Beijing asks Alibaba to divest its media assets

Founded by billionaire Jack Ma, Alibaba has built a formidable portfolio of media assets over the years spanning print, broadcast, digital media, social media and advertising. Notable interests include stakes in the Twitter-like Weibo platform and several popular Chinese digital and print news outlets, as well as the South China Morning Post, Hong Kong’s main English-language newspaper. Some of these interests are in US listed companies.

Such influence is seen as a serious challenge to the Chinese Communist Party and its own powerful propaganda apparatus, the 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 divestments 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 technology support for the upgrade of their business and to drive commercial synergies with our core trading activities. We do not interfere or get involved in the day-to-day operations or editorial decisions of the companies, ”the statement said.

The asset divestment talks are the latest in a series of feuds between Beijing and Mr. Ma, who was once China’s most celebrated entrepreneur. At the end of last year, Chinese leader Xi Jinping personally explained the plans of Ant Group Co. – Alibaba’s financial technology affiliate – down to launch what would have been the world’s largest IPO, amid growing unrest in Beijing over Ant’s complex ownership structure and concerns that Ant was adding risk to its financial system. Mr. Xi was also angry with Mr. Ma for criticizing his efforts to strengthen financial supervision.

Antitrust regulators are also preparing to impose 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 the case. In addition, Alibaba should end a practice whereby, according to regulators, the technology giant banned traders from selling goods on both Alibaba and rival platforms.

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

and Youku Tudou Inc., one of China’s largest video streaming platforms. Officials have also reviewed Alibaba’s entertainment portfolio, although direct divestments in that portion of Alibaba’s business may not be necessary, say people familiar with discussions related to Alibaba’s entertainment business.

It is not clear whether Alibaba will have to sell all of its media assets. Any plan Alibaba comes up with needs the approval of the Chinese summit, say people familiar with the matter.

Concerns from the Chinese government have increased in recent years about Alibaba’s influence on the media and how the company has used its investments in news and social media to influence government policies that are seen as unfavorable to its businesses.

Those concerns grew after an incident in May last year, when dozens of Weibo reports of a senior Alibaba’s alleged involvement in an extramarital affair were removed.

A subsequent investigation by China’s Cyberspace Administration, the country’s internet watchdog, found that Alibaba was responsible for the meddling in Weibo messages and said the company had “used capital to manipulate public opinion” in a report to the United States. leadership. , citing officials who saw the report. It is the Communist Party that controls public opinion on all media platforms and the private sector should not assume this role, the officials said. Alibaba owns about 30% of Nasdaq-listed Weibo and is the social media company’s largest customer, with nearly $ 100 million in advertising and marketing revenue in 2019 to its platform, according to the most recent annual data available.

In June, the internet watchdog publicly chided Weibo for what it called “disruption of online communications” and asked to rectify the situation. In November, Xu Lin, a deputy director of the party’s central propaganda division, said in a public forum that China should “ resolutely ban the dilution of party leadership in the name of [media] convergence, be resolutely on the lookout for risks of capital manipulation of public opinion. ”

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

The divestment of its media interests isn’t necessarily a big negative for Alibaba, which could come back from the regulatory attack in a safer position with Beijing after relinquishing some non-core assets. It could also help keep the company away from future political minefields as the authorities keep tight control of the media.

Alibaba isn’t the only Chinese tech giant dealing with media. Tencent Holdings Ltd.

WeChat’s messaging service has become one of the main ways regular Chinese get news. Bytedance Ltd. operates the popular news aggregator Jinri Toutiao, which uses artificial intelligence to send news to hundreds of millions of users.

It is not clear whether other technology companies will have to follow the same pattern as Alibaba when considering the sale of media assets.

Alibaba’s media investments began before the company achieved international fame with its record-breaking IPO on the New York Stock Exchange in 2014. Over the years, Alibaba and Ant have bought shares in some of the country’s most popular media outlets, including corporate-focused Yicai. Media Group and technology-focused news portals Huxiu.com and 36Kr.com.

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

Media outlets often met Alibaba’s overtures with enthusiasm, given the tech giant’s deep pockets and digital expertise. Since the post was purchased by Alibaba in 2016, it has expanded its digital news offering and editorial, and completed a makeover of its Hong Kong headquarters.

Some journalists and readers were concerned that Alibaba, which has offices a few floors above the Post newsroom, would disrupt the newspaper’s coverage in order to please Beijing. But the newspaper at times published stories that seemed unfavorable to Chinese leaders, including extensive coverage of the Hong Kong protests in 2019 and 2020 and Beijing’s growing control over the city.

Mr Ma, explaining the reasons for his acquisition of the Post, said in a public forum in 2017 that he never interfered with newsrooms and respected journalism.

[We] they shouldn’t let the media down, they shouldn’t let themselves lose and they shouldn’t let the media lose objective and rational communication because of money, ”Mr. Ma said at the event hosted by Xinhua.

Write to Jing Yang at [email protected]