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Market Avenue

Paperless Book Reading
Paperless Book Reading
UPDATED: August 30, 2010 NO. 35 SEPTEMBER 2, 2010
Growing Pains

Hanvon Technology Co. Ltd. has become a pioneer in China's e-reader industry. With improving technology and brand recognition, the Beijing-based company sold 267,000 e-readers in 2009, accounting for at least 90 percent of the domestic market. Wang Bangjiang, Vice President of Hanvon, sat down with Beijing Review reporter Hu Yue, to share his views on the development and challenges of the industry. Edited excerpts follow:

Beijing Review: What do you think of the development of China's e-reader industry? Will e-book readers change the reading habits of the Chinese people?

Wang Bangjiang, Vice President of Hanvon Technology Co. Ltd.

Wang Bangjiang: The industry is bursting with vitality with an annual double-digit growth rate in the customer base. Meanwhile, an increasing number of enterprises are entering the sector, hoping to cash in on the bonanza. With competition heating up, those without technological competitiveness and brand recognition will fail.

But much of the growth now comes from high-end users, due to an expensive price tag. For example, Hanvon products are mostly sold at around 2000 yuan ($294). The e-book reader will not be acceptable to most of the Chinese consumers until the price decreases to 500 ($73.5) to 600 yuan ($88.2).

Of course, Hanvon is sparing no effort to reduce the price and at the same time improve product quality. There is still some room to squeeze costs by choosing more price-competitive parts suppliers.

I believe e-books will coexist with printed matter in the long term, but will eventually become the mainstream, due to the environmental benefit and reader convenience. To achieve that, there is still a lot to do to enrich book content and strengthen product functions. Paper books, however, will become art collections with much less practical use.

What are the major reasons for the market success of your company? What technological barriers are you still confronted with?

Hanvon has become a market leader in the growing e-reader industry in China thanks to its technological edge and effective marketing strategies.

First, we put our focus on high-end customers, mostly business managers who would like to read books about history, management and philosophy. Catering to their specific needs, we added a variety of business functions to our products, such as note-taking and hand-writing recognition.

Second, vigorous efforts are made to enrich our book content and spark customer interest. We install more than 3,000 books for free in our products and have also built an online store with around 100,000 books for the customers to download. In addition, a nation-wide service station network has been built to provide instruction and maintenance services.

These efforts are paying off, as reflected in the sales boom, but Hanvon still has a long way to go. Our e-ink technologies, for instance, are far from being perfect. Our products are still unable to support video and color e-books, and the screens are also quite slow to refresh. To address these technological difficulties, Hanvon dedicates a bulk of its profits to research and development.

What is the cooperation like between content providers and device makers in China?

In past few years, we encountered some obstacles in seeking cooperation with content providers. Many publishers had little understanding of e-books and considered it a threat to the traditional publishing industry. But now, the dynamics have changed significantly.

An increasing number of publishers have built close ties with Hanvon as they recognize the overwhelming trend of e-books, which is more efficient and environmental-friendly. Meanwhile, we adhere to a fixed business model that allows the content providers to set the price of e-books and receive 80 percent of the sales revenues.

Are China's e-book readers competitive with foreign counterparts, such as the Kindle of Amazon.com Inc. ?

Hanvon and Kindle are both professional e-book readers. In terms of technologies and functions, Hanvon is no less competitive than Kindle. We have developed a variety of unique functions, such as search, dictionary and translation.

But Amazon basks in the glow of a much more mature market, where customers are willing to pay $10 to download a book. With juicy income from content sales, Amazon is well positioned to lower device prices, which in turn attracts more customers. This is not the case in China, where most customers are used to the free downloading of books. So Chinese e-reader makers like Hanvon still rely on device sales for most of their revenues, and find it difficult to lower device prices.

In addition, there are only five major publishers in the United States, accounting for at least 80 percent of the industry. Such concentration makes it easier for the book industry to go electronic. In China, the number of publishers is more than 600.

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