Luo Li

The news came out this week in English-language media, that Luo Li, the founder and former head of one of China’s largest literary websites, Qidian, has been arrested, though there are still conflicting reports about what he’s actually been accused of and the whole picture remains a bit murky.

Some sources say that he was illegally selling copyrighted material that belongs to Qidian’s parent company, the entertainment giant Shanda; other reports say the charge is that Luo accepted bribes amounting to around $30,000 in a copyright negotiation.

Qidian, which Luo founded in 2002, is a site that has a tiered system for accessing content (or “literature,” as we like to call it around here). Stories that aren’t very popular are free, but when they reach certain number of downloads, authors can start charging a small amount per thousand words, which is split 70/30 between the author and Qidian. In 2004, it was acquired by Shanda, which also owns similar literature websites Hongxiu, Xiaoxiang, and Under the Banyan Tree.

But in February, Luo left Qidian and his departure may be significant in light of the recent events. On the website Tech In Asia, C. Custer writes that: 

when Luo resigned from Shanda Literature at the beginning of the year, the rest of the Qidian founding team resigned with him. A source close to Luo told Caixin that Luo and Qidian’s other founder Yang Chen were planning to start another literature website in cooperation with Tencent Literature. If that’s true, Shanda says Luo has also violated the non-competition agreement he signed when he left Shanda Literature, and Shanda’s management says it has already turned that document over to authorities and will pursue legal action if Luo was planning to start a competing platform. Caixin’s source close to Luo, though, says he signed no such agreement.

The news that Luo may be contemplating a new literary website under the Tencent aegis is interesting: Tencent, one of the world’s largest internet companies, operates microblogging sites, social networks, gaming portals, and search engines, but thus far, it hasn’t made Shanda-level inroads into the literature market.

Qu Yunxu and Shen Hu at Caixin Online report that the site in question is Chuangshi.qq.com, which is “already the the second largest online literature website after Qidian.com in the numbers of online writers and daily contributions.” Whether Luo and other Qidian employees are actually guilty of shady copyright dealings remains to be seen– what’s clear is that Shanda feels the bite of an already powerful competitor, with a big network behind it, on their heels.