Beijing is asking Alibaba to sell its media assets

Alibaba, founded by billionaire Jack Ma, has amassed over the years a formidable portfolio of media assets spanning print, broadcast, digital, social media and advertising. Notable participations include participation in the Weibo-type Twitter platform and several digital and print Chinese news outlets, as well as the South China Morning Post, Hong Kong’s first English-language newspaper. Several of these holdings are in companies listed in the United States.

Such influence is seen as a serious challenge to the Chinese Communist Party and its own powerful propaganda apparatus, people said.

The party’s propaganda department did not respond to a faxed request for comment.

Alibaba declined to comment on discussions with regulators about possible divestitures of media assets. In a statement, the company said it is a passive financial investor in media assets.

“The purpose of our investments in these companies is to provide technological support for updating their business and to generate business synergies with our core business. We do not intervene and do not get involved in the daily operations of companies or in editorial decisions “, it is mentioned in the communiqué.

Discussions on the disposal of assets are the latest development in a series of competitions between Beijing and Mr Ma, who was once China’s most famous entrepreneur. Late last year, Chinese leader Xi Jinping personally abandoned Ant Group Co.’s plans. – Alibaba’s financial technology affiliate – to launch what would have been the world’s largest initial public offering amid growing unrest in Beijing over Ant’s complex ownership structure and concerns that Ant has added risk to financial system. Mr Xi also resented Mr Ma for criticizing his efforts to strengthen financial supervision.

Antitrust regulators are also preparing to charge a record fine of more than $ 975 million for what they call anti-competitive practices on Alibaba’s e-commerce platforms, The Wall Street Journal previously reported citing people with knowledge of this matter. In addition, Alibaba should put an end to a practice whereby, according to regulators, the technology giant has banned traders from selling goods on both the Alibaba and rival platforms.

In addition to media and online retail, Alibaba also has a sizeable entertainment division, consisting primarily of the Hong Kong-listed Alibaba Pictures Group. Ltd.

and Youku Tudou Inc., one of the largest video streaming platforms in China. Officials have also reviewed Alibaba’s entertainment portfolio, although it may not be necessary to divest that part of Alibaba’s business, said people familiar with discussions about Alibaba’s entertainment business.

It is unclear whether Alibaba will have to sell all of its media assets. Any plan that Alibaba comes up with will need the approval of China’s top leadership, people familiar with the matter said.

Concerns have risen in recent years over China’s official status over Alibaba’s media influence and how the company could have capitalized on its investment in news and social media to influence government policies deemed unfavorable to its business.

These concerns were raised following an incident in May last year, when dozens of Weibo posts were deleted about the alleged involvement of a senior Alibaba executive in an extramarital affair.

A subsequent investigation by the Chinese Cyber ​​Administration, the country’s cyber surveillance dog, found that Alibaba was responsible for interference with Weibo stations and said the company used “capital to manipulate public opinion” in a report to management. , the Journal reported. , citing officials who saw the report. The Communist Party is the one that controls public opinion on all media platforms, and the private sector should not take over the role, officials said. Alibaba owns about 30 percent of the Weibo listed on the Nasdaq and was the company’s largest social media client, contributing nearly $ 100 million in advertising and marketing revenue in 2019 to its platform, according to the latest annual data available.

In June, the watchdog on the Internet publicly rebuked Weibo for what he called “interference with online communication” and asked him to correct the situation. In November, Xu Lin, deputy director of the party’s central propaganda department, said in a public forum that China must “resolutely ban the dilution of party leadership on behalf of [media] convergence, beware of capital risks that manipulate public opinion. ”

He did not identify Alibaba by name during his speech, but used the words that appeared in the report of the cyber watchdog.

The divestment of its media interests is not necessarily a big negative for Alibaba, which could reappear from the regulatory attack in a safer position with Beijing after giving up some noncore assets. It could also help the company move away from future political mining fields, as the authorities maintain tight control over the media.

Alibaba is not the only Chinese technology giant dealing with the media. Tencent Holdings Ltd.

The WeChat messaging service has become one of the main ways in which ordinary Chinese receive news. Bytedance Ltd. operates the popular news aggregator Jinri Toutiao, which uses artificial intelligence to push news to hundreds of millions of users.

It is unclear whether other technology companies will have to follow the same pattern as Alibaba in considering eliminating media assets.

Alibaba’s media investments began before the company rose to international fame with its record IPO on the New York Stock Exchange in 2014. Over the years, Alibaba and Ant have acquired stakes in some of the most popular media. mass media of the country, including business. Yicai Media Group and Huxiu.com and 36Kr.com technology-focused news portals.

One of the most prominent acquisitions was the South China Morning Post, which has its roots in the British colonial rule in Hong Kong. It has also set up joint ventures or partnerships with powerful state media, such as the Xinhua News Agency and local government-run newspaper groups in Zhejiang and Sichuan provinces.

The media has often enthusiastically met Alibaba’s openings, given the technology giant’s deep pockets and digital expertise. Since it was bought by Alibaba in 2016, Post has expanded its digital news and editorial staff and completed the renovation of its Hong Kong headquarters.

Some journalists and readers were concerned that Alibaba, which has offices a few stories above the Post Office, would interfere with the newspaper’s coverage to thank Beijing. But the newspaper sometimes published stories that seemed unfavorable to the Chinese leadership, including extensive coverage of the 2019 and 2020 Hong Kong protests and Beijing’s growing control of the city.

Mr Ma, explaining why he bought the Post, said in a public forum in 2017 that he had never intervened in the editorial operations and respected journalism.

“[We] it must not let the media fall, it must not let the media get lost and it must not let the media lose objective and rational communication because of money, “Mr Ma said at the Xinhua event .

Write to Jing Yang to [email protected]