Blue Whale News, December 30 (Reporter Chi Lei) A few days ago, Zhongnan Media issued the “Announcement on the Proposed Termination of Zhongnan Basic Education Composite Publishing Project and Other Fundraising and Investment Projects”. From the announcement, we can see the new situation and changes encountered by a publishing industry giant with a market value of 10 billion yuan in the Internet wave in recent years.
A few days ago, Zhongnan Media issued the “Announcement on the Proposed Termination of Zhongnan Basic Education Composite Publishing Project and Other Fundraising and Investment Projects”.
According to the announcement, the total number of fundraising projects to be terminated this time includes “Zhongnan Basic Education Composite Publishing Project”, “National Publication Marketing Channel Construction Project”, “Hunan Xinhua Bookstore Regional Center Store Renovation and Upgrading Project”, “Hunan Xinhua Bookstore E-commerce Platform Project” and “Zhongnan Publishing and Media Group Publishing and Distribution Information Platform Construction Project” 5 projects, with a total amount of 765 million yuan not yet invested. The fundraising dates back to October 2010, 14 years ago. At that time, the actual net amount of funds raised by Zhongnan Media was 4.123 billion yuan.
As shown in the figure below, only the capital investment progress of the “Zhongnan Publishing and Media Group Publishing and Distribution Information Platform Construction Project” of these five projects is just over half, and the other four are basically in the start-up period or even the stage of zero investment.
Zhongnan Media terminated 5 projects at one time, what are the reasons behind it? In the announcement, Zhongnan Media disclosed in detail the specific progress of the project and the specific reasons for its termination. Blue Whale Education has sorted out the relevant details for reference.
Zhongnan Basic Education Composite Publishing Project: In order to reform the traditional single teaching and auxiliary service pattern, realize the combination of paper teaching and digital network teaching and auxiliary services, and promote the company’s industrial upgrading, structural adjustment and optimization, Zhongnan Media planned the project. The project originally planned to set up Zhongnan Famous Teacher Education Technology Co., Ltd. for implementation, with the “network education platform” Famous Teacher Network as a comprehensive digital operation platform, using online and offline interaction to gather educational resources and establish a compound education publishing and service system.
Since the end of 2010, the venture capital atmosphere in the online education industry has been unprecedentedly enthusiastic, the industry competition has continued to intensify, and the market pattern has changed rapidly. In 2011, Zhongnan Media and Huawei jointly invested in Tianwen Digital Media, and injected the platform, team, and resources of the “Famous Teacher Network”, which was originally planned to undertake the operation of the project, into Tianwen Digital Media. After that, the company has successively laid out digital education service platforms and companies such as Beike and Zhongnan Xunzhi.
However, after the introduction of the “double reduction policy” in 2021, the needs of primary and secondary school users in digital and intelligent education, the threshold of related businesses, and the market structure have undergone great changes. Projects planned for 2010 have made it difficult to create a competitive advantage in the current environment.
National Publication Marketing Channel Construction Project: The project originally planned to establish a book product marketing system covering 25 major provinces (municipalities and autonomous regions) and 230 prefectures and cities across the country, mainly focusing on educational book products and supplemented by general book group purchases, and the main body of implementation was Hunan New Textbook Co., Ltd. (hereinafter referred to as “New Textbook Company”), a wholly-owned subsidiary of Zhongnan Media.
However, in recent years, with the promotion of the national “game of chess” in the work of teaching materials, the whole process of textbook construction and management system has supervised the whole process of compilation and distribution of textbooks, and higher requirements have been put forward for the update of the distribution methods of the issuing units.
In particular, the emergence of the Internet model has impacted the traditional sales channels of books, and the rise of online sales channels has gradually formed a new competitive pattern. The market environment and feasibility of the project have changed, and the original idea of laying out provincial platform marketing terminals is no longer strategically forward-looking and advanced.
Hunan Xinhua Bookstore Regional Center Store Renovation and Upgrading Project: The project originally planned to renovate and upgrade regional center stores including Hunan Book City, and improve the profitability of the store by improving hardware facilities, expanding scale, and strengthening the sales function of cultural and technological products such as fashion and digital. The implementing entity is Hunan Xinhua Bookstore Co., Ltd., a wholly-owned subsidiary of Zhongnan Media, that is, the Provincial Xinhua Bookstore in Hunan Province.
However, in the process of specific implementation, some regional center stores have not been renovated and upgraded due to objective reasons such as changes in the market environment, and some of them are different from the previous project planning in the implementation process (such as the demolition of the original store and the rebuilding of the site). In recent years, due to multiple factors such as e-commerce channels, digital reading, and the new crown epidemic, the revenue of physical bookstores has declined while operating costs have increased, and the performance has been under double pressure. Although the state has issued preferential policies to support the development of physical bookstores, it still cannot alleviate the operating pressure caused by rising rents and labor costs.
Therefore, Zhongnan Media believes that in the new context, the upgrading and transformation of physical bookstores should think more about cost reduction and efficiency improvement measures, and transform from book sales venues to comprehensive cultural service venues. Simply redecorating and expanding the area of the store can no longer meet the new needs and then realize transformation and upgrading.
Hunan Xinhua Bookstore E-commerce Platform Project: The project originally planned to build the largest online sales platform in Central and South China through the existing supplier resources, logistics resources, network resources, information system resources and human resources of Xinhua Bookstore in Hunan Province, mainly selling publications, stationery and fashion digital products. The platform adopts two modes: B2B and B2C, and the implementation body is Provincial Xinhua Bookstore, a wholly-owned subsidiary of Zhongnan Media.
There are two reasons for the termination of the fundraising project. On the one hand, the competition of e-commerce platforms is fierce, and the development dividend of the industry has disappeared. The year 2010, when the project was established, was a year of vigorous development of book e-commerce platforms, but with the decline of the paper book industry, book e-commerce platforms gradually declined. The scale of comprehensive e-commerce platforms has been further expanded, and the dividend period of rapid development of e-commerce platforms has passed, and it is difficult for homogeneous new e-commerce platforms to survive.
On the other hand, the trend of digital transformation of the cultural industry has changed. From a policy perspective, the cultural industry is encouraged to carry out the overall digital transformation rather than simply developing e-commerce; From the perspective of the development of the cultural industry, it has changed from the “Internet” to the integrated development of enterprise digitalization, empowering business with technology; From the perspective of information technology and e-commerce development, new technologies such as 5G, AI, and the metaverse have given rise to new models, new formats, and new products, and the integration of issuance business and new technologies is the general trend. With the technological update and the change of the e-commerce environment, the solution of the self-built sales platform of the original project is no longer the optimal solution.
Zhongnan Publishing & Media Group Publishing and Distribution Information Platform Construction Project: The project is to realize the standardization and optimization of the company’s publishing business process, realize the integration and sharing of internal data, and realize the management of editing, printing, distribution, warehousing, finance and other links through an integrated integrated management system through the introduction and construction of ERP system. The construction includes three aspects: one is the publishing information system, the other is the distribution and logistics information system, and the third is the docking of the above two information systems and the information system of Zhongnan Media Headquarters.
However, in recent years, the policy environment, information technology, market environment, and corporate strategy related to the project have changed. First of all, the State Administration of Press, Publication, Radio, Film and Television has issued a series of policies, requiring the cultural industry to carry out the overall digital transformation, rather than simply developing ERP digital management within enterprises; Secondly, the changes of various new technologies in the use of information, the way of information search and presentation, consumption and payment methods, etc., have brought about fundamental changes in the form of publishing products. The company needs to promote the overall transformation and upgrading of the business model and enterprise management model based on new technologies, rather than just the informatization of business processes. Thirdly, the current development has entered a new stage of “pan-culture and digitalization”, and the development trend requires the publishing and distribution industry not only to be digitally managed within the enterprise, but more importantly, to be externally oriented to the construction of the information platform.
On the whole, the fundamental reason for the proposed termination of the above five fundraising projects of Zhongnan Media is that “it cannot keep up with the development of the times”. And this is also a common phenomenon in the publishing and printing industry. As one of the typical traditional industries, the development of the publishing industry has basically reached a stage of stagnation. The current situation of the publishing industry is the stable industry structure, the business model is solidified, the companies are basically controlled by state-owned assets, and most of the employees flow in a small range in the circle. As a member of the industry, Zhongnan Media is not exempt from vulgarity. Some of these five projects even spanned 10 years, and the iteration speed of various new technologies in these 10 years is far beyond the imagination of the industry.
According to the semi-annual report of Zhongnan Media, its main business currently has seven major sectors. They are publishing business, distribution business, printing, printing material supply, media, digital education and financial services.
According to its third quarterly report, its revenue in the third quarter was 2.473 billion yuan, a year-on-year increase of 1.47%; In the first three quarters, the revenue was 9.366 billion yuan, a year-on-year increase of 1.72% – no matter what changes in the economic situation of the whole society this year, it can be said that the impact on the revenue of Zhongnan Media is very small. Similarly, the upstream and downstream industrial chains and customer groups of the industry basically have little to do with changes in the economic situation.
In short, whether it is from the termination of the fundraising project, the characteristics of the industry or the company’s performance, it can be seen that the development path of Zhongnan Media has been finalized. The new situation and new technology have an impact on its operation, which is caused by the dual factors of industry characteristics and company characteristics, and is also the general status quo of the entire publishing and printing industry.