Sights Set on Greater China--Taiwan's Publishing Industry After WTO Entry

Last year's weak economy and many natural disasters put Taiwan's publishers to a severe test. In rapid succession the website-turned-newspaper Tomorrow Times, The Great Sports Daily, and the Independence Evening Post went out of business. More bad news came when Typhoon Nari battered Taiwan in September, causing losses of tens of millions for the publishing industry. The long-established and well-respected Senseio Bookstore suffered damage worth NT$60 million, causing its market valuation to tumble by NT$20 million. Even Eslite bookstore, which had long been on a solid economic footing, was forced to postdate its checks. There used to be 6,000 publishing houses in Taiwan, but one-third went out of business last year. Others have at least temporarily ceased operations, leaving only some 2,000 still up and running.

But before the industry even had a chance to lick its wounds from a tough year, a tremendous new challenge arose. Mainland China joined the WTO in mid-December, followed by Taiwan on January 1. Membership is going to have a huge impact on Taiwan's agricultural sector. But will it prove a balm or bane to that producer of "food for thought," the publishing industry?

At the end of January, more than 100 members of the PRC's Chinese Periodical Association came on an official visit to Taiwan, and Eslite held a "Mainland Chinese Magazine Exhibition," which displayed more than 1000 popular magazines from the PRC. As mainland magazines were thus establishing a foothold in Taiwan, the Taiwanese publishing industry likewise began to gaze upon the still-closed 1.2 billion person mainland market, planning its own invasion.

At the end of January more than 100 members of the Chinese Periodical Association came to Taiwan. They brought with them over 1000 current periodicals, as well as the first issues of over 160 periodicals from before 1949, when the Nationalists were still in control of mainland China.

Harder to substitute

According to the website "books.com. tw," the 20 biggest surprises in 2001 included the following: "Hong Kong capital poured into Taiwan with the objective of tackling the 'Greater China' market"; "Next Magazine came to Taiwan"; and "The Taiwan publishing industry faces imminent collapse?!" All of these changes are related either directly or indirectly to the WTO.

Robert Lin, president of Children's Publications, believes that opening the industry up to foreign capital is already exposing the domestic publishing sector (which is made up largely of small and undercapitalized firms) to harmful competition. "Next Magazine's release of the secretly filmed VCD showing politico Chu Mei-feng having sex with a married man is the best example," says Lin.

Yet many people in the publishing industry believe that cultural industries such as publishing are special cases that will not be affected much by WTO membership. "The impact of WTO membership on the publishing industry in Taiwan will play itself out gradually, over a long period of time," says Ho Fei-peng, general manager of Cite Publishing. Even if cultural industries are open to outside competition, he argues, there is still the question of whether foreign companies can adapt to local conditions and tastes.

"Agricultural and industrial products of the same type are pretty much interchangeable, but cultural limitations come into play in the publishing industry," says John Kuo, head of the publishing house Ecus. Because publishing is inescapably cultural, cultural considerations will always play a big role. "Who can take the place of Chu Tien-hsin or Chang Ta-chun in Taiwan?"

Local chauvinism and resistance to what is foreign makes substitutions difficult in matters cultural. In this respect, it couldn't differ more from finance.

In reality, the publishing industry in Taiwan has been completely open since the ROC Publishing Law was repealed in 1999. Publishers from America, Britain, Denmark, Japan, France, Hong Kong and Singapore have set up shop in Taiwan, selling textbooks, computer and technology guides, language instruction texts, and books on current events and international trends. Women's magazines, with their emphasis on the au courant, were among the favored first targets of foreign publishers in Taiwan.

Chao Yi-hung, director of the Government Information Office's Department of Publication Affairs, explains that the ROC's Publishing Law was repealed in preparation for joining the WTO. The law dated from 1930, and although it had been revised in the intervening years, it contained much that no longer suited the times. Rather than embarking on a major overhaul, it was deemed easier just to junk the whole thing. (Of course, the commercial, criminal, and tax codes still apply to the publishing industry.) Opening the market to foreign investment was seen as the best way to prepare the publishing industry for the challenges of WTO membership.

With WTO membership there will be a trend toward media mergers. At the end of last year, Taiwan's Business Weekly Media Group announced it was merging with Hong Kong's TOM.COM. The photo shows (from left to right) Nong Nong Publishing's chairman Wu Li-ping; TOM.COM's Sing Wang; and the president and vice president of the Business Weekly Media Group, Chin Wei-tsun and Yu Kuo-ting.

A multinational feast

In order to adapt to the crises and opportunities presented by WTO membership, the government had in recent years been trying to make Taiwan a global leader in Chinese-language publishing. Part of this strategy involved opening up the market in order to attract foreign investment.

Some people have been concerned that as soon as multinational companies invest in Taiwan they will use strong-arm Hollywood-style marketing tactics to sell books, movies and related merchandise all at the same time. They worry that the book market here will become a feast for multinationals, with the advantages going to firms with the deepest pockets.

Now that the market for textbooks is no longer protected, Cheng Chung Books, with a third of its business in textbooks, is anxious to transform itself. Shann Sheaulin, Cheng Chung's general manager, believes that the publishing industry will grow increasingly polarized, with large corporate groups and small specialty publishers. The mid-sized houses will find it increasingly difficult to survive.

In May of last year, PC Home, the Cite Group, Sharp Point Publishing, Business Weekly and other outfits were bought up in rapid succession by TOM.COM, which is owned by Li Ka-shing of Hong Kong. This illustrates the trend toward large corporate groups in Taiwan publishing. TOM.COM plans on combining media with high technology, and hopes to ultimately become the dominant such firm in greater China.

Will this trend toward large corporate groups with abundant capital affect the publishing industry's independence? Will it weaken its power to convey and transmit culture, so that the culture itself suffers? These are questions that worry many.

"When you become part of a large corporate machine, what can you really accomplish as an individual cog in the wheel?" wonders John Kuo, who formerly led Owl Publishing, once part of the Cite group. As a result of his doubts, Kuo left Owl to found Ecus. "Publishers still don't know how to strike a balance between idealism and competitiveness," he says.

Ho Fei-peng, general manager of the Cite group, looks at things differently. "Creativity and the power to convey culture come from the people at work in the field, not from those with the capital." He notes that Crouching Tiger, Hidden Dragon turned out the way it did because of director Ang Lee's efforts, not because of the ambitions of the investors. In Ho's view there's nothing wrong with the trend toward conglomerates: "To realize its ideals, a publishing firm needs a sustainable business model. And a sustainable business model requires corporate-style management."

But Ho argues that conglomeration does not necessarily force a publisher to sacrifice everything in pursuit of the almighty dollar. Cite has not forgotten its social responsibility, says Ho, who describes Cite as having a "gardener's philosophy." In one year, it publishes 1000 titles, some aimed at the mass market, and others that aren't expected to sell well. "By being economically efficient, we can protect the books that don't make any money," he says.

The greater China market

For the Taiwanese publishing industry, which was already open to foreign competition, WTO membership will only have an impact insofar as it affects the cross-strait book market. How will Taiwan be affected by the huge Chinese-language book market of mainland China? Most are optimistic.

The movie Crouching Tiger, Hidden Dragon used a Taiwanese director; mainland locations; crew members from Taiwan, mainland China and Hong Kong; and global distribution channels. It is a concrete example of how to integrate Chinese resources. The eagerly awaited greater China market will more and more become a reality now that both Taiwan and the mainland have joined the WTO.

Recently, a translation of a book describing the collapse of the Japanese publishing industry has been the talk of Taiwan's publishing industry, because the reason given for the Japanese industry's malaise-an overabundance of titles-is also a concern in Taiwan.

Linden Lin, the editor-in-chief of Linking Publishing, provides some basic figures for comparison. Every year 80,000 titles are produced every year for the 1.3 billion people of mainland China. The 200-plus million people of the United States produce 70,000 titles. Japan's 130 million people produce 65,000 titles. And the 23 million people of Taiwan produce 38,000 new titles. Taiwan appears to be simply creating too many different books.

Yet Ho Fei-peng argues that if you look instead at the greater China market, which includes the PRC, then the number of Taiwanese titles is in no way excessive. He says the publishing world's boundaries are created by language and writing, not by geography. And of course the Chinese-language market is not restricted to Taiwan.

The CEO of TOM.COM, Sing Wang, calculates that based on the Taiwanese average expenditure of 1.54% of income on reading matter, the mainland's publishing market has a potential of US$12 billion.

"Suddenly the largest market ever has appeared in front of our eyes, and Taiwan has become a part of it," notes John Kuo. "This will pose great challenges to the Taiwanese publishing industry." In the future it will be essential for the publishing industry here to take the mainland market into consideration.

The main act

How to expand beyond the Taiwan market is the question of the moment.

Cite has chosen to forge alliances in its attempt to reach beyond Taiwan. Ho Fei-peng explains that Cite formed an alliance with TOM.COM to reach out to bigger markets: "Taiwan's economic development over the past 40 years has been just the opening act as far as this company is concerned. The big show is just about to begin." Cite anticipates becoming an international concern, setting up in other Chinese-language markets such as Hong Kong, Malaysia and mainland China.

Apart from the mainland market, the international market is another realm that the Taiwan publishing industry is working hard to enter. The GIO's Chao Yi-hung explains that the Taipei International Book Exhibition is aimed at assisting Taiwan's publishing industry to sell to foreign markets. Held for the ninth time last year, it resulted in sales of foreign rights to more than 2000 titles.

Fighting with hands tied

Unfortunately for Taiwan, the mainland will at first have the playing field tilted in its favor. Because Taiwan entered the WTO as a developed nation, its publishing industry will immediately become completely open. Mainland China, on the other hand, is listed as a "developing nation" and will gradually open its market over the course of eight years.

Children's Robert Lin notes that mainland China does not feel confident about how it will survive market opening under the WTO, viewing Mandarin-speaking Taiwan as "enemy number one."

Lin points out that publishing is a product of a nation's cultural consciousness, and has social as well as economic implications. "By controlling consciousness you have power," he says. Lin worries about the publishing giant across the strait: "PRC publishers can come over here but we can't go over there. Aren't we getting the short end of the stick?" He advocates that the government should help to protect domestic publishers.

But Chao Yi-hung points out that when PRC media firms invest in Taiwan or export copyrighted materials to Taiwan, they are subject to the Statute Governing Relations Between the People of Taiwan and Mainland China.

Tsai Ing-wen, the chairwoman of the Mainland Affairs Council, notes that a mainland investment can be blocked or restricted if it is regarded as potentially monopolistic; politically, socially or culturally sensitive; or potentially disruptive to economic development or financial stability. With the tenuous cross-strait relationship, the activities of PRC news media in Taiwan are both politically and culturally sensitive, so until government agencies have carefully reviewed the situation, the old restrictions will still apply.

With regard to copyrighted imports such as newspapers, magazines, recordings and books, Chao explains that everything that has research value (whether the copyright is held by an individual or an organization) can be imported. Books and recordings of a cultural nature can likewise be published in Taiwan, so long as applications are filled and sensitive passages amended. But news-oriented newspapers and magazines from the mainland cannot be published or sold here.

With regard to the problem of the exchange of copyrighted materials across the strait, Linking Publishing's Linden Lin believes that Taiwan ought to follow the model established by the English-speaking nations of Britain, Australia and the United States. Unconditional opening of the market to works published on the mainland would not only create chaos, but the much lower prices would make Taiwan's publications no longer competitive. It would be best to adopt the model of having different circulation areas, with separate rights held for editions with simplified as opposed to complex Chinese characters.

Though some people believe that such protectionist measures would be insufficient, others believe they are unnecessary.

"Protectionist policies are used by rulers as propaganda to keep people ignorant and malleable," says Ho Fei-peng, who argues that cultural industries are too connected to political regimes in most Oriental societies. Instead of expecting the government to implement protectionist measures on behalf of the publishing industry, wouldn't it be better to put one's faith in the "invisible hand" of the market?

Losing the lead

Because market opening came relatively early in Taiwan, its publishing industry is ahead of the mainland's in every respect: in quality and timeliness of content, in experience with foreign companies and markets, and in packaging and marketing. Yet, with the mainland in hot pursuit, the gap is gradually narrowing.

Cite's Jan Hung-tse points out that there are three prerequisites for becoming a large international Chinese-language media group: (1) a staff that is passionate and professional about their work; (2) access to a growing market; and (3) an excellent corporate strategy and financial structure. In the past Taiwan's publishers were only able to meet the first of these three conditions.

The mainland does not currently allow foreign groups or individuals to set up publishing houses. There are now over 500 state-run publishing houses. Then there are more than 3000 privately run distributors. Later this year, the mainland will allow foreign-owned bookstores, which will be permitted to sell both domestic and legally imported foreign books. Many Taiwanese have expressed interest.

Currently, the only cross-strait cooperation in the field of publishing involves the purchase and sale of copyrights. But because profits are slim on the mainland and pirates numerous, Taiwan publishers have shown little interest in selling rights to the mainland.

Even though a few pioneers from Taiwan are staking out positions in the mainland market under other nations' flags, most Taiwan publishers have yet to be prodded into action.

"If you are going to stake a claim, then you've got to really do it; otherwise the early arrivals aren't necessarily going to be winners," says Robert Lin. To pull in big profits, you must take big risks, and therefore in the first years of WTO membership, Taiwanese publishers should first protect their positions at home while closely monitoring developments on the mainland.

With WTO membership and the repeal of the Publishing Law, Taiwan's publishing industry has opened its doors. People have a lot of different opinions about how to respond, but so far the industry just seems to be playing it by ear. Some worry that publishers ought to prepare better for what lies ahead. "Only the strong will be able to stand their ground," says Ho Fei-peng. The Cite group is working hard at strengthening its staff's expertise, professionalism and understanding of the industry. On the other hand, John Kuo believes that instead of merging with other companies, Taiwan publishers should be focusing on defining themselves: "In the future publishers will require a clearer and clearer understanding of their niche. That's going to be the key to their survival."