Welcome to TCB In RMB, a weekly summary of important developments in the Chinese entertainment business.
Regulators To Entertainment Firms: Cool It On Overseas M&A
An investment bank executive told the state-run newspaper 21st Century Business Herald this week that Chinese regulators have explicitly instructed film and entertainment companies to back off from investment in overseas mergers or acquisition.
The pullback on entertainment industry M&A can be seen to have started as early as last May, when the China Securities Regulatory Commission prohibited outside industries from investing funds in the film, TV, virtual reality and fintech sectors. Restricting capital inflow to entertainment, China’s economic planners want to create additional growth for the country’s more traditional industries.
Billionaire actress and “Heavenly Queen,” Zhao Wei has been among the most high-profile victims of this new restraint. Her RMB 3 billion bid ($436 million) for a controlling 29% stake of animation producer Zhejiang Wanjia fell through in February. According to Zhao’s representatives, several Chinese banks refused the company’s request to provide financing for the deal.
Popular Variety Show Sued for Unoriginality
One of China’s oldest animation studios Shanghai Animation Film Studio has filed a copyright infringement suit against Zhejiang Radio & Television Group and video-streamer iQIYi, seeking RMB 2 million in damages ($290,400).
Per the suit, Running Man China, a comedy-variety show with an all-star cast produced by Zhengjiang Radio & Television Group since 2014, illegally copied a number of its elements from Calabash Brothers, an animated hit produced by Shanghai Animation in the 1980s.
Because Baidu-owned iQIYi—China’s largest online video platform—streams the show online, they were also named as a party to the suit.
LeSports Not Playing Games, Plans Hong Kong IPO
LeSports, the sports unit of cash-starved Chinese technology conglomerate LeEco, is reportedly planning an initial public offering in Hong Kong in 2018.
While LeSports has collected $1.35 billion worth in VC investment, data published last year by the Shanghai government news service Jiemian showed that the company had yet to turn a profit. As of November 2015, according to Jiemian, LeSports’ revenue was RMB 291 million ($42 million), against losses of RMB 500 million ($72 million).
Sohu Sues Ex-Exec For Abandonment
Sohu, the Beijing-based Internet portal and video-streamer has applied for arbitration regarding Ma Ke, the company’s former executive responsible for acquiring streaming rights to US television shows. Claiming that Ma failed to abide by a non-compete clause by jumping straight from Sohu Video to Alibaba-owned video streamer Youku.com, the company seeks a judgment in the tens of millions of RMB.
At a press conference held this week, Sohu CEO Zhang Chaoyang declared his belief that because “Ma Ke Cases” are all too common, it is important to establish and enforce rules to protect business interests and trade secrets. “Via legal procedure, I hope to create a baseline for the video industry,” Zhang said. The case is scheduled to be heard on June 13th.