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Congratulations and Controversy as AOL launch its new China Portal
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posted Wednesday, 26 April 2006
After months of speculation, anticipation, and a few false starts, AOL has this month announced the finalization of a multi-million dollar partnership deal with SMG Broadband, the internet wing of the Shanghai Media and Entertainment Group; one of China's largest and most successful media groups.
Under the deal, SMGBB will provide a wide range of Chinese language news, sports and entertainment services to AOL's China web portal. (http://www.aol.com/chinese).
| "We are going to cooperate with AOL, mainly providing them with programs in Chinese language" Wang Xiaotang, Spokesperson, SMG Broadband, China |
Although AOL has long provided limited Chinese language services, this deal is considered to be a crucial step for the Virginia based company in its quest to break Americas into the growing Chinese language market, and it will allow AOL to include a much broader range of foreign language material than ever before, including over 200 minutes of Chinese language video footage per day, that has been specially selected to cover both Mainland Chinese and Overseas Chinese issues.
Future Plans?
Initially, all of the content provided through the AOL-SMGBB tie-up will be available free of charge through AOL's public access Chinese language portal. However, if this service proves successfully, it will be expanded to include additional premium rate pay-per-view and subscription services; including enhanced sports coverage and financial news.
It has also been speculated that the portal may soon expand again to provide video on demand episodes of some of China's most popular soap operas and dramas.
| "This partnership is just a beginning, with the major fruits still to come in the future" Zhang Dazhong, Vice President, Shanghai Media Group, China. |
SMG recently signed a similar deal to provide Chinese language financial news to CNBC Asia-Pacific.
Second Time Around?
While the AOL-SMGBB tie-up is an important expansion for AOL, is not the company's first foray into the Chinese language market.
In 2001, AOL (then AOL-Time Warner) entered into a partnership deal with the Chinese electronics group Legend, now known as Lenovo.
Under the deal, AOL was to pre-install its software on PCs manufactured by Legend, and to provide internet access and online community services to Mainland Chinese consumers through the FM365 broadband portal; a joint AOL-Legend venture in which both companies had agreed to invest $US100 Million.
The deal however broke down in 2003 and the partnership was formally dissolved in January 2004, by which time the two companies had only investing $US50 Million, $US25 Million each, half of the agreed amount.
The Breakdown?
At the time of the breakdown, it was announced that Legend had ended the partnership; with Chinese officials blaming 'market dynamics' for the failure of the deal, and going on to state that changes in the ADSL broadband price structure and the introduction of new wireless distribution technology meant that AOL was no longer an attractive partner.
| "The industry has changed in China. We have to think about a new partnership, otherwise it will be tough" Ma Xuezheng, Executive Director, Legend (Lenovo) |
Legend went on to buy out AOL's 49 percent stake in FM365 for an undisclosed sum, and to signed a new distribution deal with China Telecom.
Deception?
Soon after the official announcement of the end of the AOL-Legend deal was made, a number of alternative accounts of the breakdown of the partnership began to emerge which contradicted Legends account of events.
Later, it was revealed that the partnership had in fact been dissolved by AOL; which chose to pull out after serious ethical concerns were raised.
According to Time-Warner Chief Executive Richard Parsons, company executives became alarmed after being visited by Government Officials who demanded that AOL give Beijing full access to their network; including the right to intercept, modify and retain data being sent to and from AOL-China subscribers, as a pre-condition for being allowed to access China's web market
Shortly afterwards, AOL pulled out of the deal.
| “We made a judgement that it wasn't a market that we wanted to enter in this way at this time'' Richard Parsons, Chief Executive, Time Warner |
Had AOL yielded, it would not only have meant allowing Beijing to block AOL-China subscribers from accessing banned website, but also allowing Chinese security forces to arbitrarily track the online activities of any user, read their emails, and link their user account to their real world identity.
Lessons Learned
In light of AOL's previous ethical concerns, AOL has this time opted for a one-way content provision deal with SMGBB. It will also be based entirely in the US, and will be primarily aimed at Chinese speaking US residents.
| “By creating this free, language-specific portal, we can better serve the millions of people in the United States who want access to critical features and communications tools, especially the latest news and entertainment video, in Chinese.” Norman Koo, Web Strategy Executive, AOL |
As such, while SMG will be providing content to AOL in the US, AOL will not be providing web content or access in China. Meaning that its activities will neither be subject to Chinese law, or to direct state interference as was the case with the failed FM365 partnership.
Concerns?
Although welcomed by both Chinese Americans and Overseas alike, and based outside of Beijing's Jurisdiction, the news that AOL's web portal includes a partnership with SMGBB has however raised some issues among observers.
As such, some China watchers have voiced concern over the fact that AOL's Chinese language content is being provided by a subsidiary of SMG, a Mainland Chinese company with strong ties to the state. Meaning that any content provided by it will not only be subject to Chinese censorship, but also that it will follow Beijing's official line on history, society and politics.
A line which often clashes with America's own.
| "Through the partnership, we can provide the latest and accurate news to Chinese-language users." Zhang Dazhong Vice President, Shanghai Media Group, China |
Owing to this, AOL has been left open to the criticism that it is 'assisting in the spread of Chinese propaganda', and that it may inadvertently be 'undermining the moral values' of Chinese Americas by exposing them to 'harmful foreign influences'.
Similar concerns were raised in Canada in 2005, when Rogers Cable; Canada's largest Basic Cable provider, announced that it was planning to add 9 Mainland Chinese stations to its package line-up.
| "These channels will jeopardize the integrity of our country and we call on our new government to stop them and call on Rogers to drop their sponsorship" Elaine Xie, Co-chair, Canadians Against Propaganda, Canada |
In that instance, the main body of concerns revolved around the fact that the stations would be provided live and in an unscreened form, exactly as seen on the Mainland. Meaning that they would certainly include material from Xinhua and other state bodies that promotes hatred, or which attempts to justify crimes against humanity as 'being for the greater good'. Both of which are forbidden under Canadian Law.
| "many of these programs airing in China would be in blatant contravention of The Canadian Charter of Rights and Freedoms, the Broadcasting Act and sections 318 and 319 of the Criminal Code prohibiting the advocacy of genocide as well as the public incitement of hatred and the wilful promotion of hate propaganda with intent to destroy in whole or in part any identifiable group." Canadians Against Propaganda, Pressure Group, Canada |
In the case of the AOL-SMGBB partnership, however, all content will be hand picked for inclusion on the portal, and will be subject to American legal jurisdiction. AOL will also have the final say over what is and isn't permitted on its site
As a cable provider Rogers would have no content control.
Blacklist Confirmed
In addition to revealing the truth about the AOL-Legend split, Parsons has also confirmed that Beijing had presented the company with a ‘blacklist’ of words that it was supposed to bar as a condition of being allowed to operate on the mainland.
| “[Time Warner was] given lists of words that you have to block through your service, like ‘democracy’” Richard Parsons |
A restriction that acted to further cement AOL-Time Warner's departure from the the FM365 deal
| “[We were concerned about] what we would look like here in the US, if we agreed to a governmentally imposed regime where words like democracy had to be blocked'' Richard Parsons |
While the existence of such ‘blacklists’ is well know, it is not common for firms to directly acknowledge being presented with them.
View Comments/Add a Comment (3)
1. apu left...
Wednesday, 26 April 2006 10:12 pm :: http://apusworld.blogspot.com
What remains to be seen is whether this would be a first step for AOL to
then follow it up with a re-entry into the Chinese domestic market itself.
Then it will be really interesting to see how the company balances
'requirements' on the mainland with how it wants to be seen in the western
world
2. The Angry Chinese Blogger left...
Wednesday, 26 April 2006 10:36 pm :: http://angrychineseblogger.blog-city.com
Since AOL left its partnership with Legend, we've had three or four big
scandels with Yahoo, Microsoft and Google all complying with Chiense
censorship, there's even been two congressional investigations into
American complicity with China, and all three came out of them with a toe
hold in China's markets that will earn them lots of money, and minimal
damage to their business in the US.