China Said to Push for More State Control Over Video Websites

  • Government plan said to including stakes, board seats
  • China’s Communist Party tightening grip over online content

China’s media regulator is proposing online video companies including Youku Tudou Inc. and Synacast Corp.’s PPLive sell equity stakes to the government in a move that would tighten its control over the businesses, according to people familiar with the matter

The State Administration of Press, Publication, Radio, Film and Television met the video providers on May 18 to detail the plan, said the people, asking not to be identified because the meeting was private. The regulator suggested the signing of non-binding agreements between video providers and the state companies taking the stakes by June 10, the people said.

The government would take at least 1 percent of shares, gain board seats and have some control over content with some companies in attendance expressing an unwillingness to cooperate, the people said.

The meeting offers new details about the scope of government plans to take “special management stakes” in Internet companies. Bloomberg News reported earlier this month that leaders were considering a pilot program for such an arrangement with web portals and mobile apps that focus on news content, but the idea of applying that to video-streaming companies was previously unknown.

It’s still not clear what would happen if companies refuse to give stakes to the government or if the regulators will proceed with the plan. The move would allow Communist Party leaders to exert even greater control over the web and the companies that distribute content online, such as Tencent Holdings Ltd. and NetEase Inc.

The government already exerts strict control over licensing for online video by only giving licenses to seven companies, and has made it difficult for international firms to have a share in the country’s $5.9 billion online video market. 

Leshi Internet Information & Technology Corp., whose representatives were said to be at the meeting, declined to comment in a text message., the streaming service of Baidu Inc., and Youku Tudou’s owner Alibaba Group Holding Ltd. declined to comment in e-mailed statements. PPTV didn’t respond to a request for comment and Canny Lo, a spokeswoman for Tencent, wasn’t immediately able to comment. The regulator didn’t respond to a faxed request for comment.

Under President Xi Jinping, China has enacted stricter limits on media and Internet freedoms over the past year. The proposal for “special management stakes,” first outlined in November 2013, would give authorities the ability to block content from reaching the web.

In the pilot program pitched to online news providers, officials offered to issue licenses in exchange for a board seat and stock, people familiar with the matter have said. The government wouldn’t receive dividends or any other form of bonus and won’t interfere in business decisions outside of control over content distribution, the people said.

In the May 18 meeting, the regulator recommended that online video companies choose among five state media companies to serve as shareholders but said they could work with others as well, according to the people familiar.