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Sohu latest Financial News and Financial report overview of the Chinese Market expert Doug Young, Former Reuter Journalist and Chief Editor

Regulator Eyes Online Video in Ad Crackdown 广电总局或限制视频网站广告

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Chinese regulators seem to have discovered a sudden fondness for the Internet, first saddling many social networking sites with cumbersome “real name” rules and now potentially setting their sights on the fast-rising video-sharing sector. I doubt these 2 initiatives are related, but they both do reflect a worrisome surge in China’s classic heavy-handed approach to fast-rising new industries, which often ends up stunting their development or even killing them outright. In this latest news, Chinese media are reporting that an official at SARFT, the agency that regulates TV, has hinted that tough new requirements limiting the amount of ads that TV stations can show during their programs may also soon be extended to video sharing sites. (English article) The new requirements would come just months after many of China’s leading video sites, including Youku (NYSE: YOKU), Sohu (Nasdaq: SOHU) and Tudou (Nasdaq: TUDO) have signed a series of landmark agreements to offer legally licensed content as they wean themselves from the pirated material that has historically been a mainstay on such sites. (previous post) Thus the new requirements, if they come, would almost look like punishment for this positive development, when instead encouragement should be offered. This new requirement would follow the higher-profile move in December when Beijing issued new rules requiring all social networking sites (SNS) to register users using only their real names. (previous post) That rule dealt a blow to Sina (Nasdaq: SINA), whose wildly popular Weibo microblogging service looks set to become the biggest victim of that new policy. Frankly speaking, I’m not even really sure how dependent the online video sites are on advertising for their revenue, as some of the movies and TV shows offered under these new licensing agreements are on a pay-per-view basis that would see users paying to watch content. But regardless of the current situation, advertising is clearly a potential revenue source as these companies work toward sustained profitability, and any move by regulators to put sharp new limits on this activity could seriously hamper the industry’s development.

Bottom line: Potential new rules limiting ads for online video sites could seriously hamper the industry’s development, hurting their chances for sustained long-term profitability.

Related postings 相关文章:

◙ Tudou, Youku: China’s New Piracy Police　　土豆和优酷：中国打击盗版的民间警察

◙ Jishi the Latest in Low-Key Media Listing Parade 吉视传媒加入中国媒体低调上市大军

◙ Tudou Surprises With Profit, Licensing Deal 土豆网意外扭亏为盈视频分享市场的好兆头

Xinhuanet IPO Sets Stage For Media Listings 新华网IPO或将开启媒体上市热潮

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There’s an interesting report in the media space that the Xinhua News Agency plans to publicly list its news web site — a development with hugely symbolic overtones that could foreshadow a long-awaited liberalization in this highly sensitive sector and portend a major new round of IPOs for big media firms. Foreign media are citing unnamed sources saying that Xinhua is planning a domestic listing for its news portal, Xinhuanet, in a deal that would see it raise around 1 billion yuan, or more than $150 million. (English article) The size of the offering is really of little or no significance since Xinhua, as the Communist Party’s main mouthpiece, already receives most of its funding from the government and is unlikely to need such funds. What’s much more important is that Xinhua is making this IPO at all, as ownership of the media, which has the power to influence public opinion, has been a highly sensitive matter in the past, even as most other sectors were allowed to make public offerings paving the way for private ownership. This move by Xinhua, if it really happens, would send an important signal to China’s other major media groups, including CCTV, Shanghai Media Group and other major players, that it’s ok for them to list some of their major assets, paving the way for an interesting new round of possibilities for investors with huge growth potential. Such a development would, in fact, extend a recent trend that has seen a growing number of movie and TV show makers, many of them owned by regional media companies, make a string of low-key public offerings as they hope to tap emerging demand from not only traditional TV stations, but also an fast-rising group of content-hungry video sharing websites like Youku (NYSE: YOKU), Tudou (Nasdaq: TUDO), Sohu (Nasdaq: SOHU) and PPLive. (previous post) Xinhua, as one of China’s oldest media, already sets the tone for the rest of the nation’s TV stations, newspapers and websites in terms of news coverage, and this latest move would indicate that public ownership of the media is ok, at least on domestic stock markets. The timing of a Xinhuanet listing is still unclear, meaning it could still be months or years away. But if and when such a listing occurs, look for many more to follow as a wide range of regional and local media groups clamor to raise funds to expand their national reach.

Bottom line: A pendiing IPO for Xinhua’s web portal could auger a flood of new domestic listings for big Chinese media firms, providing an interesting investment option with strong growth potential.

Related postings 相关文章:

◙ Jishi the Latest in Low-Key Media Listing Parade 吉视传媒加入中国媒体低调上市大军

◙ 2011: A Breakthrough Year in Copyright Protection 2011年：中国版权保护取得突破的一年

◙ Video Makers On Cusp of Renaissance 视频制作商或迎来美好时代

2011: A Breakthrough Year in Copyright Protection 2011年：中国版权保护取得突破的一年

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It seems quite appropriate that 2011 is ending with news that Internet search leader Baidu (Nasdaq: BIDU), which for years symbolized rampant disregard for copyrights on China’s unruly Internet, has been removed from a US list of “notorious markets” for piracy, capping a year that saw great progress in intellectual property protection. (English article) Baidu’s achievement after it signed a series of landmark licensing agreements with major music labels like Universal, Warner (NYSE: WMG) and Sony Music (Tokyo: 6758) in July as it launched a service selling legal copies of their music. (previous post) Baidu’s removal from the list was just the latest major advance in copyright protection, as China’s crowded field of online music and video sites all took new steps to secure exclusive content to set themselves apart from rivals in the competitive sector. The nation’s top 3 video sharing sites, Youku (NYSE: YOKU), Sohu video (Nasdaq: SOHU) and Tudou (NYSE: TUDO) all signed their first big licensing deals during the year to offer TV shows and films from the likes of Warner Brothers (NYSE: TWX) and Disney (NYSE: DIS). (previous post) Some domestic names like Huayi Brothers (Shenzhen: 300027) signed similar deals, as early signs emerged of a coming renaissance for domestic content makers, an increasing number of which are looking to domestic IPOs to fuel their growth. (previous post) In another interesting development just last week, Youku and Tudou filed a series of copyright infringement lawsuits against each other, showing that these companies themselves could emerge as a potent force to help police against future copyright violations. (previous post) Last but not least, many of the sites themselves are increasingly producing their own exclusive content, with Phoenix New Media (NYSE: FENG) and PPLive announcing such initiatives during the year, which should also help the programming industry’s development. (previous post) Of course, there is still much work to be done. Despite its launch of a legal music service, Baidu continues to operate its popular older music service where swapping of pirated songs is rampant. And while Baidu was removed from the “notorious” list, Alibaba’s Taobao, China’s e-commerce leader, remains on the list for the widespread sale of knock-off products on its site. Still, in all my years covering China tech and media, 2011 certainly looks like a year of major breakthroughs in copyright protection as Chinese firms finally wake up to the reality that piracy isn’t a very good long-term business model.

Bottom line: Baidu’s removal from a US piracy list reflects big progress in the anti-piracy battle in China in 2011, with the campaign likely to maintain momentum into 2012.

Related postings 相关文章:

◙ After Years, Baidu Does the Right Thing 百度多年来的一个正确之举

◙ Video Makers On Cusp of Renaissance 视频制作商或迎来美好时代

◙ Youku’s New Formula: Sponsored Programs 优酷“新配方”：赞助项目

Tudou, Youku: China’s New Piracy Police　　土豆和优酷：中国打击盗版的民间警察

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An entertaining tiff has broken out between China’s top 2 video sharing sites, with Tudou (Nasdaq: TUDO), the country’s second largest player, accusing top player Youku (NYSE: YOKU) of copyright violations, prompting Youku to counter with its own similar allegations. (Tudou lawsuit article; Youku lawsuit article) The series of actions are interesting less from a monetary perspective, but more because they show that China’s private sector may finally step in and become a much more effective policeman for protection of copyrights than Beijing has been, despite years of effort by the government to curb the problem. Let’s look at the actual news first, which saw Tudou complain to regulators that Youku ignored its repeated requests to take down episodes of a popular Taiwanese TV talk show that Tudou said it held the exclusive mainland Chinese rights for. Youku responded with its own accusations that Tudou was showing more than 60 TV programs which Youku holds the rights to. In addition to complaining to authorities, both companies are threatening legal action against each other. Of course, most people know China’s courts have proven an ineffectual avenue for resolving this kind of dispute, as decisions can take months or longer, and penalties are usually so small that they provide little or no deterrent effect. That said, the interesting thing here is that Youku and Tudou, as the industry’s top 2 players with big resources at their disposal, could potentially emerge as the kind of private sector policemen that China sorely needs to clamp down on piracy. For example, smaller Web firms that depend on trading of pirated movies and TV shows to bring traffic to their sites, might think twice if they are worried that big names like Youku, Tudou and Sohu (Nasdaq: SOHU) might take legal action against them or complain to regulators who have the power to shut them down. All of this can only be good news for the program makers themselves, like the big Hollywood studios and domestic names like Huayi Brothers (Shenzhen: 300027), which will be able to not only make bigger profits in China, but also be able to focus more on building their China distribution while leaving the business of clamping down on piracy to private sector players who also get hurt by copyright violators.

Bottom line: A spat between China’s top 2 video sites shows that such sites could emerge as a powerful private sector force to help stamp out video piracy in the country.

Related postings 相关文章:

◙ Sohu’s Blowout Earnings: IPO In Store for Video? 搜狐发喜报视频业务或上市

◙ Video Makers On Cusp of Renaissance 视频制作商或迎来美好时代

◙ Jishi the Latest in Low-Key Media Listing Parade 吉视传媒加入中国媒体低调上市大军

Jishi the Latest in Low-Key Media Listing Parade 吉视传媒加入中国媒体低调上市大军

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It seems that while I’ve been talking for months about the huge potential for video program makers due to demand from online video sites, a steady stream of just such companies have been making low-key IPOs in  China. Truth be told, most of these companies look like very regional players connected to larger state-owned groups, but nonetheless they could still provide an interesting investment proposition for those with access to China’s stock markets. In the latest of such offerings, a company called Jishi Media, based in northeastern Jilin province, is getting ready to apply for a domestic listing, Chinese media are reporting. (Chinese article) The offering  would follow a relatively high-profile recent listing for another regional player, Jiangsu Phoenix Publishing (Shenzhen: 601928), and other recent offerings by names like Central China Land Media (Shenzhen: 000719), Zhejiang Daily Media (Shanghai: 600633) and Shanghai Worldbest (Shanghai: 600757). Another interesting play could be Toonmax, the animation arm of Shanghai Media Group, China’s second largest media company, which one of my sources also tells me is seeking to make a listing. These companies complement bigger names like US listed Phoenix New Media (Nasdaq: FENG) and Huayi Brothers (Shanghai: 300027), which in my view are better bets due to their national scope. But that doesn’t mean that some of these regional players might not make interesting bets, especially a relatively big name like Animax whose programs would undoubtedly provide high quality offerings for China’s hungry stable of online video channels like Youku (NYSE: YOKU), Tudou (Nasdaq: TUDO) and Sohu (Nasdaq: SOHU), which have all recently signed a number of high profile deals to offer movies and TV programs from major Hollywood studios. I wouldn’t be surprised to see 1 or 2 of these smaller regional programers emerge as big names in the future, much the way regional TV station Hunan Broadcasting has become one of China’s most popular stations by offering popular programs combined with strong marketing.

Bottom line: A growing number of media firms making domestic IPOs could provide an interesting investment option, capitalizing on strong demand for programming from online video sites.

Related postings 相关文章:

◙ Video Makers On Cusp of Renaissance 视频制作商或迎来美好时代

◙ Tudou Surprises With Profit, Licensing Deal 土豆网意外扭亏为盈视频分享市场的好兆头

◙ Sohu’s Blowout Earnings: IPO In Store for Video? 搜狐发喜报视频业务或上市

 

Baidu, Sohu Highlight China Shell Games 百度搜狐拆分业务让金融骗局再度受关注

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When was the last time you saw Google (Nasdaq: GOOG) or Amazon (Nasdaq: AMZN) spin off one of its units into a separately listed company or inject assets from its parent company into a listed unit? The answer of course is that they never engage in any of these common practices of big China state-run companies, but that hasn’t stopped the country’s booming private Internet sector from becoming increasing masters at such games. The latest machinations in these games have seen Sohu (Nasdaq: SOHU) sell its online game information site, 17173.com, to its separately listed online game unit, Changyou (Nasdaq: CYOU) for a nifty $162 million (English article; Chinese article), while search leader Baidu (Nasdaq: BIDU) is spinning off its struggling e-commerce site YouA into an independent company complete with its own venture funding. (English article) Of course, the granddaddy of this kind of shell game is Shanda Interactive (Nasdaq: SNDA), which listed on the Nasdaq many years ago, then spun off its core online game business into a separately listed company, Shanda Games (Nasdaq: GAME), and is now in the process of trying to spin off its  online literature unit into yet another public company, Cloudary, even as Shanda Interactive itself attempts to de-list as its share price languishes. (previous post) Leading web portal Sina (Nasdaq: SINA) has also engaged in this kind of financial shell game. This situation has evolved in part because many of China’s Internet companies often stray from their core business into completely unrelated areas — a practice seldom seen at major Western firms. But from an investor perspective, this kind of game results in a lack of transparency, as parent companies can often manipulate situations to make results of these spun-off companies appear on their own balance sheets if the results are positive, and then magically disappear if the business is performing poorly. Shares of Chinese web firms are currently mostly the playthings of speculative short-term investors; but if these companies ever want to be taken seriously by longer-term institutional buyers, this kind of game playing is one of the first things that needs to stop.

Bottom line: The latest spin-offs by Baidu and Sohu cast a spotlight on China web firms’ fondness for financial shell games, which will continue to scare off long-term institutional investors.

Related postings 相关文章:

◙ Shanda Moves Ahead With Privatization 投资者对盛大私有化仍持保留态度

◙ Shanda Plays Games With Big Dividend 盛大游戏寄望高额分红计划提振股价

◙ Sina’s Weibo: Growth Engine or Growing Burden? 新浪微博：动力or负担？

Mid-Sized Firms Suffer First In Internet Bubble Burst 中国互联网泡沫破裂

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Malaise continues to inflict the overheated Chinese Internet realm, with veteran new media firm Kongzhong (Nasdaq: KONG) falling into the loss column and newly listed children’s website Taomee (Nasdaq: TAOM) reporting a shrinking profit, as both fell victim to stiff competition. I won’t go too much into the reports of these two companies, but Kongzhong reported a $17 million loss, compared with a profit a year earlier, as its Internet games business saw an especially sharp drop. (company announcement) Likewise, Taomee, whose shares have lost about half their value since its June IPO, saw its third-quarter profit shrivel by about a third as it opted to focus on customer loyalty over profits. (company announcement) Meantime, Chinese media are reporting that another small firm, online shoe retailer Letao, has slashed its marketing budget by 80 percent as competition erodes its bottom line as well. (English article) What all this tells me is that China’s long-awaited Internet bubble is finally starting to burst, as these kinds of small- to mid-sized companies are typically the first to feel the pinch when a correction starts to hit an overheated sector like this. By comparison, bigger companies like Baidu (Nasdaq: BIDU) and Sohu (Nasdaq: SOHU) continue to report relatively healthy growth in both sales and profits, though even they are seeing profits come under pressure amid rising costs in the face of fierce competition. Look for more suffering among mid-sized Internet firms like Taomee and Kongzhong in the months ahead, with many likely to get purchased, merge with similar-sized rivals or simply go out of business in the next 12-18 months. In a rare piece of good news from the space, faded new media firm Linktone (Nasdaq: LTON) has announced that it escaped a potential de-listing by managing to get its stock price above the $1 threshold demanded by the Nasdaq. (English article) Indeed, the company’s shares have been above $1 for 15 days now, though such an accomplishment is hardly cause of celebration for a company whose shares have mostly moved lower in its turbulent history as a publicly traded company.

Bottom line: The latest gloom from Kongzhong, Taomee and Letao show mid-sized Internet firms are suffering as China’s Internet bubble starts to burst, with bigger pain ahead in the next 12-18 months.

Related postings 相关文章:

◙ Parade of China Money-Losers Report to Wall Street 多家中国企业亏损凸显市场竞争激烈

◙ Renren Finds Video Bargain in China Web Bubble 人人网低价收购56网 凸显中国互联网困境

◙ More Internet Froth in Alibaba Valuation, Dangdang Price War 阿里巴巴估值奇高凸显网络泡沫

Baidu Video Tries Blockbuster Licensing

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Baidu’s (Nasdaq: BIDU) online video joint venture Qiyi seems to have learned a lesson from its pirating parent, announcing a new exclusive licensing deal for the China online video rights for the popular latest installment in Paramount’s (NYSE: VIAb) “Transformers” movie franchise. (English announcement) Baidu itself has found big success in allowing the exchange of pirated material, mostly music, over its web site in recent years and continues to offer such services despite ongoing government pressure on Chinese web firms to get out of the pirating business. But in a nod to that pressure, in July it formally launched a service for legally obtained music, and announced a series of high-profile licensing deals to offer music on it from several major Hollywood record labels, though added it had no intention of closing its piracy-plagued older music site. (previous post) This new strategy from Qiyi, which already appears to offer legal copies of popular US TV series, looks relatively smart to me, drawing on exclusive rights for individual big-name movies to draw in viewers. Still, it will have to compete with the likes of online video leader Youku (NYSE: YOKU) and the video site operated by Sohu (Nasdaq: SOHU), which have also signed similar though much bigger deals with major Hollywood studios in the last few months. Its unclear if Qiyi, founded less than 2 years ago, will be able to pay the big bucks that these older, more established companies are paying for exclusive rights to big-name films, which may explain its approach of buying of single blockbuster title rather than signing broader licensing deals which are much more expensive. The company also has the advantage of tapping a huge potential audience of users from Baidu, China’s dominant search engine with nearly 80 percent of the market. That tie-up, combined with this early approach to exclusive licensing for single blockbusters, could create a potent formula for success as Qiyi looks to establish its name in the online video space.

Bottom line: Online video site Qiyi’s signing of an exclusive deal for a single Hollywood blockbuster looks like an interesting approach, which, combined with support from parent Baidu, could boost its chances for success.

Related postings 相关文章:

◙ Baidu Comes Under Government Fire 政府“修理”百度

◙ Baidu Seeks Diversification in Tudou Talks 百度求购土豆，寻求多元化

◙ After Years, Baidu Does the Right Thing 百度多年来的一个正确之举

News Digest: November 1, 2011

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The following press releases and media reports about Chinese companies were carried on November 1. To view a full article or story, click on the link next to the headline.

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◙ Sohu.com (Nasdaq: SOHU) Reports Q3 Unaudited Financial Results (PRNewswire)

◙ China Online Sales Seen Tripling Driving Warehouse Surge: Retail (English article)

◙ Tencent (HKEx: 700) Confirms Strategic Investment in Kaixin (Chinese article)

◙ Baofeng Selects Underwriters for 2012 US IPO (English article)

◙ Sina Corp (Nasdaq: SINA) to Report Q3 2011 Results on November 8 (PRNewswire)

News Digest: October 29-31, 2011

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The following press releases and media reports about Chinese companies were carried on October 29-31. To view a full article or story, click on the link next to the headline.

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◙ Lashou Files For IPO to Raise Up To $100 Million (Chinese article; English article)

◙ E-House (NYSE: EJ) Proposes to Buy Outstanding CRIC (Nasdaq: CRIC) Shares (PRNewswire)

◙ Sohu (Nasdaq: SOHU), Microsoft (Nasdaq: MSFT) May Partner on Online Video – Source (English article)

◙ Yahoo (Nasdaq: YHOO) Aims To Sell Asia Assets, Not Entire Company – Source (Chinese article)

◙ ICBC (HKEx: 1398; Shanghai: 601398) Third-Quarter Profit Gains 28% (English article)

China Regulors Threaten E-Commerce, Group Buying 官方监管威胁到电子商务与团购业务

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After standing aside and letting its online sector develop largely unhindered for the last decade, China is suddenly showing a worrisome trend of trying to regulate everything on its often unruly Internet, a move that, while needed, could also interfere with market forces. In separate developments on the same day, media are reporting Beijing is preparing to regulate both its group buying sites as well as its e-commerce sector to bring more order to these spaces that have become ultra-competitive in the last 1-2 years. (group buying article; e-commerce article) In this case the reason behind each move is unrelated. For group buying, the reason seems simply to be a desire to regulate an industry that has become ultra-competitive, with quality control virtually non-existent and many players teetering on the brink of closing. (previous post) For e-commerce, the issue is directly related to a massive fee hike last week by Alibaba’s Taobao Mall, China’s leading B2C site, that led to an uprising by smaller merchants who complained they were being targeted for elimination from the site. These two new rounds of regulation for major emerging sectors follow other recent reports that China will soon regulate the vibrant micro-blogging space, and months after it issued its first round of electronic payment licenses and as it prepares to issue online mapping licenses. There definitely seems to be a trend emerging here, which looks a bit worrisome in light of Beijing’s past record at heavy-handed interference in emerging tech sectors. In one case a few years back, Beijing’s heavy regulatory hand effectively killed a vibrant SMS industry that was once a major source of revenue for the likes of Sina (Nasdaq: SINA), Sohu (Nasdaq: SOHU) and NetEase (Nasdaq: NTES). It has also attempted to regulate online games from time to time, which may be partly responsible for that industry’s unexciting growth profile of recent years after years of explosive growth. While some form of direction is certainly needed to bring order to the unruly e-commerce and online auction sectors, it’s far from clear to me that this direction needs to come from Beijing, which instead would be better advised to provide some “guidance” and let market forces do the main work.

Bottom line: New campaigns by Beijing to regulate e-commerce and online auctions are misguided efforts that will ultimately severely hamper growth in both sectors.

Related postings 相关文章:

◙ Taobao Mall’s IPO March Collides With Merchant Uprising 淘宝商城IPO或因商户“起义”被推迟

◙ Group Buying Turmoil Grows With 55tuan Layoffs 窝窝团撤站裁员 团购业整合在即

◙ Investors Punish Sina for Slow Weibo Progress