Baoding Municipal Party Secretary speaks out, China National Library Network loses 300 million yuan to self rescue | Enterprise | Secretary

"Enterprises such as Zhongtu Network and Hebei Huashang Printing actively carried out self rescue in the flood disaster. We hope that all affected enterprises can establish confidence and firm determination, actively carry out self rescue, and resume work and production as soon as possible. The Municipal Party Committee and Government will make every effort to help enterprises solve their current problems as soon as possible."

According to the Baoding Daily, from August 13th to 14th, Party Xiaolong, Secretary of the Baoding Municipal Party Committee, inspected and guided post disaster recovery and reconstruction work in some affected communities, townships, streets, and enterprises in Zhuozhou City, and visited and comforted cadres, volunteers, and relevant county and city aid personnel who were fighting on the front line of recovery and reconstruction.

Among them, Party Xiaolong conducted on-site inspections of the book storage warehouse in Wharf Town and Hebei Huashang Printing Co., Ltd. in Dongxianpo Town, and had conversations with Huang Ping, founder and CEO of Zhongtu Network, and Yang Yuansheng, general manager of Hebei Huashang Printing Co., Ltd., representatives of the affected enterprises. He expressed condolences to the enterprises for the flood disaster and gained a detailed understanding of the disaster situation and recovery and reconstruction work.

On August 2nd, the office building of Zhongtu Network was flooded. Respondents provide

He said that many enterprises such as Zhongtu Network and Hebei Huashang Printing actively carried out self rescue in flood disasters, fearless of difficulties and facing them at critical moments, demonstrating their corporate spirit of self-reliance, self-improvement, and positivity. The Municipal Party Committee and Government attach great importance to the post disaster recovery and reconstruction work of all disaster affected enterprises. I hope that all affected enterprises can establish confidence and firm determination, actively carry out self rescue, and resume work and production as soon as possible. The Municipal Party Committee and Government will make every effort to help enterprises solve their current problems as soon as possible.

Zhuozhou is a key warehouse for the publishing industry, and a group of enterprises represented by Zhongtu Network suffered heavy losses in this flood.

According to media reports earlier, over 80% of the over 4 million books on China National Library were damaged, and their accumulated wealth was flooded. In addition, according to an article published on the official WeChat official account of China Library Network, the 6000 square meter library of Jiayouyuan Cultural Development Co., Ltd. was flooded, with more than 20 million foreign books lost and millions of books destroyed; Over 8000 square meters of Xiaohongfan Children's Books warehouse was affected by the disaster, with over 3 million sets of books damaged; The Guangchen Culture suffered over 500000 damaged books, worth over 30 million yards; The 3000 square meter warehouse of the Paper Sound Bookstore was damaged, and 4/5 of the books were scrapped; Beijing Times Mandarin International Media Co., Ltd. estimates a loss of over 200 million yuan, with a warehouse size of nearly 8000 square meters and a stock of over 3.6 million books, almost completely wiped out

Pengpai News noticed that on August 14th, Baoding Mayor Yan Jihong presided over a special meeting on post disaster assistance measures. She emphasized the need to comprehensively understand the bottom line, and the competent departments in various industries should deploy their elite forces to the front line, conduct on-site inspections of disaster stricken enterprises one by one, understand difficulties and demands face-to-face with enterprise leaders, establish a "list of enterprise disasters" by industry and field, and provide targeted assistance to enterprises in resuming work, production, and market. We must make every effort to provide precise assistance, strive for national and provincial financial, financial, tax and fee reductions and other policy support, study and formulate several measures to assist enterprises in resuming work, production, and market in our city, make full use of financial tools, tilt more projects, policies, and funds towards disaster stricken enterprises and individual businesses, form a multi-level policy support and guarantee system, and enhance the confidence of market entities in resuming work, production, and market.

What is the loss of 300 million yuan for Zhongtu Network? More than half of the annual profits of listed companies

The Shanghai Book Fair opened today and will carry out a relief sales activity for disaster stricken institutions in Zhuozhou. In addition, it will also assist disaster stricken book companies in starting again through methods such as "I donate when you buy books" and "I donate when you buy tickets".

In fact, books soaked in heavy rain in Zhuozhou have been scrolling through the screen since early August. According to industry estimates, this flood may cause losses of up to 10 billion yuan, with Zhongtu Network suffering losses of up to 300 million yuan. However, none of the companies affected by the disaster have gone public, making it impossible to find their business scale through public channels and assess the true destructive power of the flood.

For this, we have found over twenty publishing and distribution companies listed on the A-share market. The main business of these enterprises involves the publication and distribution of books. Compared to the small and medium-sized book enterprises that suffered losses in Zhuozhou, these companies have a larger operating scale and higher level of business. But even these large listed companies are not easily facing a loss of 300 million yuan from Codex.

The above chart shows the net profit level of each publishing company in 2022, which is attributable to the parent company. It can be seen that 16 companies have not earned a net profit of 300 million yuan in one year of operation. The so-called deduction of non net profit attributable to the parent company can be simply understood as a profit level that is closer to the essence of the enterprise's operation. It removes the impact of non recurring gains and losses on profits, such as the inflow of funds from a book company's disposal of a property.

However, amidst regret, when reading the annual reports of the publishing and distribution companies mentioned above, we have discovered an interesting cognitive difference: people have an impression that bookstores are difficult to operate, and closing them is not a new thing; But in fact, the top publishing and distribution companies are doing well. We have identified three reasons for this.

Reason 1:

Bookstores are just the last end of the industry chain

In our minds, the impression of the physical book industry often comes from bookstores, but in fact, bookstores are only the last end of the industry chain. According to open book data, for the entire industry, offline retail only accounts for 10% to 20% of the market share. Just like a blind person touching an elephant, the decline of offline bookstores that people perceive with the naked eye does not represent the overall situation of this industry.

The following figure presents the basic industrial chain of the traditional publishing industry. According to the 2021 News and Publishing Industry Analysis Report by the General Administration of Press and Publication, the revenue from physical book publishing in 2021 was 108.22 billion yuan, accounting for the largest proportion of the entire mid stream sector. In the downstream stage, besides textbooks being distributed by Xinhua Bookstore, most ordinary books are sold online, accounting for 84.7%.

However, e-books do not appear in this figure. The electronic publication shown in the figure refers to a media form that stores information in a fixed physical form for reading after being edited and processed in digital code, such as CDs, disks, etc. According to data from the China Academy of Press and Publication, digital publishing revenue was 1276.26 billion yuan and e-book revenue was 6.6 billion yuan in 2021.

At the same time, the differences between bookstores are also enormous.

Large chain bookstores such as Xinhua Bookstore have stable business sources and natural advantages in scale operation and risk management. And using the differentiated positioning of "airport stores" and backed by the big tree of CITIC Publishing, CITIC Bookstore can also carve out a path by focusing on categories such as business, finance, and psychological self-help. Before the epidemic, CITIC Bookstore had four stores with revenue exceeding 15 million yuan, of which CITIC Bookstore at Shenzhen Airport had a single store annual revenue exceeding 40 million yuan.

However, most of the small independent bookstores, such as the disaster hit Yecao Bookstore, are in trouble in social media such as Xiaohongshu and Tiktok. The active voice of this type of bookstore in the public opinion field has also amplified the dilemma of book retail.

Reason 2:

Version number and copyright, the existence of the moat

For the upstream, midstream, and downstream of the publishing and distribution industry, large listed book companies generally have a layout, but due to poor gross profit margins in the upstream, the top book companies are currently focusing on the publishing and distribution links.

From business data, in the vast majority of enterprises, revenue from physical book publishing and distribution contributes over 70%.

The reason why top book companies coincidentally agree is because both of these links have obvious moat characteristics.

The bottleneck in the publishing process lies in the book number and exclusive copyright.

The book number, also known as the admission ticket for a book. If a private publishing house wants to publish a book, it needs to be affiliated or a United Nations publishing house to obtain the edition number. Many best-selling books on the market are actually operated by private book companies, but due to the existence of book editions, state-owned publishing groups also participate in the distribution of accounts.

Having more exclusive and high-quality content copyrights means that a publishing house is more likely to create best-selling books and improve publishing efficiency. According to a business report from Publishing Media, Qingdao Publishing House, a subsidiary of City Media, signed the copyright for all varieties of Junichi Watanabe in 2017, including 140 works such as "Paradise Lost" and "Blunt Sensation". Among them, the book "Blunt Sensation Power" was carefully operated by Qingdao Publishing House, and its sales on Dangdang.com reached 18 million yuan in 2022, driving the overall sales momentum of inspirational books by Qingdao Publishing House.

Although the issuance process is open to private capital and foreign investment, there are also entry barriers, mainly manifested in the ability to designate certain enterprises as the sole supplier of textbooks and teaching aids. Due to historical reasons, the Xinhua Bookstore system has always been the only distribution unit for primary and secondary school textbooks in China. From the current perspective, Xinhua Bookstore has been spun off into the assets of multiple listed companies. Therefore, if a publishing group's asset package includes Xinhua Bookstore, it is highly likely to have exclusive distribution rights for local textbooks.

We have excerpted relevant statements from the 2022 annual reports of some companies:

Phoenix Media, as the only unit in Jiangsu Province with textbook distribution qualifications, undertakes the distribution of textbooks for various schools throughout the province;

Longbian Media is the only enterprise in Heilongjiang Province that has obtained the qualification for distributing primary and secondary school textbooks;

Shandong Media is the only enterprise with the qualification to distribute teaching materials for primary and secondary schools within Shandong Province;

Since 2012, Zhongnan Media has been the supplier of single source procurement and has signed procurement contracts with the Provincial Department of Education;

Xinhua Media has the distribution rights of kindergarten textbooks, primary and secondary school textbooks, and vocational school textbooks in Shanghai.