Give me a B
Jan 11, 2019 (WiC 436)

Bytedance was unquestionably the rising star of China’s internet sector in 2018. The rapidly growing popularity of its main services – an AI-curated newsfeed (Toutiao) and a short video site (Douyin) – even worried Tencent, which feared its ubiquitous social media app WeChat was losing eyeballs to the rival offerings. As we pointed out last year, this led to a very public feud between the two companies resulting in legal action (see WiC416).

Also getting in on the act was Baidu (see WiC424): in September it sued Bytedance for illegally streaming the TV drama The Story of the Yanxi Palace. This followed a lawsuit by Bytedance against Baidu for copyright infringement, this time over the streaming of a talk show made by Toutiao.

An article by Reuters Breakingviews at the end of December seems to have further fuelled the Baidu-Bytedance rivalry. Entitled ‘Bytedance will take over the B in China’s BAT’, it was part of a series of predictive pieces about 2019 (the BAT acronym refers to the grouping: Baidu, Alibaba, Tencent). It turned out the headline got both parties very excited and prompted the release of public statements.

On December 29 the Baidu communications department posted on its social media account that: “Baidu will not consider buying Bytedance”. This declaration clearly irked Bytedance’s executives who claim a higher valuation than Baidu (the former is an unlisted unicorn worth $75 billion at its last fundraising; the latter is New York-listed and this week had a market value of $57.8 billion). Li Liang, a VP with Bytedance, released a screenshot of the Reuters article and said the Baidu comment revealed “the importance of learning English”, claiming the term ‘take over’ had been misunderstood by its rival. The headline, Li suggested, was predicting that in 2019 the ‘B’ in the BAT would no longer be Baidu, but Bytedance instead. reckons the fight over the term ‘take over’ reflects the differing psychologies of the pair. Baidu is the “old giant” which has dominated China’s internet as part of the BAT triumvirate for the past decade, but is now on the defensive. Bytedance is the upstart that wants to replace the weakest link in the BAT.

So beyond the companies reactions what did the Reuters article actually predict? It called a “union of Baidu and Bytedance… a tantalising prospect”, arguing both had advantages in artificial intelligence, had complementary client bases and that a deal would bring cost savings as the economy’s growth rate further slows. WiC had also forecast a transformational Baidu merger, albeit slightly earlier in October. We suggested Robin Li’s search giant might combine with Ding Lei’s NetEase, after the two internet giants inked a strategic cooperation in online music streaming (see WiC429).

No trouble brewing this time
Dec 14, 2018 (WiC 435)

There are 9,999 rooms in Beijing’s Forbidden City but a plan to turn one of them into a Starbucks in 2007 ran into intense opposition. Much of the fury was stoked by Rui Chenggang, a news anchor, who termed the plan as an insult to Chinese culture and started a campaign to kick the coffee chain out of the Forbidden City. He got what he wanted after winning the backing of half a million internet users on Sina Weibo.

More than a decade on and an attempt to bring coffee to another of China’s most iconic buildings is underway. A coffee shop called Corner Tower Cafe opened in the Palace Museum this month. Most of its beverages showcase aspects of Chinese civilisation, with many named after emperors. Visitors can enjoy “Kangxi’s Favourite Hot Chocolate” (ironic, really, as a kind of cocoa drink was presented to Kangxi in 1706 but the Qing emperor didn’t like it). And a tea is on offer that was apparently “favoured by all the 3,000 concubines”, presumably indicating it is good for women’s health.

The Palace Museum has developed more than 10,000 ‘cultural and creative products’, Xinhua says, and now makes more than $150 million in revenue every year. So don’t bet against another Corner Tower Cafe popping up in the Forbidden City. And this time Rui won’t be able to stop it: he is serving a six-year jail sentence for graft (see WiC246).

When you wish upon a (red) star
Nov 30, 2018 (WiC 434)

Among the American companies most at risk of collateral damage from trade war tensions or the threat of consumer boycotts in China, high up on the list would be Disney.

Not only is Disney increasingly dependent on the Chinese box office (see page 16 for more on the success of its latest Marvel hit Venom), it has also made a major financial commitment to the country through its newest theme park in Shanghai.

But if Disney’s boss is worried about the side effects of Donald Trump’s tariff policy, he isn’t showing it publicly. During a recent earnings call Bob Iger focused more on the rising visitor numbers at Shanghai Disney – in part driven by the opening of its Disney Toy Story Park in April – expressing confidence in the park’s future. A six-year $1.4 billion expansion has been agreed for its Hong Kong park too – which again is mostly reliant on mainland tourists.

In fact, the company has strongly hinted that another Disney park could soon be built in China, reports the Beijing Business Today. A location near Beijing is said to be favoured (rival Universal Studios is due to open one of its own theme parks in the capital by 2020).

The Chinese authorities also seem to be supportive of Disney’s prospects. Earlier this month the country’s antitrust body approved – without conditions – the US media giant’s $71.3 billion acquisition of studio 20th Century Fox. Reuters said that meant that the merger had cleared its last major hurdle.