Tencent's China Literature Full-Year Earnings Jump 23 Percent

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Ma Huateng, chairman of Tencent

The publicly traded online literature company saw strong growth from licensing and developing IP generated on its platforms while also acquiring Chinese film and TV studio New Classics Media for $2.3 billion.

China Literature, the publicly-listed e-books platform of Chinese internet giant Tencent, said its gross profit rose 23.2 percent to $372.7 million in 2018. 

"We are pleased to report that we generated solid operational and financial results in 2018 as we continued to execute our mission of introducing high-quality literary content to readers and allowing authors to profit from their original writing," Wu Wenhui, co-CEO of China Literature, said Tuesday.

Annual revenue at the company increased 23 percent over 2017 to $734.1 million. The company said the gains were "primarily driven by an increase in the number of paying users and their growing willingness to pay for premium online literature content for [Tencent Literature's] own products." 

The biggest event for China Literature in 2018 was its acquisition of powerhouse Chinese film and TV studio New Classics Media for $2.25 billion in October.

China Literature said revenue from IP operations increased by 160.1 percent to $146.1 million, "primarily due to the consummation of the acquisition of New Classics Media, which contributed $40 million in revenue from the distribution of TV series, web series and films during the last two months in 2018."

"We believe China's online literature market and downstream entertainment industries have enormous growth potential, which we are increasingly tapping into through our burgeoning intellectual property business," said Liang Xiaodong, co-CEO of China Literature. Liang noted that China Literature licensed over 130 online works of writing to various third parties for adaptation into video content.

He added that the acquisition of New Classics would "further bolster [China Literature's] position as a leading player in IP and help us further develop and monetize our deep library of content."

He continued: "We have already started working with them to adapt certain content in-house, and we are exploring ways to identify content from our library that has potential to become successful in other formats. Looking ahead, we are confident in our ability to continue delivering long-term value for our shareholders by leveraging our high-quality literature and developing it into blockbuster IP."

China Literature owns and operates nine major branded products related to the consumption of literature content online in China, such as QQ Reading, a unified mobile content aggregation and distribution platform. Other products focus on individual genres and their respective fan bases. China Literature's main shareholder, Tencent, provides the company with exclusive distribution access to Chinese consumers via its sprawling array of internet services, including QQ, Tencent News, WeChat, streaming platform Tencent Video and others.