China Literature, China’s top online publishing and bookselling platform, lost $465 million in the first six months of the year, reversing a $55 million profit from the first six months of 2019. The loss came despite a 10% hike in revenue, to $461 million. The company is owned by Tencent, which in 2018 led a $51 million funding round for Wattpad, the Canadian social writing platform. China Literature attributes a large proportion of this year’s loss to mismanagement of their acquisition of New Classics Media, a film and television production company it acquired in 2018 for $2.2 billion.

Last year, China Literature also encountered challenges when the Chinese government accused affiliated companies of publishing salacious material. China Literature’s stock price plummeted and it’s valuation was cut by nearly three-quarters of a billion dollars. It has since recovered somewhat, but shares were down on the latest earnings release.

Company executives have admitted that China LIterature’s business model may be broken. The firm has long relied on a model in which readers make micro-payments to read on the site, as well as rights sales for print publishing, and TV and film adaptations. The Covid-19 crisis slowed IP sales dramatically in the first six months of the year, with revenue down 41.5% and physical book sales and affiliated revenue dropped more than 50%

In addition, a new free-to-read app introduced last year proved unpopular and proposed changes to the way writers are compensated sparked a backlash among the site’s authors.

“The first half of 2020 presented tremendous challenges for China Literature,” said Cheng Wu, CEO of China Literature in a statement. “The sudden outbreak of the COVID-19 pandemic and a complex and changing macro-environment had a negative impact on our business. The Company recorded a loss for the first time in many years. The disappointing results made us realize that the lack of resilience of our underlying business model and our structural issues that have piled up over the recent years. We will take actions to actively deal with these challenges and have already quickly responded to address some of the most urgent issues affecting the cornerstones of our business.”

In a rare expression of candor for a Chinese business executive, Cheng Wu, continued, “Going forward, we will focus on upgrading our content, platform and ecosystem to unlock the core values of the Company and to achieve a turnaround. In the long run, we are prepared to adopt a new culture and creative ideas from a more strategic and multi-dimensional perspective. We will also work with our strategic partners including Tencent to develop the industry together, with a more open and positive attitude, and invest in our future with greater courage and patience.”

One possible correction may involve putting more effort into building it’s English-language presence: China Literature launched an English-language site, Webnovel, several years ago, and postings to self-publishing forums indicate the company has been actively recruiting more English-language writers to the site in recent months and the company launched a $10,000 writing contest in June.

E-book and audiobook sales have been robust throughout the period that saw many bricks-and-mortar bookstores shut down across Europe as a result of the Covid-19 crisis, according to a new report by German digital distributor Bookwire and Austrian industry consultant Rüdiger Wischenbart. (The lockdown is identified in the report as running from week 11 to week 19 of 2020).

The study looked at some two million digital transactions across Germany, Austria and Switzerland (DACH) and found e-book sales spiked 26% during the period of lockdown compared with the weeks prior to the order. Audiobook downloads more than doubled, seeing a 109% increase during the period, bolstered by targeted marketing campaigns by publishers and discounts. Once the lockdown period ended, sales at bricks-and-mortar stores bounced back in Germany and across the region, and while the level of e-book and audiobook sales flattened, they remained higher than prior to the lockdown.

“Our data analysis has revealed that the top genres of romance and crime thrillers were not solely responsible for growth during the Covid-19 period. Even books for children and adolescents or nonfiction books can become e-book bestsellers,” said Jens Klingelhöfer,
CEO of Bookwire.

Perhaps even more important than the sales rise was the news that the number of people signing up for new digital audiobook subscriptions was up 37% over the period before the lockdown. “We get a strong hint that interest in subscriptions is on the rise,” said Wischenbart. “For so long, the gospel was that this wouldn’t work with trade books. We saw how the model caught on with STM and professional books, yet said, ‘Nah, not with consumer books.’ What we see in our data is strong evidence for a shift in consumer behaviour.”

Wischenbart added that the report also suggests, “E-books aren’t as dead as we read in reports for years.” Like Klingelhöfer, he cited the interest in a broad range of categories, and underscored that marketing was essential to prompting sales. “Smart PR works!,” he said. “Both publishers and retailers can create a huge impact, provided they do the right thing, such as very targeted promotions at the right time for the right audience, and they agree to work together in a coordinated fashion.”

Storytel Sees Gains

Separately, Storytel, the Swedish e-book and audiobook retailer subscription service with wide distribution across Europe, reported big gains in streaming sales, which rose 43% for the first six months of the year, compared with 2019, and a 42% jump in subscription sales over the same period. The company, which is present in 20 countries and is strongest in the Nordic countries of Europe, said it expected to see slower growth for the remainder of the year. The company has 1.2 million paying subscribers and is aiming for 1.5 million by the end of the year. The company continues to expand by acquiring affiliate companies, including Kitab Sawti, an Arabic-language audiobook retailer, and is preparing to launch services in Thailand and Indonesia before the holiday season. The company continues to operate at a loss due to its rapid expansion.