Rupert Murdoch Backs Away From China

News Corp. Sells Controlling Stake in Chinese Operations to China Media Capital

By Published on .

HONG KONG (AdAgeChina.com) -- Starting with Mao Zedong, modern Chinese leaders have never underestimated the power of mass media, both inside and outside China's borders.

Rupert Murdoch
Rupert Murdoch
While looking for opportunities to promote the mainland through soft power measures, like the launch last month of a 24-hour English-language global news channel run by Xinhua, China's state news agency, they have granted few concessions to foreign broadcasters.

One of the world's biggest broadcasters, Rupert Murdoch's News Corp., appears to have given up trying to change their mind. The media conglomerate has sold a controlling stake of its business in that market to China Media Capital (CMC), a government investment fund.

The exact terms of the deal were not disclosed but the sale includes Xing Kong and Xing Kong International, general entertainment channels, Star's Channel [V] Mainland Channel music channel and the Fortune Star Chinese movie library, which owns 757 Chinese-language titles.

James Murdoch, News Corp.'s London-based chairman and chief executive for Europe and Asia, and previously the Hong Kong-based CEO of News Corp.'s Star TV division, said in a statement that "the agreement with CMC recognizes the value we have created in Star China and enables us to continue to grow it for the future."

But that's not the way the deal has been painted by media observers, who have watched News Corp. struggle for nearly two decades to expand its business into mainland China.

The company has had some minor successes. In 2002, it gained landing rights for Xing Kong to air on pay-TV platforms in a small number of homes in Guangdong, a Chinese province adjacent to Hong Kong. In 2006, News Corp. signed a deal with China Mobile to launch a wireless music platform featuring Channel [V] content.

India is more lucrative for foreign broadcasters
Those minor deals didn't come close to meeting News Corp.'s goals in China, however. Industry sources say the company's revenues in the mainland have never passed $50 million, one-tenth what News Corp. makes in India, the region's other massive population center.

Seeing no signs that Chinese leaders plan to liberalize media regulations, News Corp. started backing out of the region one year ago with a major restructuring of its Star TV operation. The Asian broadcaster was split into three pieces, Star India, Star Greater China and Fox International Channels (FIC). That led to the layoff of hundreds of staff in Hong Kong, including CEO Paul Aiello. This week's sale is a further indication that News Corp. is focusing its energy on more lucrative operations like Star India.

The deal is also a sign that China is eager to expand its investments in overseas media. China's first private equity fund with a focus on investment in the media industry, CMC, was established in April 2009 with the backing of the National Development and Reform Commission. CMC is searching for investment opportunities in China and abroad. The agreement with News Corporation marks CMC's first investment project, but is unlikely to be the last.

"The entry of Chinese capital into the international media market will help facilitate its changes and development. Today's agreement represents a first step in that direction. CMC will continue our efforts in developing operational and investment platforms for international media," said Li Ruigang, CMC's chairman as well as president of Shanghai Media Group, China's second-largest media conglomerate.


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