From 1999 to 2016, How Did “Hongxiu Tianxiang” Find a Way to Survive? | 20 Years of Internet Literature ②

The process looks ordinary from the outside. The choices and the hardships inside it are not something an outsider could imagine.

What we call internet literature began as nothing more than writing posted online. Then came the writers the internet unearthed, then content made specifically for online readers, and then work that turned around and changed literature offline.

Literature met the same fate as every physical industry the internet has remade.

We are visiting the key figures of the past 20 years one by one, hoping to put this history on the record.

“A maid in green holds the inkstone, urging me on to finish my exam papers; a beauty in red sleeves adds fragrance as she keeps me company while I read.” No one expected that this fusty, pedantic couplet would find a market in the age of online reading — much less that it would succeed.

Sun Peng did not expect it either. In 1999, at 22, he built a website and called it Century Youth. It was the turn of the century, the internet tide was rushing in, and Nasdaq, which carried the whole internet dream, had not yet crashed. The site, on the domain 21youth, was a creature of its moment.

Century Youth was a portal site in miniature. Its Thornbird gallery offered pictures to download, its Melodies and Lyrics section offered MP3s, and its Very Urban channel covered pop-culture news. Yahoo was the benchmark everyone revered; Sina, Sohu and NetEase had only just started out by imitating it.

There was also a literature channel, where people could not only read but write. Sun Peng lifted four characters from that couplet — hongxiu tianxiang, “red sleeves add fragrance” — and gave them to a new site on its own domain. Eighteen years later, nobody remembers Century Youth. Hongxiu Tianxiang became Sun Peng's label instead, and the thing he built a career on.

At first Hongxiu was a personal website, and it got through the years after the dot-com bubble burst on almost no money. Five years in, it began to commercialize, built a team and started generating cash. Nine years in, Shanda — founded the same year as Hongxiu — became its largest shareholder and folded it, along with its former rivals, into Shanda Literature. In 2013, Shanda Literature split apart and Tencent set up Tencent Literature. In 2015, Tencent bought Shanda Literature and merged it into China Literature. Hongxiu became part of China Literature in that deal.

In June 2016, Sun Peng left as well.

Looking back on the 17 years from founding Hongxiu in 1999 to walking away in 2016, Sun Peng sees nothing revolutionary in internet literature's business model. Writers still write and readers still pay; the whole process simply moved off publishing houses and bookstores and onto websites.

But that move, which changed nothing fundamental, was full of real difficulty, and the success that eventually made Sun Peng a success came only after countless choices. It was harder than he had expected.

I

Before 2003, internet literature had no workable business model. The internet had no convenient way to collect money, so even something as simple as “writers write, readers pay” could not be done. Rushing into commercialization meant risking what happened to Rongshuxia (Under the Banyan Tree), which was dragged under by staff and bandwidth costs.

There were not many ways to stay alive. Bring in more money, or spend less. Hongxiu chose to spend less.

When he started Hongxiu, Sun Peng set his sights high: “From the very start, what we wanted to build was a complete product, a website that could keep running.” He wanted a platform for both writing and reading, serving writers who published online and readers who loved to read. So he demanded a lot of the site: a better reading interface, a smoother publishing system, a more complete set of rules for managing it all.

But like many sites of that era, Hongxiu began as a personal website. Sun Peng built no team for it: “Development, design, editing — it was all fellow netizens back then.” Together, over the internet, they put Century Youth together. In the site history kept before Hongxiu's redesign, this group is called the Thornbirds creative group.

As a personal website, early Hongxiu cost almost nothing. The biggest expense was probably the server. Sun Peng found a friend willing to host it, which ran to a few hundred yuan a year. He could cover that himself.

It did not buy advertising. It posted on forums instead, telling netizens that a literature site called Hongxiu had opened. That brought in its first users and gradually made it a mid-sized stronghold of internet literature.

More users meant more submissions, and Hongxiu badly needed editors to read them. Building an editorial team is the turning point for any internet literature site. It was exactly what forced Rongshuxia to expand, and Rongshuxia failed in the end because it could not find a way to make money. Sun Peng's problem was more immediate: his own finances could not support an editorial team. So he mobilized the netizens instead.

Around 2000, getting online required a modem, and modems were expensive, so most people on the internet were reasonably well off. Many of them went online mainly to find like-minded people to talk to, and the mood on the internet was correspondingly simple and clean. When Sun Peng posted a call for volunteer editors, netizens signed up eagerly. At the peak, seventy or eighty volunteer editors were working for Hongxiu.

They were unpaid, but Sun Peng did not manage them loosely. Every volunteer editor had a workload quota. Every Monday, all of them filed a weekly report. Sun Peng sorted them into groups — Fiction Group One, Fiction Group Two, and so on. Volunteers even served a two-month probation and had to pass a review before taking the job formally.

The work was not light. Sun Peng recalls that in one year the busiest editor read more than ten thousand submissions. Unpaid labor on that scale is hard to imagine now, but in that wild era of the internet the volunteers kept Hongxiu running on enthusiasm alone. “Our early short stories were exceptionally clean — not even a typo.” That, something Sun Peng is still proud of, was entirely their doing.

With editing handed to the volunteers, Sun Peng did essentially everything else himself. “Site operations, optimization, picking what to recommend on the homepage, site design, page code,” he said. “You're the webmaster. When resources are limited, everything lands on you.”

He did think about raising money. But China had no mature private-financing market to fund startups yet, and internet literature had no clear business model, which was another obstacle. Sun Peng recalls meeting Lei Jun, Zhou Hongyi and others in 2003; nothing ever came of it.

So Hongxiu ran on almost nothing for more than four years. Only in 2004, when management at the company Sun Peng worked for learned he was running the site and decided to invest, did he formally begin commercializing it. He took 500,000 yuan in seed money from his employer, carved out an office area on the company's premises, and went into business.

Sun Peng later called 1999 to 2004 “the wild personal era, driven mostly by personal interest.” Hongxiu never had an overnight hit the way Rongshuxia did, but it lasted long enough to reach a time when internet literature might finally have a business model. “Keeping a company alive matters more than leading for a moment,” he said.

II

In hindsight, 2004 was probably no accident for Hongxiu.

By then Sina, Sohu and NetEase had found their profits in SMS value-added services and were growing steadily. Shanda and Jiuyou had listed on Nasdaq on the back of games. Amazon bought Joyo; CNET bought ZOL. All of it said that the internet industry was coming back to life after the bubble.

As the path to profit grew clearer, capital moved into the internet, which also marked the end of the personal-website era. Over the next decade and more, the internet produced giants that steadily ate up the industry's individual operators and new entrants. Had Sun Peng not commercialized at that 2004 juncture, Hongxiu would very likely have disappeared into the sea of the internet, like millions of other personal sites of the time.

The 500,000 yuan he got was not a lot, so finding a business model became the most important work at Hongxiu.

Traditional publishing turned out to be hard work for little money. In 2005, Hongxiu found a partner company and put out its first batch of books. Hongxiu supplied the novels; the partner handled the ISBNs and the sales channels. Hongxiu put several hundred thousand yuan into the arrangement.

Sun Peng thought the books sold reasonably well, probably because of the unusual way they were marketed. He took his team to Tianjin for a book trade fair. The venue was plastered with ads from the big publishing houses, and Hongxiu could not afford to advertise inside. So the team went to a construction site across the street and rented the whole outer wall for 1,000 yuan a day.

It worked. Anyone walking into the fair only had to look up to see Hongxiu's enormous billboard. Distributors came to look at its books, and every title ended up selling more than twenty thousand copies. The distributors also paid half up front before Hongxiu shipped, which eased a great deal of the cash pressure of getting into publishing.

Unfortunately, “most of the money for those books was never settled with us, and the publishing company we worked with has since gone under,” Sun Peng said. “Our marketing was strong, our recognition in the market went up — we just never made the money.” After that, Hongxiu stopped doing publishing itself and licensed its novels to publishing companies instead, leaving them the printing and the marketing.

Besides publishing, Hongxiu started selling film and television rights to its novels early on. In 2010, a film called My Beautiful Boss, starring Peter Ho and Jing Tian, came out. The novel of the same title had first been serialized on Hongxiu, and the rights had been sold back in 2006. The 2011 television series Naked Marriage was likewise adapted from a Hongxiu novel of the same name, written by Yueying Lanxi.

In 2009, Hongxiu launched a publishing and screen-rights channel. According to reports at the time, a group of production companies — Orange Sky Entertainment, Zhao Baogang Studio and Ciwen Media among them — signed partnerships with Hongxiu, which would recommend its best titles to them. Anyone else interested in a novel on the site could come to Hongxiu and negotiate directly. In 2012, Hongxiu relaunched the channel. Its own promotional material quoted one of its authors, Niepan Hui: “Promoting and operating internet literature at scale will undoubtedly drive a boom in film and television.”

It is true that most productions today have a novel somewhere behind them. But back then, production companies did not crave so-called IP nearly as fiercely as they do now, so what Hongxiu actually earned was less impressive than it sounds: licensing a novel to a production company brought in anywhere from tens of thousands to a few hundred thousand yuan.

And there were not many novels worth adapting to begin with. Even when a production company was interested, actually getting made was unlikely. Reports say Niepan Hui sold the adaptation rights to three novels, and that two of them, The Imperial Concubine Who Wore Prada and Hidden Marriage, were expected to become television series. Search for them today and there is no trace of either.

III

Hongxiu's first two years of commercialization were rough; neither screen rights nor publishing brought in enough. In the end, what created real value was the fiction itself. Only after Hongxiu started its VIP paid-reading service in 2006 did it have steady cash flow and the ability to turn a profit.

Paid reading was not Hongxiu's invention. Qidian Chinese Net introduced it first, in October 2003. Users topped up by bank transfer, by phone or through online banking, and got different tiers of VIP privileges depending on how much they put in; top-tier members could read paid novels at 0.03 yuan per thousand characters.

Qidian gathered a group of internet literature writers, promised them all of the reading revenue during the system's early months, and pushed VIP paid reading onto the market. To pull in more users, it also made every VIP title free to members for its first month.

“Because Qidian paid out in full, some authors made more than a thousand yuan in the first month alone — an enormous leap over what earlier sites with VIP schemes had paid,” says A History of the Development of Internet Literature, a book co-written by Qidian founder Lin Tingfeng.

Hongxiu started charging much later than Qidian, but Sun Peng says it was the first internet literature site aimed at women to do so. Some authors, afraid readers would balk at paying, stayed out of the VIP program, but Hongxiu found enough titles to launch it anyway. That gave it a real edge over comparable sites.

“Bank-card online-banking top-ups were 70 percent of it,” Sun Peng recalls. Back then a user had to go through a tedious process at a bank branch to switch on online banking, then use a USB security key to pay. “It was honestly a huge hassle. But seeing that many people top up anyway, I knew the demand was real.”

Paid reading quickly gave Hongxiu decent cash flow. “Not long after we started it, we were doing a few thousand yuan a day,” Sun Peng said. As the number of internet literature readers kept rising, so did the money. By 2012, Hongxiu was taking in roughly 200,000 yuan a day from paid reading.

“Hongxiu's VIP revenue was the highest of any women's reading site,” Sun Peng said, sizing up the period. “About two-thirds of Qidian's, and more than double anyone else's.”

Only then was Hongxiu finally out of danger. And to this day, VIP paid reading remains the single most important source of revenue in internet literature.

IV

VIP revenue only worked because readers wanted the novels on Hongxiu badly enough. CEO fiction — romances built around a domineering, fabulously rich male boss — was Hongxiu's specialty, it fed female readers' longing for love, and it was extremely addictive. In that sense, calling internet literature a spiritual opium is not an exaggeration.

This was also the result of a deliberate shift Hongxiu made in 2005. Open the site's homepage today and three of the five titles rotating through the recommended slots have “CEO” in them. The other two cannot escape the “domineering CEO falls for me” formula either: “The man leans in over her, one hand slamming the wall beside her head, and An Xiaoyu has nowhere left to run.”

The earliest Hongxiu was nothing like today's site, awash in pink fantasy. As noted, “red sleeves add fragrance as I read by night” was not purely a longing for a woman. It was a scholar's idea of the good life, folding the scent of burning incense, the company of a beautiful woman and the pursuit of the Way and of worldly standing into a single line of verse.

What Sun Peng set out to build was a place for people with literary ambitions to publish and talk to one another. Hongxiu carried many kinds of writing — fiction, essays, polemics, poetry, song lyrics, scripts, diaries — which earned it a reputation as “the Chinese-language internet's most complete literary site in terms of genres covered”.

One essay published on Hongxiu, The Desolate Beauty of the Ancient Yangguan Road, was even picked up by Oxford University Press for a Hong Kong secondary-school Chinese textbook. Written by Chu Liang under the pen name Yin Gong, it is a travel piece about visiting the ancient Yangguan Pass at Dunhuang, and it has also turned up as a question on school Chinese exams. “A lot of our early short pieces were genuinely fine work,” Sun Peng said.

But around 2005, Hongxiu pulled a large batch of fiction written for men off the site and went after women readers instead, CEO fiction above all. Sun Peng recalls: “By 2008 and 2009, [Hongxiu] had become the biggest cluster of CEO fiction on the internet.”

The basis for the shift was the readers. Put simply, whatever they responded to most, Hongxiu moved toward. Contemporary romance and CEO fiction were filtered out that way. In Sun Peng's telling, users chose and the team adjusted to the choice: “Using how willing users are to pay to measure how popular a work is — that's the best method there is.”

Hongxiu was fighting for survival at the time. In 2004, Sun Peng left his employer and set up a company to run the site. He could no longer lean on netizens working for free, so the team kept growing, and office and server costs climbed with it. Under that pressure, tuning the content toward the mass market looked, in business terms, close to inevitable.

Writing for women, CEO fiction in particular, also set Hongxiu apart from other literature sites. Fiction for men was already divided between Qidian and Huanjian Shumeng, then still thriving. Among the sites for women, each had its own corner: Xiaoxiang Shuyuan leaned toward palace-intrigue fiction, Jinjiang Literature City belonged more to the fujoshi crowd, readers of male-male romance. Hongxiu took its place with CEO fiction.

Sun Peng's own taste runs to wuxia novels and he has not read much of the CEO fiction on his site, but he thinks its popularity makes sense: it is a contemporary variant of the talented-scholar-and-beautiful-lady story that classical fiction told over and over.

It is certainly a loss that distinctive work like The Desolate Beauty of the Ancient Yangguan Road has vanished from the internet. But CEO fiction has a value of its own. Shao Yanjun, an associate professor of Chinese at Peking University, argues: “Every new genre that appears in internet literature, every mutation of a genre, corresponds to the appearance and shift of some current of social thought.”

In 2011, Tang Qingchuan and Li Juejun of Shaanxi Normal University criticized the vanity and similar traits that CEO fiction assigns to its women, then still affirmed the genre's significance as an expression of women pursuing equality between the sexes.

For Hongxiu itself, the significance of CEO fiction was more practical: these novels had more readers, sold more easily and could be turned into television series and films. This is precisely where Hongxiu parted ways with Rongshuxia before it, and what laid the foundation for its VIP model.

V

In March 2008, Hongxiu took investment from Shanda. Sun Peng gave up part of his stake, and Shanda became the largest shareholder. That July, Shanda combined Hongxiu with Qidian and Jinjiang Literature City to form Shanda Literature, and poached Hou Xiaoqiang, then a deputy editor-in-chief at Sina, to run it.

With Shanda's money behind it, Hongxiu entered what Sun Peng calls a period of fast growth. From 2008 it rolled out the Hongxiu Publishing Fund to help authors get into print, ran internet literature competitions to pick out good work, set up an incentive fund to push authors toward better books, and tried to expand into screen adaptations.

But Shanda brought more than money. It brought trouble. Sun Peng is reluctant to say much about that period, but you can infer a good deal from what happened in 2013, when Qidian's founding team broke with Shanda Literature, took Tencent's money and set up Chuangshi Chinese Network.

Shanda Literature was assembled out of several websites, and both Chen Tianqiao and Shanda Literature's management wanted to integrate all of them for efficient management. According to a report in the 21st Century Business Review, Qidian's founders refused: “Chen Tianqiao originally wanted to try making Qidian free, and dropped it only after Wu Wenhui's team argued strenuously against it; later, when the company moved to put everything on the Shanda Passport system, Qidian resisted fiercely again, and it went through only after Chen Tianqiao personally forced it.”

The founding teams of the individual sites were persistently at odds with Shanda Literature's management, and Hongxiu's position was more tangled still. After the acquisition, Sun Peng still held a sizable stake in Hongxiu, while Shanda Literature, once Hongxiu sat under it on the org chart, also held managerial authority over it. A mismatched structure like that blurs who is responsible for what, so whenever the two sides disagreed about where to take the site, the disagreement was hard to settle.

The internal friction Shanda Literature's structure produced ended in a loss for everyone. Chuangshi Chinese Network, the Qidian founders' new site, made plenty of noise but stayed well behind Qidian. Hou Xiaoqiang announced his resignation as Shanda Literature CEO at the end of 2013, citing his health. And through all of it, Chen Tianqiao's own thinking was changing.

In the same report, Shanda Group president Qiu Wenyou mentioned that Chen Tianqiao kept fielding offers for Shanda Literature from one investor after another, and that Chen himself had considered selling.

By then Shanda was drifting ever further from Chen Tianqiao's dream of building China's Disney, an entertainment empire. His plan to pull entertainment together through an internet set-top box failed for being too far ahead of its time. The projects Shanda invested in, the video site Ku6 among them, either never got integrated or ran into trouble on their own. Even the core games business looked exhausted, having leaned too long on a single title, Legend of Mir.

Shanda around 2013 was, fairly described, on the eve of a crisis. Chen Tianqiao was most likely already planning to sell its assets off and cash out.

Against a tide like that, Hongxiu could not do much. Sun Peng says that from 2012 on, fights over who controlled the business left the site's planning and development more or less stalled. Many plans collapsed before they were ever really tried.

In early 2015, Shanda sold Shanda Literature as a package to Tencent for 5 billion yuan, and it was reorganized into China Literature. But China Literature still faced the same job of integrating the individual sites, and for the sites' founders, the awkwardness of their position did not change much.

In June 2016, the founders of several China Literature sites announced they were leaving, among them Xiaoxiang Shuyuan CEO Bao Weikang and Novel Reading Network CEO Liu Junmin — and, of course, Sun Peng. That was the end of the story between Sun Peng and Hongxiu.

VI

After leaving, Sun Peng looked back over those 17 years. Hongxiu's value, he believes, was in offering a lot of people the possibility of a different life. Ordinary people's writing could be published through Hongxiu and find readers of its own. And the way Hongxiu ran itself pushed that trend toward mass-participation writing further still.

It is not that Sun Peng discounts star authors; he simply did not want Hongxiu leaning too heavily on the handful of people at the top of the pyramid. He also thinks helping more people realize their own worth means more than one author earning tens of millions of yuan a year. So, unlike other internet literature sites with their resident deities, Hongxiu never had a single figure who stood for it.

“Along the way, Hongxiu fulfilled a lot of authors' dreams of writing. They could earn a few hundred to tens of thousands of yuan a month, enough to write without worrying,” Sun Peng said. “There was one author writing for Hongxiu who hasn't spent a cent of his family's money since he started college. We helped a lot of people like that. We did well by a great many authors.”

Sun Peng believes internet literature “never got onto the internet industry's most mainstream track.”

In 2016, the whole industry's output was worth roughly 4 billion yuan, counting both paid reading and licensing income from screen development. By comparison, the film industry took 45.7 billion yuan in box office alone that year, not counting the licensing fees films collected from video sites or the revenue split on pay-per-view.

By today's understanding, internet literature is a wellspring of IP, its value amplified through adaptation into film, television, games and animation. China Literature itself once said that within five years, revenue from adaptations would match revenue from paid reading.

But as Sun Peng sees it, none of that really belongs to internet literature. What is booming is the entertainment business as a whole. Hou Xiaoqiang, the former Shanda Literature CEO, once told CBN Weekly that Scarlet Heart earned 100 million yuan while the sale of its rights earned 300,000.

Sun Peng wants to dig further into what internet literature is worth. He thinks there are still many people who have not become readers of it. “It's like OPPO and vivo. You might not see them in Beijing, Shanghai or Guangzhou, but in third- and fourth-tier cities, in the countryside, down every street, the scale is frightening. We have to go find the people who've never come across internet literature.” Yet according to data from the China Internet Network Information Center, as far back as 2010, before smartphones and mobile internet had spread, rural readers of internet literature under 24 already far outnumbered urban ones. As a low-barrier form of entertainment, internet literature today seems to pull hardest at exactly that broader mass level.

After leaving Hongxiu in June 2016, Sun Peng got ready to start over. What caught his interest was a phone app called Hooked, which turns novels into the format of a chat app — tap the screen once and a new line of dialogue appears.

He thinks it is a fresh format and an easy one to accept, given how many people are already used to chatting on WeChat. He and his team have built a similar app, which will launch soon. Beyond finding more readers for internet literature, this new format carries Sun Peng's idea of what internet literature might become.

Cover image: Ashes of Time