MEDIA: LeTV, iQiyi, Youku Snared In Crackdown — Again
Bottom line: Beijing’s latest online video clean-up is part of its drive to guide a bigger transition from a traditional TV to an Internet-based broadcasting landscape, with more similar moves likely over the next 1-2 years.
It’s been at least a month or two since Beijing’s latest crackdown on unhealthy Internet content, so it should come as no surprise that the morality police have launched yet another campaign, this time targeting cartoons. The latest dragnet has snared video superstar LeTV (Shenzhen: 300104), Baidu-backed (Nasdaq: BIDU) iQiyi and most other top industry players, who are among 29 companies being investigated in this latest web clampdown.
China’s broader Internet clean-up campaign is now actually entering its second year, and dates back to April last year when leading web portal Sina (Nasdaq: SINA) had its video license revoked for hosting pornographic content. (previous post) Since then, nearly ever major video site has been investigated and punished at one point or another, and social networking sites (SNS) like Tencent (HKEx: 700) WeChat have also embarked on clean-ups of controversial content.
From an investor’s perspective, these increasingly frequent clean-ups seem to have less and less meaning as each new one gets disclosed. That’s partly because Beijing regulators are moving very carefully with their actions, probably under orders from central government officials whose biggest fear right now is China’s slowing economy.
That fear means Beijing is unlikely to do anything radical that might result in lost jobs that would result if sites were closed or licenses revoked. The situation was far different last year, when regulators were taking more radical steps like revoking licenses and banning the sale of products like Internet TVs that were allowing the Internet video firms to compete directly with traditional TV stations.
All that said, it’s still worth looking at the latest headlines that say most of the nation’s leading video sites are on the list of 29 companies being probed for hosting inappropriate cartoons. (Chinese article) In addition to LeTV and iQiyi the list includes the industry’s other major 2 players, Sohu (Nasdaq: SOHU) video and Youku Tudou (NYSE: YOKU), as well as Tencent’s video service.
The reports only say that the companies have been put on a blacklist for their violations, hinting that they probably aren’t facing any serious punishment but are simply being told to remove offending content. Programs singled out for mention in a CCTV report include episodes from the series “Tokyo Zombies” and “Onslaught of the Giants” just to give readers an idea of who is being targeted.
A quick look at the stocks of publicly traded video sites shows that investors are still slightly worried about these crackdowns. LeTV shares slid the most, shedding 7 percent in the latest session, though they’ve been quite choppy lately since CEO Jia Yueting announced a major plan to sell some of his shares. (previous post) Youku Tudou shares lost 2.6 perccent, though they’ve also rallied lately on rumors of merger talks with iQiyi, while Sohu shares were up 1.2 percent.
The fact of the matter is that these clean-ups are probably a good thing for the video services, which are often quite careless about offering pirated content and also about how they organize their programs in general. Most of these companies are already quite careful about filtering politically sensitive content, which has potentially bigger consequences.
This kind of campaign isn’t at all unusual for China, though in this case it has gone on a bit longer than some similar campaigns in the past. That’s not too surprising, as the broadcast industry is currently undergoing a huge shift that is likely to radically alter the landscape, with online video increasingly competing with traditional TV stations. Accordingly, Beijing probably wants to guide the transition as much as it possibly can.
Related posts:
