This huge IP market is surging in China. Here's why.

Written by Grace

Jan

The intellectual property (IP) market in China is unquestionably growing and strengthening. But why? In this article, we explore the three key reasons investors and companies are turning to intellectual property to enhance their marketing efforts, and why intellectual property is becoming such an attractive asset. As we shall see, the growth of the cultural and entertainment industries in China continues apace, presenting opportunities for those enterprising enough to take them.

1.Strong Protection Increases the Value of IP

Stricter copyright laws and enforcement are making intellectual property a far better investment as companies see that their intellectual property rights will be respected.

In 2015, the Chinese government passed its toughest copyright laws to date, aimed at protecting those areas of the economy most vulnerable to piracy and copyright infringement in the age of the Internet, namely the creative and cultural sectors.

As a result of these encouraging developments, global companies aiming to expand their reach in the growing Chinese market have sought to leverage the rising value of better protected intellectual property in their marketing efforts.

For example, KFC made productive use of the popularity of Onmyoji – an extremely popular online game in China – to promote ‘The Star Meal’ custom boxes and flash cards.

And while intellectual property has become a valuable potential source of influence for forward thinking companies, the creative industries – along with the wider Chinese economy – have continued to show strong growth.

2. Continuing Growth for Chinese Creative Industries

1) Technological Improvement

Technology brings animation production efficiency and cartoon communication costs down.

Since the new millennium began, the improvement of animation software and the maturation of CG (Computer Graphics) technology has freed up human resources from having to perform traditional animation. This has broadened the room for potential development in animation, and, with the rise of the Internet, more comic readers have migrated online as the disadvantages of traditional comics have become clearer compared to the convenience of online comic consumption.

2) Market Size

The total output value of the Chinese creative industry has now exceeded 150 billion yuan, and the online content market has reached nearly 10 billion yuan.

In recent years, the content consumption market available to China's cultural industry has grown rapidly. Also, the share of the Chinese cultural industry made up by animation has grown as a proportion of the overall industry.

Driven by the availability of capital, new media, and consumer groups, the output value of the animation industry continues to grow rapidly. In 2017, the total output value of China's animation industry reached 153.6 billion yuan, mainly from the upstream animation content market and the corresponding downstream derivative market.

In fact, the downstream derivative market is the main source of output value from the animation industry. In the Japanese animation market in the world, the most mature in the world, the output value of the derivative market is about 8-10 times that of the content market. In recent years, with the improvement of the quality and output of domestic animation, the scale of the online animation market in China has also been increasing rapidly.

3) User Base

The scale of ACGN（animation,comic, game, novel）users is nearly 350 million, and the number of online animation users is 219 million.

With the improvement of teenagers' material living standards and the spread of ACGN culture in China, the number of users and potential users in China is huge. Data from iresearch shows that in 2018, the scale of ACGN users in China was nearly 350 million, and the total of online animation users reached more than 200 million. The large size of this user base brings with it huge market demand for further growth and development in the Chinese animation industry

Clearly, the growth and success of the Chinese cultural sector along with the willingness of Chinese consumers to pay for original, copyrighted content – as opposed to inauthentic or pirated alternatives – suggests the underlying strength of this market.

But for this promising trend to continue, it will be essential for companies to successfully engage with China’s younger population. Indeed, the post 1990 and even 1995 generation are an increasingly important group of consumers within China. Forward thinking investors, companies, and entrepreneurs are already considering the role of young people in this dynamic market.

3. Chinese Millennials are Ready to Buy

The economy of China continues to grow, along with the spending power of Chinese citizens.

With a growing population and middle class, it would be surprising if we failed to observe a growing number of young people with the means and inclination to spend money on copyrighted materials (increasingly perceived as high-end and prestigious) within the cultural sector.

For the post-1990 and post-2000 generations, the average monthly income of families is as high as 10,676 yuan. According to data released by the national bureau of statistics, the average monthly income of Chinese households in the first half of 2017 was 6,250 yuan, and that of the post-1990 and post-2000 generations was 70.8% higher than that of the whole country. This group of young people growing up in relatively favorable material conditions are more willing to consume cultural entertainment services.

According to iresearch user survey data, the size of China's post-1990 and post-2000 population is more than 280 million, and entertainment consumption accounts for 28.9% of the total consumption expenditure, with users spending an average of more than 1.6 hours consuming online entertainment each day. Iresearch data product mUserTracker shows that among users under 24 years old, online entertainment products such as video services and game services occupy a large proportion of users' time, accounting for 27.1% and 9.2% respectively.

The potential of this strategy is clearly demonstrated by recent successes. For example, on Tmall Super Brand Day, the high-end audio equipment manufacturer Beats released a special edition headset featuring a cartoon character from the valuable intellectual property ‘Line Friends’.

This was the first time Beats had made use of intellectual property of this type, but the benefits became clear immediately. The launch of this customized headset in conjunction with the creative deployment of an online game built on the same IP set a new Tmall single-day sales record for high-end headsets (over 2,000RMB).

In this case, the intellectual property was particularly popular with young Chinese women, helping Beats to increase their sales among that demographic.

Conclusion

Given increased copyright protections, the size of the market, and the demonstrated ability of companies to use carefully selected intellectual property to reach new consumers, brands are rightly beginning to leverage this important asset.

Those seeking to profit as China continues to grow can look forward to enjoying the benefits of dynamic creative industries and a young customer base with money to spend.

This huge IP market is surging in China. Here's why.