Beijing asks Alibaba to get rid of its media assets

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

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

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

Alibaba declined to comment on discussions with regulators regarding 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 their business upgrading and to generate business synergies with our core business activities. We do not intervene or get involved in the day-to-day operations of companies or in editorial decisions, ”the statement read.

The asset divestiture talks are the latest development in a series of feuds between Beijing and Mr. Ma, who was once China’s most famous entrepreneur. At the end of last year, Chinese leader Xi Jinping personally scuttled plans by Ant Group Co. – Alibaba’s financial technology subsidiary – to launch what would have been the world’s largest initial public offering, so that Beijing was increasingly uncomfortable with Ant’s complex ownership structure and feared Ant was adding risk to the financial system. Mr. Xi was also angry with Mr. Ma for criticizing his efforts to tighten financial control.

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 subject. In addition, Alibaba would be required to end a practice whereby regulators say the tech giant prohibited merchants from selling goods on both Alibaba and competing platforms.

Beyond media and online retailing, Alibaba also has a large entertainment division, consisting primarily of Hong Kong-listed Alibaba Pictures Group. Ltd.

and Youku Tudou Inc., one of China’s largest video streaming platforms. Officials have also looked at Alibaba’s entertainment portfolio, although outright divestitures in this part of Alibaba’s business may not be necessary, said people familiar with discussions related to Alibaba’s business. Alibaba entertainment.

It is not clear whether Alibaba will have to sell all of its media assets. Any plan Alibaba comes up with will require approval from senior Chinese management, people familiar with the matter said.

In recent years, Chinese authorities have become increasingly concerned about Alibaba’s media influence and how the company has been able to leverage its investments in news and social media to influence government policies deemed unfavorable to its businesses. activities.

These concerns increased following an incident in May last year when numerous Weibo articles about the alleged involvement of a top Alibaba executive in an extramarital affair were suppressed.

An investigation by the Cyberspace Administration of China, the country’s Internet watchdog, found that Alibaba was responsible for the interference in Weibo’s publications and said the company had used “capital to manipulate the Internet. ‘public opinion’ in a report to management, the Journal reported. , citing officials who have seen the report. It is the Communist Party that controls public opinion on all media platforms and the private sector should not take on this role, officials said. Alibaba owns around 30% of Nasdaq-listed Weibo and was the social media company’s biggest customer, contributing nearly $ 100 million in advertising and marketing revenue in 2019 to its platform, according to annual data. most recent available.

In June, the internet watchdog publicly berated Weibo for what it called “interference with online communication” and asked it to rectify the situation. In November, Xu Lin, vice director of the Party’s central propaganda department, said in a public forum that China should “resolutely prohibit the dilution of the party leadership in the name of [media] convergence, resolutely guard against the risks that capital manipulates public opinion.

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

Giving up its media interests isn’t necessarily a big drawback for Alibaba, which could re-emerge from the regulatory assault in a more secure position with Beijing after giving up some non-core assets. It could also help the company avoid future political minefields, as authorities maintain a strong grip on the media.

Alibaba isn’t the only Chinese tech giant with an interest in media. Tencent Holdings Ltd.

WeChat’s WeChat messaging service has become one of the primary ways ordinary Chinese people receive information. Bytedance Ltd. operates the popular news aggregator Jinri Toutiao, which uses artificial intelligence to convey information to hundreds of millions of users.

It is not clear whether other tech companies will need to follow the same pattern as Alibaba when considering divesting media assets.

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

One of the most significant acquisitions was the South China Morning Post, which dates back to the days of 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 newspaper groups run by the local government in Zhejiang and Sichuan provinces.

The media has often greeted Alibaba’s openings with enthusiasm, given the tech giant’s deep pockets and digital expertise. Since its takeover by Alibaba in 2016, the Post has expanded its digital news offering and editorial staff and completed the overhaul of its headquarters in Hong Kong.

Some reporters and readers feared that Alibaba, which has offices a few floors above the Post’s newsroom, would interfere with the newspaper’s coverage to please Beijing. But the newspaper occasionally ran articles that appeared unfavorable to the Chinese leadership, including extensive coverage of the Hong Kong protests of 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 had never interfered with newsroom operations and respected journalism.

“[We] must not let the media down, must not let the media get lost, and must not let the media lose objective and rational communication because of the money, ”Ma said at the event, held by Xinhua.

Write to Jing Yang at [email protected]