Commercial break

Call Me by Fire star Jordan Chan, seen here with his wife Cherry Ying

After Sisters Who Make Waves, Hunan Satellite TV hit ratings gold again with a masculine equivalent of the reality competition: Call Me by Fire. Like its predecessor, it was a knock-out competition for 33 mid-career celebrities. But this time it was a cast of men aged 27 to 57 competing to form the pop group, including household names like Hong Kong actor Jordan Chan, the world famous Chongqing-born pianist Li Yundi and the Taiwanese rapper MC Hotdog.

The format did well, dominating social media chatter after each episode and cementing Mango TV’s pole position in TV programming in the reality genre.

Advertisers have taken heed. In the first half of this year, Mango Excellent Media, the Shenzhen-listed media company with ties to the broadcaster, saw revenues rise 36% compared with a year earlier to Rmb7.8 billion ($1.21 billion). Net profit grew 31.5% to Rmb1.5 billion over the same period, the third consecutive year of over 30% increases.

Despite the commercial success, Alibaba’s investment arm Ali Venture Capital announced plans to sell its entire stake in Mango Excellent Media in August. The e-commerce firm only bought the 5.01% stake in Mango last December for Rmb6.2 billion, or Rmb66.2 per share, at a point when the company was enjoying the halo effect of Sisters’ success.

The show did so well that Mango was able to tap into its fanbase to launch its own e-commerce platform, which was believed to be the main reason it accepted the investment from Alibaba (see WiC520 for more about the deal).

Since then its shares have struggled, falling from almost Rmb92 per share at the beginning of this year to Rmb41. Selling at the current price means that the Hangzhou-based e-commerce giant could well book a loss of about Rmb2.3 billion on the short-lived Mango TV investment.

Mango TV claims that Alibaba is trying to waive its one-year lock-up agreement on the original purchase, without naming a potential buyer. But Alibaba is also known to be under government pressure to divest some of its media stakes. The selldown comes at a time when regulators are tightening their control over the internet and entertainment sectors.

While Beijing has allowed larger tech firms to commercialise their media operations, their growing influence over the creation and distribution of content has worried the authorities. Alibaba, in particular, has an extensive portfolio of media assets. In addition to owning Hong Kong-listed Alibaba Pictures Group and video-streaming company Youku, it also has stakes in microblogging platform Sina Weibo, video-streaming site Bilibili and film studio Beijing Enlight Media. According to Hong Kong’s South China Morning Post, which Alibaba also owns, the tech titan invested in over 40 Chinese media companies between 2011 and 2020.

The divestment of the stake in Mango TV will mark the tech giant’s first major sale of a media asset since it became embroiled in an antitrust investigation last December. In March, regulators ordered Alibaba to spin off other media assets to temper what was deemed as the group’s ‘overwhelming influence’ on public opinion.

“It’s fair to say that Alibaba’s control over information, media and personal data in China has far exceeded [that of] tech giants in other countries,” Zhu Ning, professor of finance and deputy dean at the Shanghai Advanced Institute of Finance, told Nikkei Asia.

Other commentators wondered how sales like these could signpost a new era for China’s media companies, which might struggle to find new sources of funding as the internet titans retreat from the sector.

“The regulatory situation is reshaping how capital is raised for different sectors within the internet industry. Judging from overseas investors’ wait-and-see approach toward Chinese-concept stocks, many online streaming video platforms [such as iQiyi] that are listed in the US will find their ability to raise capital greatly reduced in the near future,” one insider warned 21CN Business Herald.

In another signal of the shake-up ahead, the National Development and Reform Commission proposed new rules last week that seem designed to curtail the influence of private sector investors in the media business. The new document, which was published to solicit public feedback, includes a list of news and entertainment categories that will be walled off from private capital, including “unlawful news media-related businesses”.

The rules stipulate that “non-public capital” won’t be allowed to “invest in, set up or operate news agencies, newspapers, publishers, or radio or television stations”.

Many of the proposals aren’t particularly new. An original ban on private investment in the news media was instituted in 2005, though it applied to traditional publishing channels. Privately-run online news media skirted the rules, operating in a regulatory grey area.

This time round the regulations are likely to be more encompassing, closing off some of the opportunities for media firms to find wealthier backers. Nevertheless, in the case of Alibaba’s sale of its Mango TV stake, the divestment shouldn’t hamper Mango too significantly. In August the media firm raised Rmb4.5 billion by issuing new stock to three institutional investors.

Probably more importantly Mango is well-respected for its creative and commercial skills. “As one of the leading satellite networks in the country, the company’s core advantage lies in its ability – tried and tested over recent years – to develop new programmes and concepts. That ability has nothing to do with its shareholders. Even its foray into e-commerce relied on the traffic from its shows and had little to do with Alibaba. So Alibaba’s retreat should not have a substantial impact on the overall business of the network,” reckons Hexun, a news site.

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