The trouble is far from over for Jack Ma’s embattled Alibaba Group Holdings. China’s government has asked the company to sell off its vast collection of media assets, according to a report in The Wall Street Journal.
The request represents yet another escalation of the regulatory pressure that has been heaped upon Ma’s e-commerce, entertainment and fintech empire following the spectacular failure of Ant Financial to go public last November.
The crackdown on Alibaba’s media holdings began earlier this year after Chinese officials took a full accounting of the tech conglomerate’s collection of assets. According to the Journal‘s sources, “officials were appalled at how expansive Alibaba’s media interests have become” and requested the company to come up with a plan to cut back on its holdings. Beijing reportedly was alarmed by the potential power Alibaba’s network of media properties could give it over public opinion in China — a lever that should only be welded by the Chinese Communist Party, according to the country’s authoritarian government.
Over the years Alibaba has assembled a vast portfolio of stakes and ownership positions in influential media and entertainment companies at home in China and abroad, ostensibly because such touchpoints with consumers could provide business synergies for the firm’s core e-commerce business.
The Journal‘s sources said Chinese officials were primarily concerned about Alibaba’s news and social media interests, but that they also reviewed the company’s large portfolio of entertainment holdings. “Outright divestitures in that part of Alibaba’s business may not be necessary,” people familiar with discussions said.
On the news and social media side, Alibaba and Ant own: 100 percent of the South China Morning Post, the region’s leading English newspaper; 30 percent of Weibo, China’s version of Twitter; 37 percent of the influential Chinese news organization Yicai Media Group; 5.3 percent of China’s largest offline advertising network, Focus Media; and others.
On the entertainment side, Alibaba owns the Hong Kong stock exchanged-listed Alibaba Pictures Group, which contains a film studio, the popular Tao Piao Piao ticketing app and online video giant Youku. The company also owns a stake in Steven Spielberg’s Amblin Entertainment, and pieces of leading Chinese studios including Huayi Brothers Media, Bona Film Group, Hehe Pictures and China’s two largest exhibitors, Wanda Pictures and Dadi Cinemas. The company additionally holds 6.7 percent of youth-oriented video service Bilibili and 5 percent of Mango Excellent Media, a popular online video subsidiary of the state-backed TV network Hunan TV. The company also has invested in several Hollywood action films, such as Paramount’s Mission Impossible franchise.
Ma’s crisis began in late October 2020, when he gave the now infamous speech that plunged his business empire into turmoil. Addressing a collection of business leaders and government figures at a financial conference in Shanghai, Ma sharply criticized China’s regulators and state-owned banks for their backwardness while advocating for greater leeway and room for innovation for companies like his fintech firm Ant Financial, which was set to IPO just days later. The remarks infuriated China’s communist party leadership, leading Chinese president Xi Jinping to personally order the cancelation of the imminent blockbuster public offering. Expected to raise at least $34 billion, Ant’s IPO would have been the biggest stock-market debut in history.
Since then, the clouds only have darkened further for Ma and Alibaba. In late December, Chinese regulators bluntly announced they were launching an antitrust investigation into Alibaba’s flagship e-commerce business, as well as enforcing new rules constraining Ant’s business activities. Antitrust regulators are reportedly preparing to hit Alibaba with a record fine of over $975 million for alleged anticompetitive practices on the company’s e-commerce platforms.
The Journal‘s sources said it remains unclear whether Alibaba will have to sell off a portion of its media assets or its entire portfolio in the category. But any plan the company devises will be carefully reviewed and require the sign-off of senior government leadership.