From These Organizations:
This post was originally published on the Rev’d Blog
This is the first of three articles looking at the challenges faced by international B2B publishers as they look to establish operations in China. (Part 1 of 3)
There’s no secret in knowing China is rife with pirates. No matter how much the legal system evolves, and no matter how many cases come before the courts, the pirates are irrepressible.
I’m not going to explore how to take an intellectual property (IP) abuser through the cumbersome legal system, but I would like to share a few tips on how publishers, or information rich businesses, can thrive in the world’s largest market.
Many B2B publishers have been eyeing the potential in China, but few have yet to make any significant headway in the rapidly growing market place. There’s no doubt Chinese businesses are information and knowledge hungry, but the challenge is how to get in and start growing a presence.
The 2010 PricewaterhouseCoopers report “From paper to platform: Transforming the B2B Publishing Business Model” says China will generate accelerating demand.
Electronic books will augment the performance of the professional book segment, while website advertising, paid content, and a rebound in print will boost the trade magazine market once economic conditions improve. China will continue to be the main driver behind Asia Pacific market growth, with an increase in total spending from US$5.6 billion in 2009 to US$8.2 billion in 2014.
Let’s take a look at the five orthodoxies I believe act as a significant barrier to global B2B publishers wishing to enter China. Starting here with the first two, the remaining three orthodoxies will be covered in the next installment.
Orthodoxy One — “I can’t do business with pirates”
Wrong, oh yes you can. It’s not a question of ignoring bad habits, but it is a question of understanding more fully why the piracy is happening. There are numerous companies of all sizes competing for a slice of China’s fast growing information sector. The foreign publishers with their expensive, high value premium content are looking for a slice of the action, but they are having to compete with small and medium-sized domestic operations that deliver services of varying quality.
Over the past decade, as China’s economy really kicked into gear, domestic companies have quickly realised the need for business intelligence. As this new need emerged and grew, numerous operations, often offshoots of state-owned enterprises (SOEs), expanded into information provision. Their challenge was simply that they saw opportunity, but often lacked the raw materials (the content) to meet market demand. The shortcut was to look around and use whatever was available. It is common to find piracy happening at all levels. They would not limit themselves to content owned by international publishers, but they would also be using content from their competitors.
Business intelligence information services was an industry in development. China’s communist system did not (and still does not) allow a free press. People are brought up to understand that official sources of information or news are delivering a message. The notion of impartiality, and the need for content to adhere to strict quality guidelines, were not qualities that were neither understood nor valued.
So what does this tell us about the motivation behind the piracy? Before continuing, I want to make it clear that I am in no way condoning copyright violations, and there are some very bad people involved in some aspects of IP theft and counterfeiting. But think about it from the perspective of the business owner. It became a simple question of how to compete. If a number of companies were competing the customer decision was often informed by two simple ingredients. The first was price, where cheaper was better, and the second was volume, where if the price was similar which service offers more? The notion of segmented offerings to drive relevancy or only taking what was required was not seen as an important factor.
When it comes to the business information sector, there certainly is an element of wanting something for nothing and then trying to monetise that content. And yes, there is also a case to be argued that China’s weak legal structures are incapable of enforcing the law leaving the ground open to abuse. But there is another way to look at this problem, especially in the way that it directly impacts major international publishers.
Who would you rather do business with?
Consider this. Finding the right partner in China is critical. In considering your options what kind of criteria would you be looking to meet? Someone who understands your products? Someone who understands your target customers? Someone who has a ready-made route to market?
In an environment that is far from transparent these attributes could well make the difference between success and failure. And if the perfect partner was also pirating your content, what then? Take them to court, or get into bed with them? What would you do?
Orthodoxy Two — “Chinese companies are not prepared to pay”
Actually they are. It depends on whether the information services are relevant and whether they have clear business value.
Let’s look at things from the China perspective. If I had a small information company and I needed to compete I would be looking for the cheapest raw materials that will enable me to grow some market share. If that is someone else’s content, then so be it. Fast forward a couple of years, and the market has moved on. Knowledge and experience are beginning to count. Increasing exposure to international practice coupled with Chinese companies growing in size and sophistication is leading some companies into far more familiar territory (from an International perspective).
They are realising that quality, accuracy and impartiality are important in the content they consume. They are also realising they need to ensure security of supply as it could be disastrous for their business if suddenly that critical report, piece of data or price assessment was not available when they expected it. For these things they were prepared to pay.
This raises the stakes for the Chinese company. They have an emerging opportunity to begin selling premium information, but in order to do that it needs to be accurate, have regular delivery and be impartial. They look around. Yes, they can get hold of the information, but can they guarantee supply?
Case study — How pirated information is sourced
The secondary market in China for premium subscription services is not complicated. The usual situation is that someone with legitimate access to the content, for example a librarian or information officer in a large company, makes a bit extra through selling copies of the subscription services.
In turn, the information publishers maintain a number of such relationships to ensure they have surety of supply.
And what do they pay? Not much. One suite of services that would cost $20,000/year was being resold to publishers for $600/year. This content was then wrapped into other services that cost around $500 per user.
Part 2 with the final three orthodoxies will follow soon.
ContentRev has more than 20 years experience in Asia and advises businesses on content strategy and how to use content to meet business goals. Contact us today.
- Don’t fear China, publishers should trash orthodoxies and embrace change (Part 3)
- 10 essential steps to change editorial to embrace digital
- China to Sell U.S. Debt ASAP
- The More Dangerous Side to Obama’s Jobs Plan: China Is laughing all the way to the bank.
- Process for Obtaining a Patent—Part 1 of 2