China Literature to step up book adaptations as content war heats up among tech giants

Tencent Holdings’s online publishing spin-off will invest in book adaptations as part of a strategy to achieve its aim of becoming “China’s Marvel”.

China Literature, which listed in Hong Kong in November, is banking on developing and marketing its massive pool of intellectual property at home and abroad to help it become a combination of the Walt Disney Company and Marvel Entertainment. On Monday, it reported a 15-fold increase in net profit last year on the back of a surge in number of paying subscribers.

“We expanded our original content offerings, improved user experience and broadened distribution channels, laying a solid foundation for the long-term growth of our online reading business,” Wu Wenhei, China Literature co-chief executive, said at a press conference in Hong Kong. The company will see more cooperation with parent Tencent in the entertainment fields, including films, television and games, he said. 

China’s tech giants are engaged in intense competition to acquire and create content, whether movies, TV dramas or games, to attract and retain users across their various platforms. By increasing the time users spend on social media, playing online games or watching live-streaming, tech companies can sell more advertising or cross-sell products and services. Alibaba Group has invested in movie-making with its Alibaba Pictures unit, while Baidu Inc.-backed iQiyi is investing in virtual reality. 

At stake is the world’s largest internet market with almost 800 million users, with the growing number of younger digital-native consumers more willing to spend on content. Tencent Video, for example, added about 20 million paying subscribers in just five months, while iQiyi added about 10 million paying customers in the first two months of this year.

According to iResearch, China’s digital literature market was estimated to increase by 32 per cent to 12.8 billion yuan last year as it served an audience of 360 million users. The research firm also estimated that more than 90 per cent of those readers were willing to watch films and TV series adapted from popular online literature. One out of eight Chinese internet video users now pay for online content and services.

The rights for Fighter of the Destiny, a fantasy novel known as Tian Ze Ji in Chinese that is serialised on China Literature, was reportedly sold for more than 10 million yuan to turn it into a hit TV series last year. A fantasy novel about a soldier avenging his murdered family, also by the same author, is being adapted for a series, according to local reports. 

China Literature’s net profit reached 556.1 million yuan (US$85.1 million) last year, up from 36.7 million yuan in 2016, on the back of an increase in the number of monthly paying customers and revenue per user. Total revenue rose 60.2 per cent to 4.1 billion yuan from 2.5 billion yuan in 2016.

Tencent’s entertainment-related businesses include social messaging apps such as WeChat and QQ, browsers, news aggregators, Tencent Video, app stores and live streaming apps. WeChat hit the milestone of 1 billion monthly active users during the Lunar New Year in February, a “remarkable number” according to Tencent Holdings chief executive Pony Ma Huateng this month in Beijing. 

Tencent’s WeChat hits 1 billion milestone as Lunar New Year boosts monthly active users

Alibaba Group, owner of the South China Morning Post, had also made a move into this growing market with Alibaba Literature, which was established in 2015.

Shares of China Literature closed at HK$82.05 on Monday, up 50 per cent since its initial public offering debut in November last year.