Half-a-Year-Old Kindle Sees Profits in China

In the past year， Amazon China saw the leave of Wang Hanhua who had been working as the president of Amazon China for seven years. But this change did not stir up too much trouble for Amazon， since the company is still developing forward in China at a slow but stable pace.

There are two things more attention worthy than the leave of a veteran. The first one is the promotional events on different holidays； the second one is the official entry of Kindle in China.

The promotional events on different holidays are what every online retailer does in China. But Amazons rare experience before that made its attempts in China more worthwhile to mention. But the newcomer is not a green hand in this matter. Wonderful discounts are provided on Double 11， Double 12 and other shopping holidays exclusive to China. And， as an American company， Black Friday and Cyber Monday are also when Amazon staged promotional events in China.

This is not the advantage that is exclusively owned by Amazon， so we wont talk about this too much. Whats making Amazon special in China and the world is its Kindle reading device. Even though the first Kindle was born in 2007 in the U.S. and has successfully changed the reading habit of many people in the world， it has been absent from China for more than six years. The situation did not change until the middle of 2013.

Actually， from the beginning of 2012， there were numerous reports or rumors talking about the entry of Kindle into China. After a years preparation， Kindle officially set foot in China on June 7， 2013 with Kindle Paperwhite and Kindle Fire. This was a serious matter for Amazon China， which was very cautious. They not only kept the release data undercover carefully， but also made a plan of investing hundreds of million yuan on the marketing promotion.

Even though Amazon has prepared carefully for the Kindle business in China， a hint of anxiety still prevailed in Amazon China. At that time， an insider from Amazon China could not help but show his worries about the market. The main problem rested with the piracy of books： are there enough users willing to pay for reading copyrighted books？

Half a year later， they can remove the uneasiness and anxiety. When Amazon held the release conference for the official entry in Kindle Paperwhite 2 on December 12， Bai Juyi， vice president of Amazon China taking charge of the Kindle business， said that the development of Kindle business was beyond the expectation. Since the Kindle business is developing well in China， KPW2 could enter China “only” four months after its launch in the world.endprint

Amazon followed its tradition to keep the data about its digital business undercover. So Bai Juyi did not reveal the number about the sales of Kindle in China， but he confirmed that the Kindle business had seen profits in China.

The shift of publishing houses

Though Bai Juyi said nothing about the sales of Kindle and ebook in China， he revealed that the general industrial trend， the average purchase of Kindle and downloads of ebooks in China are not fewer than those of many developed countries. “This is the best encouragement for us，” he said.

The ebook store of Kindle was established half a year earlier than the in- troduction of Kindle devices in China. At first there were 24 thousand kinds of books， but now it has over 60 thousand kinds of books on the shelf. Though the Chinese Kindle market is still very small compared with its U.S. counterpart which has millions of ebooks sold online， Bai Juyi is still very confident.

He cited the U.S. market as an example， pointing out that the market also grew slowly in the first two years after Amazon launched its ebook store， but it met explosive development in the third and fourth years. “The explosive development will happen to China as well，” said Bai Juyi， who forecasted that the ebook market in China is to accommodate more than 100 thousand books in the year of 2014.

For the publishing houses， the most disheartening factor for them not to be devoted to the ebook is their worry that the ebook might impact the sales of paper books. The U.S. market went through the same problem too as many U.S. publishing houses expressed the same concern after the initiation of Kindle. However， as reported by the U.S. media， the Kindle devices promoted the development of the entire publishing industry. Nowadays， the time Americans spent on reading is 4.6 times as much as the one before Kindle. The sales of paper books are also better than before.

Seeing these data， the publishing houses in China can relax. “Now the publishing houses with good partnership with us do not ask such questions，”Bai said. Some publishing houses fancying over the ebook market， such as CITIC Publishing House and Motie， almost launch the paper and digital versions of their new books at the same time. It is also related with the support offered by Amazon China. It placed the books whose digital and paper versions are published at the same time onto the eye-catching places of the website of Amazon. And the past months sales data has proven that the good sale of digital books can drive the sales of paper books too.endprint

“The primary concern of publishing houses is to expand their business and make more people read books，” Bai Juyi said. During that process， Kindle plays an important role in pulling people away from the screens of TVs， computers， mobile phones， taking them out of playground and cinemas and shifting their focus back to reading. In the U.S.， the sales of Kindle boosted the sales of contents， adding contributions to the financial reports of Amazon.

In China， Kindle is also a catalyst for ebook industry. Huang Yikun， editor-in-chief of the digital publishing center at CITIC Publishing House， said that the income from digital books of CITIC Publishing House in the third quarter was three times as high as the one of the first quarter.

Though many publishing houses have already realized the development outlook， they still need time to adjust to the changes. For example， some old books copyrights were fixed by contracts years ago. If a digital version is to be published， a new copyright should be added， involving thousands or tens of thousands books. This is a Herculean task for publishing houses.

In addition， the technology is still a barrier even though Amazon has provided the transcoding tools. Some publishing houses have set up relevant departments to make ebooks， but this is not common among all publishing houses in China. It still needs some time to make cheaper ebooks.

The new business growth in China

From aquiring Joyo and turning it into Amazon China， Amazon has been running the online retail business in China for over 10 years. In the past ten years， Amazon saw a large group of online retailers in China， such as Taobao， 360buy， Vancl and so on. In spite of the increasingly furious competition， Amazon still followed its own plan， seemingly not in a hurry to develop the ecommerce business.

Actually， in the world Amazon is not a simple ecommerce company as it does not solely rely on the ecommerce to earn money. Instead， it highlights the cloud computing and digital contents. The same strategy is working now in China. The Kindle has broken through the barriers of policy and piracy， got into China and earned profits. The next step is the cloud computing.

This should be attributed to Kindle. A senior executive of Amazon said that the time of Chinese users spent reading with Kindle is four times as much as before after the entry of Kindle in China. This means more digital books are bought and downloaded， allowing Amazon China to share more profits with the publishing houses.endprint

Two month agos， Amazons CEO Jeff Bezos for the first time disclosed the sales prices and strategies of Kindle. Amazon expects the users to buy Kindle devices at a low price and buy more contents provided by Amazon， including books， games， videos and music.

Though Amazon never published the revenue and profits of its Kindle business， Scott Devitt， an analyst with Morgan Stanley， pointed out that 34% of Amazons comprehensive profits came from the Kindle business. In 2012， the profits of Kindle business amounted to US$564 million and the figure in this year is expected to reach US$620 million.

When Kindle initially entered China， Amazon highlighted two sections： the students education and the gift. Right now the two parts are growing well and still have a greater space for the growth.

Compared with the popularity of KPW， Amazons tablet Kindle Fire HD did not enjoy that amazing development. Amazon expected Kindle Fire to drive the consumption of audio and video contents. Since these contents are temporarily not available in China， Kindle Fires role is weakened in this country. In addition， it has to face the competition with iPad and Samsungs tablets.

“Kindle Fire is also very important for us as the tablet is an important platform，” Bai Jiyu stressed. The core problem of Amazons tablet in China is the localization. The four-month delay of KPW2 into China is just because of the localization.

In addition， Kindle still has to face a lot of difficulties in China. For example， the pirated books can still take away some readers. Moreover， there is limited data Amazon accumulated on its Kindle business in China； the algorithm and logic of cloud computing has problems and the contents recommendation needs time to be improved as well. These are the points Amazon needs to break through in China.endprint