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Exposed – The Truth behind the death of AOL-China
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News and Politics :: Sino-American :: Human rights and personal freedoms :: News and Perspectives ::
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posted Wednesday, 21 September 2005
In January 2004, Chinese electronics giant Legend (Now Lenovo) called off a 2 year, $US50 Million, joint Internet venture with US media group AOL-Time Warner (Now Time Warner) citing market changes. The split was open, amicable, and forced by the actions of the Chinese Government.
The Official Account
Early in 2004, the domestic Chinese firm Legend, the company which would later become the electronics giant Lenovo, announced that it was dissolving a $US50 Million joint venture partnership that it had with American media group AOL-Time Warner because of ‘a change in the market dynamics’, more specifically because the price of ADSL Broadband services, and the advent of wireless networking technology, meant that a relationship with the media giant was no longer as attractive as before.
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"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) |
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At least that is the official account, and the one that was carried by the media at the time. Another version of events though, made available more recently by Time Warner Chief Executive Richard Parsons, offers a different slant on the breakdown of the AOL Time Warner-Legend Partnership. One that starkly contradicts assertions made by Legend, and which places the blame for the breakdown of the partnership on unethical demands being made on AOL-Time Warner by officials in Beijing.
The ‘Other’ Account
According to Chief Executive Officer Parsons, it was AOL-Time Warner who pulled out of the partnership with Legend in 2001 after authorities in Beijing made a series of unreasonable demands on the company in regards its joint Internet venture with Legend; leading AOL-Time Warner executives to pull out of their partnership over ethical concerns, and the fear that acquiescence to Beijing’s demands would seriously damage the company’s standing with consumers in the US.
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“[We were concerned about] what we would look like here
in the U.S. if we agreed to a governmentally imposed regime where words
like democracy had to be blocked'' Richard Parsons, Chief Executive, Time Warner |
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Top among the reasons cited by Chief Executive Parson, as being behind the ending of the partnership, was the insistence by Beijing that Government agencies be allow to intercept, modify and retain data being sent to and from the online subscribers; a move that would have enabled Chinese security forces to eavesdrop on anybody in China who used AOL’s software or servers to access the Internet, and to block any or all content as they saw fit.
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“We made a judgement that it wasn't a market that we wanted to enter in this way at this time'' Chief Executive Parsons |
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Blacklist Confirmed
Along with revealing the true reasons for the collapse of the AOL Time Warner-Legend partnership, Chief Executive Parsons also confirmed that his group had been presented with a ‘blacklist’ of words that it was supposed to bar from the FM365 internet service that it was jointly developing with Legend, and over its other China operations, in order for it to be allowed to operate on the mainland.
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“[Time Warner was] given lists of words that you have to block through your service, like ‘democracy’” Chief Executive Parsons |
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While the existence of such ‘blacklists’ is well know, it is not common for firms to directly acknowledge being presented with them.
The Venture
In 2001, the US media firm AOL-Time Warner and the Chinese electronics group Legend entered into a joint partnership to provide Internet access and online community facilities in China. The partnership was to see AOL software installed on Legend PCs providing Broadband access in Mainland China through the jointly owned FM365 Internet service. At the time of its collapse, both parties had invested an estimated $US25 Million each in FM365 and other programs, but had initially pledge to contribute $US100 Million.
After the collapse, Legend went on to buy out AOL-Time Warner’s 49% stake in FM365 for an undisclosed sum, and to provide broadband Internet access through China Telecom, the state owned telecom company that recently announced its intent to block voice over IP services on the Chinese Mainland.
Also cited as reasons for the dissolving of the joint venture with AOL-Time Warner were the US firm’s over cautious investment approach, which were blamed for the partnerships lack of engagement in China’s growing cell phone and messaging markets.
View Comments/Add a Comment (3)
1. Rebecca M left...
Thursday, 22 September 2005 1:31 pm
Fascinating. Do you have the links to the original articles you're citing?
Would love to see them.
2. ACB left...
Thursday, 22 September 2005 3:54 pm :: http://angrychineseblogger.blog-city.com
I don't have links available to everything but information on the original
story about Legend and AOL-Time warner (fake story) is freely available.
Here is the version printed in the PEoples daily in January 2004.
http://english.people.com.cn/200401/08/eng20040108_132131.shtml
3. Max Hyperbole left...
Wednesday, 14 November 2007 1:52 am
"Stories" within stories... I heard that Chinese authorities did indeed
unilaterally change the terms of the deal, but that the relevant impact and
concerns were largely commercial rather than ethical or PR-related.
Regardless, a high-minded (sounding) explanation makes for great,
face-saving cover...