Beijing asks Alibaba to dispose of its media assets

Alibaba, founded by billionaire Jack Ma, has over the years assembled a formidable portfolio of media assets spanning print, broadcast, digital, social media and advertising. Notable holdings include holdings on the Twitter-like Weibo platform and various popular Chinese digital and print news outlets, as well as the South China Morning Post, Hong Kong’s leading English 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 advertising department did not respond to a fax request for comment.

Alibaba declined to comment on discussions with regulators over possible disposals of media assets. In a note, the company said it was a passive financial investor in media assets.

“The purpose of our investments in these companies is to provide technology support to update their businesses and to generate commercial synergies with our main commercial businesses. We do not intervene or get involved in the day-to-day operations or in the editorial decisions of companies ”, states the statement.

Discussions about the sale of assets are the latest development in a series of disagreements between Beijing and Ma, who was once China’s most famous businessman. At the end of last year, Chinese leader Xi Jinping personally denied the plans of Ant Group Co. – Alibaba’s financial technology affiliate – to launch what would have been the largest initial public offering in the world, amid growing unrest in Beijing over Ant’s complex ownership structure and Ant concerns were adding risk to the financial system. Mr. Xi was also angry with 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 quoting people with knowledge of the subject. In addition, Alibaba would be forced to end a practice according to which, the regulators believe, the technology giant prohibited merchants from selling products on both Alibaba and rival platforms.

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

and Youku Tudou Inc., one of China’s largest video streaming platforms. The authorities also reviewed Alibaba’s entertainment portfolio, although direct sales in that part of Alibaba’s business may not be necessary, said people familiar with discussions related to Alibaba’s entertainment business.

It is not clear whether Alibaba will need to sell all of its media assets. Any plan presented by Alibaba will need the approval of China’s senior leadership, people familiar with the matter said.

Concerns have grown in recent years in the official world of China about the influence of Alibaba’s media and how the company may have leveraged its investments in news and social media to influence government policies deemed unfavorable to its business.

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

An investigation that followed by China’s Cyberspace Administration, the country’s Internet watchdog, found that Alibaba was responsible for interfering with Weibo posts and said the company used “capital to manipulate public opinion” in a report for leadership, the newspaper reported, 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, officials said. Alibaba owns about 30% of Weibo listed on Nasdaq and has been the social media company’s largest customer, having contributed almost $ 100 million in advertising and marketing revenue in 2019 to its platform, according to annual data latest available.

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

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

The alienation of its interests in the media is not necessarily a big negative for Alibaba, which could re-emerge from the regulatory attack in a safer position with Beijing, after giving up some non-essential assets. It can also help keep the company away from future political minefields, as officials maintain tight control over the media.

Alibaba is not the only Chinese technology giant that is interested in the media. Tencent Holdings Ltd.

The WeChat messaging service, has become one of the main ways for the Chinese people to receive news. Bytedance Ltd. operates the popular news aggregator Jinri Toutiao, which employs artificial intelligence to send news to hundreds of millions of users.

It is unclear whether any other technology companies will have to follow the same pattern as Alibaba when considering the disposal of media assets.

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

One of the most prominent acquisitions was the South China Morning Post, whose roots go back to the era of British colonial rule in Hong Kong. It has also created 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 often welcomed Alibaba’s proposals with enthusiasm, given the tech giant’s deep pockets and digital experience. Since being purchased by Alibaba in 2016, the Post has expanded its digital news offerings and editorial staff and completed a refurbishment of its Hong Kong headquarters.

Some journalists and readers fear that Alibaba, which has offices a few floors above the Post’s newsroom, will interfere with the newspaper’s coverage to please Beijing. But the newspaper sometimes published stories that seemed unfavorable to the Chinese leadership, including extensive coverage of Hong Kong’s 2019 and 2020 protests 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 in newsroom operations and respected journalism.

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

Write to Jing Yang at [email protected]