50% of China Mobile's Mobile Literature Revenue from Cloudary
21st Century Business Herald, 3/03/12
Liu Qiang, VP of Shanda Interactive's wholly owned online literature subsidiary Cloudary Corporation, has disclosed that Cloudary accounts for over 50% of China Mobile's (NYSE: CHL; 0941.HK) mobile literature revenue and 60% of content provided by China Mobile's mobile literature base. 60% of the best-selling original titles on China Mobile's platform are provided by Cloudary, as well as 50% of the top 100.
According to the head of a major publishing house's digital copyright department, Cloudary owes its strong sales performance to the fact that its content is well-suited to China Mobile's mobile literature user base. Cloudary's content is comprised primarily of fantasy novels, which appeal to China Mobile's key user groups of youth, low-income users, and users with limited work experience. Handsets have become the primary entertainment platform for these users, who use their monthly data allotment to download novels. By contrast, traditional publishing houses have seen poor performance on China Mobile's mobile literature platform.
China Mobile takes a 60% revenue share in its agreements with content providers such as Shanda, while Shanda takes 50-60% of its share and authors receive the remainder. After deducting all fees, Cloudary authors typically take 11-13% of total revenue.
According to an industry source, China Mobile is considering bypassing Cloudary to sign deals with authors directly, but many industry insiders are skeptical as to whether China Mobile is capable of organizing the same range of online authors as Cloudary. In order to manage its own content, operators would need to establish a huge team to review content and negotiate copyrights, areas that are not traditionally among operators' strengths.
Cloudary does not generate significantly high revenue through iTunes or any Android app stores, and faces significant piracy problems. Cloudary has entered into copyright negotiations with Apple several times, and some authors and publishers have filed lawsuits against Apple, but so far with few results.
Editor's Note: For more background on this topic, please see "Cloudary Amends IPO Filing to Include 2011 Data" MD 2/27/12 issue.
Keywords: Shanda China Mobile content mobile literature piracy revenue wireless online literature CHL revenue share 0941.HK Cloudary Liu Qiang
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