How Russia can help Hong Kong play a leading role as a digital content provider

Peter Gordon sees logical opportunities for the city in Russia’s e-book and print-on-demand success story, as well as its vision for an Asia-Pacific ‘common digital economy’

PUBLISHED : Wednesday, 21 September, 2016, 2:03pm
UPDATED : Wednesday, 21 September, 2016, 7:21pm

Any hi-tech future for Hong Kong will be based on the city’s inherent strengths, as well as a good choice in external allies. Hong Kong is unlikely, for example, to have much added-value input on driverless cars, one of the areas currently generating buzz. Similarly, it can be less than clear exactly what the city has to offer either Silicon Valley or China’s burgeoning tech sector.

Hong Kong is, however, a leader in business infrastructure with low corporate overheads, an attractive tax regime, good and low-cost communications, solid intellectual property protection and a respected court system. Its role as a financial centre is a direct result.

Money is today mostly just bits and bytes pushed around the world. But other things are also now mostly just bits and bytes: digital text, music and video, for example. Hong Kong is similarly a logical place to base digital content distribution and sales, especially direct to end-users outside the SAR. This hasn’t happened yet to any great extent, partly because much of the most valuable digital content is, among other things, tied up in English-language territorial rights agreements.

But this, like so many other things, will change.

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Hong Kong has the infrastructure for this new industry but little of the necessary technical or industry-specific expertise. Where might it find it? American companies have enough problems juggling tax jurisdictions as it is. And it is hard to see Chinese tech experts sharing solutions – even if they had them in this area – with Hong Kong.

Print-on-demand doesn’t seem to have made the same inroads into Chinese publishing. But in Russia, it’s a different story

American tech companies from Google to Amazon have tended to bulldoze all before them internationally – with, however, a few notable exceptions. Those that have resisted have tended to be in countries with domestic markets large enough to generate the requisite economies of scale, and barriers to entry (language and economic conditions as well as regulation) high enough to allow domestic firms to develop. China is one, India another; a less obvious third is Russia. While the Russian tech world is not as distinct from America’s as China’s is, many of the leading tech businesses, from social media to books, are indigenous in Russia. Russia has its own specialist in “print-on-demand” books: integrated digital and physical systems which print one book at a time. In the West, this technology makes self-publishing possible. Publishers use it to extend the life of books that would otherwise go out of print while overseas publishers can use it to gain access to the main English-language markets without having to keep stock in-country. The physical printers are fully integrated via “the cloud”, both with databases of available titles and with the commercial front-ends selling the books. Network effects result in the industry being highly concentrated.

Print-on-demand doesn’t seem to have made the same inroads into Chinese publishing. But in Russia, it’s a different story. Not only does T8, the company in question, provide Russian-language books for the Russian market, it is also integrated with overseas services to produce and supply foreign books in Russia and vice versa.

Amazon is largely absent from the Russian-language market. And like China, Russia has no dominant end-to-end e-book ecosystem like that of Amazon/Kindle. Russian firms fill the vacuum; the business configurations end up diverging. E-book market leader LitRes also makes audiobooks and offers almost all titles via a new subscription service. Their main competitor is piracy.

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That Russia produces tech-savvy engineers is not news; it is less well-known that it can also build and operate national-scale industry solutions at the intersection of the online and offline worlds that in turn integrate with similar systems elsewhere.

Nor is Russia as far away as it might seem. At the recent Eastern Economic Forum in Vladivostok, the government proposed the creation of a “common digital economy space” for the Asia-Pacific based in the region. One would have thought that if such a thing were to come about, there would be a leading role for Hong Kong. But it’s unreasonable to expect anyone to hold it for us.

Peter Gordon is editor of the Asian Review of Books. He attended the recent Moscow International Book Fair