same customer segment that e-books target.
Obviously, this cannot be said of the large telecommunications providers and electronic hardware manufacturers in the Chinese-speaking world, even though they boldly declare that they intend to integrate e-book services.
Problem No. 2: Partners with Diverging Interests
End consumers who are willing readers are crucial for the success of e-books. And consumers only care about three key questions: How to buy? Where to buy? And what's there to buy?
These are the questions that hardware manufacturers who came out with e-reading devices a few years ago failed to answer.
Amazon is in an unbeatable position, because it spent much effort on marrying soft skills such as customer orientation and convenient services with the technological possibilities of the hardware side. As a result, consumers have accepted Amazon as one-stop window that allows them to conveniently get the products they want.
"Everyone wants to learn from Amazon. There's no way around it. The problem is that Amazon is offering all-round services, whereas in Taiwan we might not yet have a single distributor able to achieve that on its own," muses PVI's Liu.
What Amazon managed to turn into an all-in-one business model involves four different, as yet independent levels in Taiwan: content providers (publishers), distribution channels (online bookstores), telecom network providers, and hardware manufacturers. Getting all these levels to work together in a close partnership is extremely difficult, and opinions starkly differ about what such an alliance should look like. An entrepreneur who has been delving into the e-book business over the past two years vents his frustration in private, saying, "It's too many horses pulling the cart in different directions."
Mutual competition also stands in the way of forming strategic partnerships.
Taiwan's leading online book vendor books.com.tw is currently building an e-book logistics platform. Leon Lin, manager of the company's logistics management team, notes that most important for the platform's success is the ongoing inclusion of newly published books. This, however, pertains to securing copyrights for the electronic version of new books and building a trusting relationship with publishing houses.
On top of that, "upstream and downstream companies have not reached a consensus" on a wide array of issues such as e-copyright acquisition, how to split proceeds between publisher and online vendor, standards for content reproduction, and how to distribute profits, observes one industry analyst. A symposium on the e-book business held by the Taipei Computer Association in August revealed just how diverse opinions are, and demonstrated that it will still take some time before an e-book business model for the Chinese-speaking world has reached maturity, the analyst concludes.
Problem No. 3: Publishers' Concerns
Leaving distribution aside, the most crucial point is the willingness of the content producers – publishing houses. Technology enterprises are used to using "free of charge" models to build their online ventures to scale. But one of the core values of content providers is that "good content has its price and must be paid for," which is essentially a diametrically opposite position.
Statistics by udn.com, the online presence of the United Daily News, show that, excluding public domain publications, there are only some 1,000 copyrighted Chinese-language e-books available for download in Taiwan, which is clearly insufficient to attract a large number of readers to the e-book market. It seems that the e-book era will remain a dream for Taiwanese readers unless publishers support such a business model. Yet publishers have deep misgivings about virtual books.
First of all, they fear it will undermine brick and mortar book sales.
A case in point is the latest book by Dan Brown, author of the bestseller The Da Vinci Code. The hardcover copy of The Lost Symbol sold at $16, but sales lagged behind expectations, because the e-book version sold at just $9.90. J.K. Rowling, the author of the Harry Potter fantasy novel series, has even prohibited her publishers from publishing the electronic version of her books concurrently with the traditional printed book.
The other big question on everyone's lips is whether it is actually possible to make money with e-books.
The idea that "knowledge has its price" is not deeply engrained in Chinese society. People are used to accessing and obtaining information on the Internet free of charge. It remains to be seen whether their interest in e-books that need to be bought is as big as generally assumed.
A short while ago a Japanese manga vendor commissioned the digital reproduction of printed comics and had them directly sold via a distributor without involving the original publisher in the process. Several television companies such as SET TV already have their own digital content departments.
All these imponderabilities make the current hype about e-books in the Chinese-language market seem to be all hat and no cattle.
"More than anything else, we want to know what the solution is for e-books in the Chinese-language market," says an electronic hardware maker in exasperation after discussing the matter in a daylong meeting.
Making e-books as popular and successful in the Chinese-language market as they are in North America looks to be no easy feat. Perhaps even someone of the caliber of Amazon CEO Jeff Bezos, who managed to create the Amazon miracle in four years, could not be sure of success, even if he doubled his efforts.
Translated from the Chinese by Susanne Ganz
Chinese Version: 電子書 在華文市場行得通嗎？