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Media/Entertainment
youngchinabiz.com : latest Business news about Media – Entertainment in China by expert / journalist Doug Young : more than two decades of experience in writting about Chinese Companies
Bottom line: Phoenix Satellite and its new media arm will continue to sputter due to China’s slowing economy and a lackluster move into mobile advertising, and founder Liu Changle should consider selling the company.
Slow move to mobile saps Phoenix New Media
Things aren’t looking too good these days for Hong Kong-based Phoenix Satellite (HKEx: 2008), a former rising star in China’s tightly controlled media market that has stumbled badly due to its inability to adapt to a changing industry landscape. Phoenix warned of a major profit decline last month due to a soft TV ad market (previous post), and now its younger Phoenix New Media (NYSE: FENG) unit is also showing signs of distress due to a heavy reliance on portal advertising delivered over traditional desktop computers.
The new quarterly earnings report from Phoenix New Media does contain one bright spot, namely a 124 percent increase in revenue from advertising services offered over smartphones and other mobile devices. (company announcement) But that part of the business is still quite small, with the result that Phoenix New Media reported overall advertising revenue growth of just 7.2 percent, and overall revenue growth of 2.9 percent during the second quarter of this year. Read Full Post…
Bottom line: Growing sophistication by Chinese film-makers will continue to power strong growth at China’s box office, and will foster a new group of homegrown players that could challenge Hollywood over the next 10-20 years.
China box office surges in July
Two blockbuster films are fueling a sudden wave of excitement over domestic Chinese films, providing new momentum for a growing stable of local film-makers and foreign-backed joint ventures. Perhaps it’s no surprise that the 2 films leading the summer charge are both animated or have animated elements, and both also use a potent combination of Chinese elements and western story-telling skills to appeal to huge audiences of young people that go to see movies during the summer holidays.
The huge success for the animated films “Monkey King: Hero Is Back” and “Monster Hunt” has fueled a big wave of national pride in Chinese film-making. It even has some observers calling for an end to the recent ban on showing foreign films during the important summer vacation period, since these new Chinese movies prove that domestic productions can compete with big foreign rivals like the “Kung Fu Panda” franchise. Read Full Post…
Bottom line: Suning’s plan to invest 1 billion yuan into PPTV’s smart TV foray is coming a bit late, but could stand a good chance of success by drawing on Suning’s position as one of China’s top TV retailers.
PPTV, Suning in smart TV partnership
Many of us were a bit surprised 2 years ago when electronics retailer Suning (Shenzhen: 002024) emerged as one of the winning bidders for PPTV, which was one of China’s leading online video sites at the time. The pair didn’t really seem like a great match, since Suning’s main business was its traditional retail stores that originally specialized in home electronics but later added more general merchandise. Suning’s newer e-commerce business didn’t seem like a great fit either, since retailing and online video entertainment don’t have too much in common.
Fast forward to the present, when Suning has finally developed a strategy for the asset with plans to pump 1 billion yuan ($160 million) into PPTV as part of PPTV’s own new drive into Internet TVs. This particular combination actually seems intriguing, since Suning is in a good position to promote such Internet TVs due to its position as one of China’s biggest home electronics retailers. Read Full Post…
Bottom line: Focus Media will re-list with a high valuation on a new enterprise-style board set to launch in Shanghai next year, while China Renaissance’s new fund to help US-listed firms privatize will attract strong investor interest.
Focus Media changes IPO re-listing plan
A couple of items are in the news involving the recent buyout wave for US-listed Chinese companies, which are rapidly abandoning New York in search of higher valuations in their home market. In an abrupt and somewhat surprising shift, Focus Media, one of the first companies in this homecoming wave, is reportedly abandoning its original plan for Shanghai.
The second item has China Renaissance, a well-respected domestic private equity firm, preparing to raise a major new fund that will help to finance privatizations of Chinese firms from New York. This particular deal looks significant, since many of the nearly 3 dozens firms to announce privatization plans this year could soon need new funding if previous commitments collapse due to recent volatility in China’s domestic stock markets. Read Full Post…
Bottom line: China’s gaming market remains stubbornly fragmented and unprofitable despite its huge potential, with no clear signs of much-needed consolidation coming anytime soon.
Gamers continue to struggle
As much of China bakes under a summer heatwave, a major trade show this week in Shanghai is casting a different spotlight on the overheated state of the nation’s gaming industry. One report is saying that only 2 percent of companies in the emerging mobile gaming space can generate big profits, and the situation may not improve anytime soon due to a stubborn state of fragmentation.
The problem has led many of China’s US-listed gaming companies to launch privatization drives over the last 2 years, including Giant Interactive, a large but decidedly second-tier player that de-listed a year ago. Giant’s talkative chief Shi Yuzhu is blaming US investors for failing to appreciate his company, with the latest reports saying he thinks Chinese stock buyers will value his firm at more than 5 times what it was worth when it de-listed from New York. Read Full Post…
Bottom line: Sputtering demand for luxury goods and cars is likely to hamstring Phoenix Satellite TV’s earnings for at least the next year, as the company increasingly loses ground to new media rivals.
Sliding luxury demand undermines Phoenix
The recent slowdown in China’s luxury goods market is claiming one of its first victims in the media realm, with Phoenix Satellite TV (HKEx: 2008) warning that a sudden chill in luxury ad sales has wiped out its profits in the first half of the year. The news certainly doesn’t bode well for traditional media companies, which are a favored place for luxury goods makers to advertise. Car makers are another major source of ad revenue for these older media companies, and rapidly slowing sales in that sector also means that names like Phoenix and even some new media high-flyers like Baidu (Nasdaq: BIDU) and Sina (Nasdaq: SINA) could be looking at a difficult period ahead. Read Full Post…
Bottom line: Investors are regaining confidence that some of the bigger, recently announced buyouts for US-listed China companies could be completed, but believe many smaller deals will ultimately collapse.
Perfect World completes buyout
Online game operator Perfect World (Nasdaq: PWRD) has formally completed its management-led buyout, offering us a good opportunity to check the status of dozens of other pending offers that look shaky due to recent turbulence in China’s stock markets. Perfect World was one of a handful of companies that launched their privatization drives before May, when a wave of new bids fueled by speculative money from China’s frothy stock markets suddenly began.
I’ve previously said that many of the earlier bids like Perfect World’s are likely to succeed, as their funding sources seemed more solid. But some of the other bids may run into trouble due shaky money sources that may rapidly disappear as China’s stock markets show signs of heading into another tailspin. Read Full Post…
Bottom line: Baidu’s heavy spending on new businesses is rapidly eroding its profits, a strategy that looks acceptable over the short-term but should be abandoned within a year or two if it fails to produce results.
online search leader Baidu
Baidu profit disappoints
I have to commend online search leader Baidu (Nasdaq: BIDU) for steadily maintaining strong revenue growth of 30 percent or more over the last few years, even as China’s overall economy has started to slow and the company faces growing challenges from new rivals. But that said, Baidu‘s costs seem to be rising even faster that its revenue, which has led to anemic profit growth in its latest quarterly results.
At the end of the day, investors should be most concerned about profits at any company, since a stock price is directly tied to the bottom line. But Baidu seems to be less interested these days in profits. The company is indeed facing many challenges, both to its core search business and also as it expands into new areas, which is driving the rising costs. But it also needs to learn to bring those costs under control, to roughly in line with revenue growth, or risk facing the wrath of investors.
Bottom line: Baidu could buy a small stake in Xunlei but is unlikely to acquire the company outright as part of their new alliance, while 58.com’s plan to rebuild its newly acquired job site should have good chances of success.
58.com goes to work on ChinaHR
I’ve been predicting a marriage for a while for online video orphan Xunlei (Nasdaq: XNET), even as it remains stubbornly single despite its lack of scale to survive as an independent company. First it appeared the company might get bought by smartphone sensation Xiaomi after the pair boosted their strategic tie-up in May, but then nothing more happened. Now the gossip mills are likely to start turning again, following the latest announcement of a major partnership between Xunlei and Baidu’s (Nasdaq: BIDU) iQiyi online video service.
58.com
Meantime in another Internet news bit, the top executive at leading online classified ad site 58.com(NYSE: WUBA) is saying he will need 2 years to turn around the underperforming online job site ChinaHR, which he acquired earlier this year. His assessment comes after the site laid off nearly all of its staff as part of the deal that saw 58.com buy ChinaHR from its Irish owner. Read Full Post…
Bottom line: The detention on suspicion of corruption of a former Tencent executive now working at Alibaba shows that Chinese Internet companies could use such internal probes to disrupt business at their rivals.
Former Tencent worker detained for corruption
Chinese tech companies are getting increasingly aggressive in their campaign to root out internal corruption, with word that Tencent (HKEx: 700) is probing current and former employees from its video unit for accepting bribes. But what’s most interesting about this latest anti-corruption drive is that one of the executives detained by police now works at the entertainment unit of Tencent rival Alibaba (NYSE: BABA). That element of the case reflects the fact that executives at China’s leading Internet companies often move between each other, in a job-hopping phenomenon that is relatively common in China.
But the move also reveals a potentially potent weapon that companies like Tencent could use in the future to try and disrupt business at their rivals. We saw a similar case just last year, when online game giant NetEase (Nasdaq: NTES) made allegations against one of its former employees who left to start social networking app Momo (Nasdaq: MOMO), causing major headaches for Momo on the eve of its New York IPO. Read Full Post…
Bottom line: Shanghai will bid aggressively for Chinese tech firms to list on a new Nasdaq-style board planned for the city, while shares of companies privatizing from New York will continue to sag in sync with China’s stock market sell-off.
Soccer club eyes IPO on new Shanghai board
A new Shanghai-based Chinese board that aims to compete with Wall Street for new high-tech listings is moving closer to reality, with reports that Baidu’s (Nasdaq: BIDU) iQiyi online video service and Alibaba’s (NYSE: BABA) affiliated Ant Financial unit will be among the exchange’s inaugural listing candidates. A separate report also says that another Alibaba-affiliated company, soccer team Evergrande Taobao, will also list on the board, which is being referred to right now as the new strategic industries board.
Meantime in New York, the current week looks set to end with just a single privatization announcement for a US-listed Chinese firm, a sharp slowdown from the 20 earlier offers in the month of June. In this case the abrupt slowdown is at least partly due to the plunge in China’s stock markets this week, and we’re unlikely to see any more offers until the situation stabilizes. Read Full Post…
