Shanda Literature: Making Money from Copyright

By Anne Zhang, China IP,[Copyright]

Copyright production is much like planting orchard. We should give it the best soil and the highest quality fertilizer, and then we will get a very good harvest. In the meantime, we should guard our fruits and find various channels to sell them.
Four months after meeting with Chen Tianqiao, Hou Xiaoqing changed from Sina’s Deputy Editor-in-Chief to the CEO of Shanta Literature.
Hou Xiaoqiang is a Master of Literature from Capital Normal University and EMBA of Tsinghua SEM. After joining Sina in August 2001, he served as an editor for Education Channel, chief editor of the Culture Channel, chief planner of the Sina Observer, the director of the Cultural and Educational Center and finally as the deputy chief editor of Sina. On July 4th, 2008, he formally took the post as CEO of Shanda Literature. From literator to businessman, Hou completed a major transformation in his life. Maybe this does not seem so accurate because Hou Xiaoqiang still keeps his dream of “everyone can write” which is the most earnest wish for him as a literator. Now Shanda has provided him a platform to realize his dream. This choice may be the best balance he has found between being a literator and businessman.
Shanda Literature, as led by Xiaoqiang Hou, contains three major original literary networks, including, and Hou is now seeking a new business model to change the fee-based model and get out of the predicament of “If charge, there will be difficulties; If no charge, there will be more difficulties”. Xiaoqiang has always stressed that 2008 was the layout year for his new business model while 2009 should have been the year to raise the curtain and to accept the test. With only a corner of the curtain opened, Shanda has already shown it is on the offensive in operating literary copyright.
Shanda Literature launched the Competition for Presidents of Writers Associations in 30 Provinces on New Year’s Eve, 2009, opened the world’s writing exhibition in March 2009 and participated in the Frankfurt Book Fair as a representative of new media. At the China International Network Literature Festival, held during the second session of the China International Copyright Expo on October 26, Shanda Literature won the Annual Award for Original Chinese Network Literature and Best Literary Website. Writers of Shanda Literature were also rewarded with the titles of Annual Award for Original Chinese Network Literature as well as the Best Works of Year. To some extent, these actions and achievements have shown Shanda’s constant trail in the concept and layout of copyright operation.
Literary piracy is a long-standing problem in China, which can be seen from the cheap pirated books being sold along the streets as well as the impact in terms of Google. With the rise of network literature, pirates follow the trends and produce the “brick books,” which are also quite popular. These acts violate the interests of copyright owners. Although the government has been cracking down severely, pirates will still continue to sacrifice their lives so long as their profits margins can reach 120%. Therefore, it is difficult to put an end to piracy. In the face of such an environment, it seems unrealistic for a copyright-based company to survive, let alone develop. However, Shanda Literature makes it clear that it is a real copyright operating company. It must be gospel for copyright holders that Shanda Literature can make money from copyright.
Service attitude, cooperation foundation
China IP: What is the edge of Shanda Literature platform?
Hou Xiaoqiang: From the perspective of writing, what we provide is not only a platform, but also a large arena with enough users. Every day, there are 10 million people visiting the Shanda network. Readers and writers can interact with each other. It is not difficult to show that the number of book reviews in the second quarter doubled the figure for the first quarter. Since the number of reviewers is proportional to the number of writers, the more people comment, the more authors write. Shanda Literature not only provides a platform for online writers, it has also attracted many traditional authors after organizing the Competition for Presidents of Writers Associations in 30 Provinces on New Year’s Eve, 2009. The current number for daily author registrations has doubled over same period last year. With more and more users, the platform of Shanda Literature is growing in volume as well as interaction, which I think is the first reason. Secondly, Shanda Literature is more than a writing platform, because it places emphasis on trust and communication. We provide a wide range of services for writers For example; we hold seminars and training courses for leading writers and issue stamps for them, which they certainly deserve as China’s most imaginative group. We offer generous signing commissions and reliable channels for copyright operation. I think this is the main reason we are attracting writers.
China IP: You just mentioned the issue of attracting traditional writers. As we know traditional writers usually have fixed publication channels and audiences, and they have a relatively fixed way of reading. Would they accept network platform? Does Shanda favor best-selling writers? Does Shanda Literature take online literature as its core?
Hou Xiaoqiang: In fact, traditional writers accepted of the network much better than imagined. When organizing the Competition for Presidents of Writers Associations in 30 Provinces last year, we sent invitations to many writers and few of them refused. The reason is quite simple: Shanda Literature follows the rules of market economy and works according to related regulations. Given the huge platform provided by Shanda, best-selling writers are welcomed, so are common authors, because it is a completely open platform. Shanda Literature is actually a copyrighted industrial company, which is focused on two things: one is copyright production and the other is copyright distribution. Copyright production is much like planting an orchard. We should give it the best soil and the highest quality fertilizer, and then we will get a very good harvest. In the meantime, we should guard our fruits and find various channels to sell them. We endeavor to develop copyright via wireless, online, offline and many other channels. This is a multiple use of production, which will maximize the value of copyright.
China IP: You mentioned several times about the services for writers. You seem to have positioned yourself as a servant for authors. How does Shanda Literature do in this regard?
Hou Xiaoqiang: When signing with Shanda, writers sign a thick contract. It costs 100 Yuan to send contract by express, but some writers may not be willing to spend the money. Therefore, we would like to pay for the express fees instead and send 100 Yuan to writers. Service is everywhere.
We have good relations with our writers and our communication is very good as well. Therefore, writers choose to cooperate with Shanda year after year. We would never treat writers as our money-making machine, since it is not our true relationship. Shanda and writers are long-term partners. Therefore, Shanda and writers serve each other and constitute cooperation partnership. You can see that Shanda’s basic business model is a dividend model, which represents both responsibility-sharing and benefits-sharing. This is also our core value. Our vision is that Chinese writers can make more money and live more decent lives, which I think is also my own ideal.
Wireless has infinite prospects and 3G business must be shared
China IP: Full-copyright operation is a relatively new concept. Can you explain it to us?
Hou Xiaoqiang: Full-copyright operation is a three-dimensional operation, which means operate copyright via online, wireless and offline channels based on the B2B model of film companies. In layman’s terms, once I have a product, I will try my best to sell it through various means. It is a simple elaboration of full-copyright operation. Now, we have completed the layout for full-copyright operation. We have our own online publishing company, wireless company, website as well as professional B2B sales department, which are all in full operation.
China IP: As an industry, does online literature have any channel other than websites? What action will Shanda take in this field?
Hou Xiaoqiang: In fact, websites are no longer the only channel for the network literature. Wireless reading will become the second-largest communication channel for network literature. According to relevant organizations, the number of China’s mobile net users will surpass traditional Internet users in 2014. In order to adapt to this change, Shanda Literature accomplished in advance its strategic layout of 3G business in the second quarter. Shanda opened the WAP site of and built the mobile platform for original literature named MOGA. The R&D and cooperation in reading terminal can provide rich reading experience for mobile phone users. Shanda has also developed the mobile client software called “Shanda Houseboy”, and reached strategic cooperation agreements with a number of telecom operators and handset manufacturers. The wireless channel allows mobile users to gain access to the 40 billion words of online literature in Shanda.
China IP: You mentioned that Shanda Literature has finished the strategic layout for 3G. Could you please talk about your dividend model?
Hou Xiaoqiang: The dividend model depends on specific circumstances. The 3G business we are talking about now contains mobile readers, WAP site and end software. Related parties must cooperate with each other to transfer the most valuable copyright through various channels. This layout is also what we are working on. As for dividend, people talk about it a lot. Why? Because we all know that online literature is a big cake and the dividend model requires compromise between wireless operators and content providers, between different content providers and between content providers and writers. The establishment of a dividend model takes some time, and wireless literature needs to accumulate strength for further development. I believe it is difficult to enlarge this market without compromise among related parties.
China IP: Will the risk of wireless reading be much bigger?
Hou Xiaoqiang: The risk of piracy certainly exists, but China Mobile and China Unicom have technical means to hit piracy. From the perspective of cost, piracy of wireless literature cost much more than network piracy. Still, we will also try our best to combat wireless piracy.
China IP: When everyone realizes that 3G is a big cake, what competitive advantage will Shanda Literature have then?
Hou Xiaoqiang: The advantage of Shanda Literature is our content. Yes, now we have the best quality and the largest number of copyrighted works. Moreover, this number is not fixed since it keeps increasing. Last year, our daily output was 30 million words, but this year the figure has already increased to more than 50 million.
It is not zero-sum game.
China IP: Now the press industry has already begun to reform. Have you felt any pressure?
Hou Xiaoqiang: From our view, the traditional publishing industry is not our competitor. What we have to do is to work together with them and jointly promote the development of China’s copyright industry. The movie Twilight can sell 50 million copies in the U.S., but why can’t China’s book? China’s market is very large in fact, and successful operation is the key. This is a game, I think, but the game of copyright industry is not a zero-sum one. One’s increase does not necessitate the other’s decrease. It is actually a win-win game, or a process for making the cake together. Only by working together can we make the cake much bigger.
China IP: You have talked about the film and television channel for copyright distribution. Currently the film My Airhostess Roommate is being show. It seems that Shanda has participated in the production of this film. Is this Shanda’s first attempt to enter the film industry?
Hou Xiaoqiang: My Airhostess Roommate is a small attempt made by Shanda Literature, but it does not mean that Shanda will enter the film industry. In fact, full-copyright operation refers to the sale and distribution of copyright. Making a movie can only be a small trial in the operation. Full-copyright operation does not necessarily mean funding movies. We have a lot of different approaches; for example, selling literary works to film and television companies, writing screenplays or funding as investor. These are all possible means.
China IP: Do you think the copyright marketing model of Shanda Literature is perfect enough? Could the copyright operation model be copied as well?
Hou Xiaoqiang: Of course not perfect. I think last year we were working on the copyright layout, and this year we should focus on elaborate development. This year can be treated as our copyright operational year. In the layout year, we arranged the board and nodes. Now we are waiting for the beginning of the real war to test our true operating level.
Any model is replicable. However, Shanda Literature has already formed its own brand, a huge flow of users, a strong team of writers, delicate services for authors as well as a deep understanding of copyright. All of these factors are hard to catch up with, although I myself hope for competition. Strong competitor is a good thing for Shanda Literature.
China IP: Recently, news came that Shanda Literature planned for a public listing. What’s your opinion on this? Are you ready for listing?
Hou Xiaoqiang: Listing is possible for Shanda Literature, but the most important thing for me is to make progress in copyright operation. We should expand the scale of the market, and then refine the development of copyright to make it much bigger and stronger. As for listing and its time, I think they are not the most important issues and not on the top of our schedule.
(Translated by Li Yu)

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