China book market: As e-books grow, they get pirated, too

Not far from Google's China headquarters on the edge of the Tsinghua University campus are the offices of Founder Apabi. Founded in 2001, Apabi designed the fonts for the first Chinese personal computer operating systems. It now has more than 50 percent of China's 300 million yuan ($44 million) market for legitimate, licensed e-books.

Most of Apabi's e-book sales are to the library market, where it controls 85 percent of the digital "stacks" at China's universities. Just before Christmas, Apabi released the Wefound handheld e-book reader, gunning for the new middle class that has money to spend and a thirst for information and entertainment.

Scarlet He, Apabi's assistant managing director, says the company, part-owned by Peking University, wants to help change reading habits in China, where commuters don't yet read like riders of the New York subways with their noses buried in their Amazon Kindles.

The Wefound (Wenfang in Chinese), is expensive at 3,800 yuan ($556). But it comes with three years of access to any of the 500,000 licensed titles in Apabi's proprietary content management system, including some from Penguin.

Competition is fierce as hundreds of companies, large and small, face little legal repercussion for selling millions of illegally scanned books online for as little as 20 fen ($0.03) per title, well below Apabi's price of 8 yuan ($1.17).

Some of the worst offenders are the libraries themselves, which, because of decades of paltry government subsidies and strict Communist party demands that education be not-for-profit, find themselves struggling in today's emerging capitalist marketplace.

"The libraries have their own view, that they want to provide the best service to the people, no matter what, but that forgets that authors need to make a living, too," said Ms. He.

Pushing the benefit of their fully searchable e-books over clunky, two-dimensional bootlegs, He says Apabi is on track to earn 100 million yuan ($14.7 million) in 2009 and will add 90,000 new titles in 2010.

Apabi doesn't see Google as a competitor, and He could see selling e-books alongside Book Search results – especially when sales pick up, not among institutional buyers such as libraries, but with individual consumers from China's 340 million Internet users.

Meanwhile, He says of Mian Mian: "The lawsuit could be a good thing. It may help Chinese publishers and authors to start to notice the power of their copyright."

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Wang Ping contributed reporting.