Bertelsmann Bets on Chinese New Media Market

In a dimly lit room above a food shop in one of Shanghai’s side streets, the clatter of keyboards mixes with the purring of an electric fan.

Internet cafes are a common site in the bustling metropolis of Shanghai. Young Chinese spend hours here, playing computer games, smoking and flirting with chatroom acquaintances.

26.5 million Chinese Web users

And they are not alone, for China is home to the world’s largest community of Web users -- a number which doubles annually. For China’s young generation, the world of the Internet offers unprecedented opportunities to gain access to the outside world, and to information otherwise rare in everyday China.

China has some 26.5 million Web users. Household computers are still rare, but Internet cafes have sprung up like mushrooms in recent months. Of the estimated 50,000 computer cafes, the majority are open 24 hours a day. The largest is said to have more than 1,000 computer stations.

Great potential for foreign firms

One company which has been quick to recognize the potential in China’s growing web community is the German media giant Bertelsmann.

Bertelsmann already sells books to 1.5 million regular customers in China. Most orders are made by phone – or via the Net.

The company already has 1,500 employees in China, and is growing fast.

Watching the media market

Under China’s watchful eye, Bertelsmann has adopted a somewhat restrained sales policy.

The range of books offered by Bertelsmann is narrow – comprised mainly of easy reading with little if any political content, which is taboo in the one-party state.

Instead, Bertelsmann sells products like knitting catalogues and self-help books with titles like "How you can be in a very good mood every day" - the literal translation of Bertelsmann's bestseller this summer in China.

Self-restraint and good contacts

The rapid movement on the Internet market has unnerved Chinese authorities, who say they need to protect the young.

Last year, the Chinese government introduced a special licence for news providers and banned the use of foreign news content.

In addition, new software has been installed in computer cafes which send off an alarm to local police stations when users look at "wrong" sites. Sites run by dissidents have been blocked. And now authorities want to keep control on the goings-on in computer cafes by making users register their identity card number while surfing the Net.

For Bertelsmann, self-restraint and good contacts to the Chinese authorities are the only way to keep track on the company’s current golden path to China.

Television viewers hold great potential for the German company - even more so than book readers. But China is said to be even more watchful over the country’s television, than over the Internet.

"We are very dependent on the government in respect of possibilities for expanding the company - particularly in the media sector. At the moment, we are involved in book distribution, which is a relatively open market. This is not the case with television," Ekkehard Rathgeber, head of Bertelsmann China says.

But Rathgeber, who already has excellent contacts in Shanghai where he has been for more than seven years, is optimistic. "We are fairly sure that we will be able to make progress in the future. And of course we are very interested, we've made that quite clear already," he says.