Media & Gaming

“No, Mr Murdoch”

Meet the dealmaker shaking up China’s media

Li Ruigang w

China’s media mogul: Li Ruigang

Rupert Murdoch once tried to persuade Li Ruigang, now chairman of the state-backed fund China Media Capital (CMC) to be his chief executive at Star Media China.

Then 33, Li was a Party official heading Shanghai Media Group, (SMG), a major state media conglomerate. Murdoch’s offer, Li told 21CN Business Herald, came with the lure of more than Rmb10 million in annual salary (now $1.6 million), plus share options in News Corp, Murdoch’s media conglomerate.

But Li declined. In a handwritten letter to Murdoch, he explained that the media mogul’s ambitions in China would be “constrained by policies”. Having a Chinese CEO wouldn’t help either in making his commercial goals more achievable, Li also warned.

The executive added that he owed his role as the youngest state media boss in China to “many patrons” and he couldn’t betray their support for personal wellbeing.

“I like you even more,” Murdoch wrote in a handwritten response, adding that the offer would stay open should he ever have a change of heart.

Li never swayed, although he would eventually take control of Star Media, the firm Murdoch tried to recruit him to. It owns three TV channels and a movie library of hundreds of Chinese-language titles.

The 53% stake in Star was CMC’s first investment in 2010 (see WiC74) but 21CN says that CMC is now planning a management buyout of the remaining stock still owned by News Corp. If true, the deal would seal the Australian-born media mogul’s final retreat from China. Last month, 21st Century Fox (another News Corp company) sold its remaining stake in another channel called Phoenix TV to private equity firm TPG.

Could Li do better than Murdoch in China? His track record suggests so. Since CMC’s takeover, Star Media has pushed further into original content. One smash result was The Voice of China, which topped TV ratings in 2012 (see WiC162). And the most recent third season has locked in Rmb1.3 billion of advertising revenue, 30% up from the previous series.

CMC was set up in 2009 to invest in private media and entertainment assets, the first fund of its kind in China. Seed money came from the likes of the state-owned SMG, China Development Bank and other government-linked firms as part of a plan to beef up Chinese influence in international media and entertainment (usually described in shorthand as China’s ‘soft power’ initiative).

CMC’s biggest investment so far is a Rmb20 billion joint venture with DreamWorks Animation to create Oriental DreamWorks, a deal signed off during President Xi Jinping’s visit to the US last February. The maiden co-production is Kung Fu Panda III, scheduled for screening next year.

But the venture has spawned a separate Rmb15 billion plan to build a new entertainment zone in Shanghai. Major investors include CMC, China Development Bank and Lan Kwai Fong Holdings, the biggest landlord in Hong Kong’s most famous bar district.

CMC is set to launch another dollar-denominated fund by the end of the year and Li told 21CN he is also working to take private a “highly recognised” Chinese firm listed in the US (in separate – though perhaps linked – news, the online gaming firm Giant Interactive announced this week that it is also delisting from Nasdaq, having received a buyout offer).

His dealmaking acumen has shined the limelight on Li who Forbes classes as a former official that “blends local political standing, commercial zeal, overseas exposure and understanding of where popular culture meets propaganda”.

Domestic media simply describes Li as “China’s Rupert Murdoch”.

Hong Kong’s Apple Daily also reported last week that CMC is on the verge of taking a controlling stake in Caixin, the publisher of one of China’s more influential financial magazines called Century Weekly. Caixin is said to be in the process of transferring its publishing licences from Zhejiang to Shanghai, where CMC is based, while a recent exclusive given to Century Weekly by Shanghai Party chief Han Zheng is being seen as underlining Shanghai’s courtship.

Questioned by 21CN about the rumour, Li wouldn’t comment. But he didn’t issue an outright denial either, and further reform of the tightly-controlled publishing market in Shanghai has added weight to the speculation.

The Jiefang Daily Group and Wenhui-Xinmin United Press Group merged late last month to form the Shanghai United Media Group. The new combination will become the biggest print media group in China with estimated assets of Rmb21 billion. Shanghai Party chief Han told reporters that the merger was prompted by the challenges of operating in a changing media environment, as well as being part of a strategy to make Shanghai an international cultural hub.

Elsewhere, the merger is being seen as a turning point for state-run newspapers, many of which are desperate for new ideas and fresh investment having lost readers to online news providers and weibo commentators. For instance, Shanghai United Media Group has already signed a contract with internet giant Baidu to cooperate in areas ranging from local news searches to cloud computing.

Shanghai Securities News reported this week that SMG – where Li Ruigang first made his name – could now come into play as part of the industry shake-up in the city.

Compared with print media, asset values in the broadcasting sectors are higher, the newspaper suggested. SMG’s 15 TV channels in Shanghai and its pay TV operations nationwide would be a welcome acquisition for a corporate raider.

“2014 will be a big year for Shanghai in terms of restructuring the media and cultural sector,” the Xinhua-run paper forecast. “The market isn’t asking whether there will be reforms but when there will be reforms. There will be answers very soon.”

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