According to reports, the mainland Chinese government has acquired small but significant share stakes in at least two of the top video streaming services in the nation.
According to a Friday Financial Times article, the Cyberspace Administration of China has purchased a 1% share in a digital media division of Alibaba based in Guangzhou. This division includes Youku, China’s third-ranked generalist video streamer, and UC Web, a mobile internet browser. On January 4, the unit’s share register noted a business entity under CAC control.
As per the article, Tencent, the nation’s leading provider of video games and social media services, is acquiring equal share ownership in a subsidiary of the CAC.
Golden shares are stock certificates that grant their owner (typically a government or a company founder) exceptional privileges that surpass their monetary value. A golden share may occasionally be used to stop an undesirable takeover. Others may grant the holder benefits, such as a board seat. The Alibaba unit also introduced a new board director on January 4 with the same name as a CAC official. However, according to the Financial Times, it did not explain his position.
The media industry in China is already largely under the authority of the Chinese Communist Party, with many of the companies being owned by national or local governments. By requiring share sales, appointing Communist Party members to boards of directors, and creating Party committees within businesses, it has moved to extend its control over the media segments that are owned privately in recent years.
The business of video streaming platforms have been brutal for the stock markets
These give the Party control over the content that the companies generate and distribute, as well as access to information on the financial and strategic operations of the companies.
The biggest long-form video streaming platform in China is Tencent Video. As of September 2022, it revealed 120 million paid subscribers. The second-placed video site, iQiyi, is supported by Baidu and reported having 101 million users as of September. Alibaba suppressed information about the number of Youku users, only disclosing that the platform’s average daily paying subscribers increased by 8% yearly and that its losses had decreased for the sixth consecutive quarter.
China’s top platforms have struggled with operating losses, debt loads, and competition from newer digital players, particularly Bilibili, Kuaishou, and Tiktok’s sister company Douyin. This is even though Chinese streamers are shielded from the competition with the global video giants. All three are working to control programming expenses while attempting to increase subscriber counts amid an economic downturn.
The government’s actions against the video businesses and their parent groups have been brutal for the stock markets to determine if they are excellent or negative news. Alibaba and Tencent shares fell on Friday before rising again in Hong Kong.
On the one hand, a government-run business might be compelled to adhere to a social or political purpose that is not focused on maximising profits. However, from another angle, the acquisition of the share shares, if ultimately verified, might mark the conclusion of a harsh government campaign against China’s “platform economy.”
The government has recently made encouraging comments about the value of internet companies as generators of economic activity, restarted the licencing process for video games, and permitted Ant to restructure.