Disney: “No TV Access, No Shanghai Disneyland.” China: ???

In the Hutong
Battling Sleep

In yet another example of the ham-handed arrogance with which Disney has managed its relations with China over the past two decades, Robert Iger, annointed Crown Prince of the Magic Kingdom told Keith Bradsher at the New York Times that unless the Chinese government granted Disney access to Chinese audiences through television, there would be no Shanghai Disneyland.

That probably makes the people in Hong Kong happy. Shanghai Disneyland could not help but compete with Hong Kong, and a third Disneyland would likely threaten the viability of all three parks in the near term. And it probably upsets the Shanghai government something awful.

But what is particularly striking is Iger’s belief that he can use so crude a lever to get what he wants from the Chinese government. He’s going to find his reception in Beijing to be a hell of a lot less cordial than he had hoped.

Who knows? Maybe the gambit will pay off. Maybe the government wants a Disneyland so bad it can taste it.

If not, though, and if the authorities are true to form, they will treat his comments as nothing less than crude public blackmail, and Disney will move to the back of the line for any consideration from SARFT. Because neither SARFT nor China can be seen responding to this kind of corporate thuggery. There would be no end to the practitioners if it did, and that would create a dangerous perception of weakness.

Changes in the Hutong

In the Hutong
After Dinner

For those of you who follow us over here at the Hutong, a quick update:

• Silicon Hutong is undergoing a MAJOR makeover. We are delighted to announce that we have asked Creative Design Studios to create a site for Wolf Group Asia (my new digs) and turn Silicon Hutong into something far nicer to look at, with a blogroll, photos, graphics, and other goodies.

• I’m heading to L.A. for some R&R and to do some interviews for my book project for three weeks. Due to the limitations of the software I am using, I’m not sure I’ll be able to post, but I’m going to be logging and will post on return.

• I’m going to ease up on the 1000 word posts a bit and start keeping things a little more pithy. I’ll still be posting the occasional long entry, but I want this to be something that remains an easy and insightful read.

As always, I welcome flames and other correspondence at siliconhutong@mac.com.

Best,

David

Yahoo’s Legal Obligations

In the Hutong
Waiting for another Monday Conference Call

Richard over at The Peking Duck references a post by “Chinese Law Prof ” which suggest that, in fact, Yahoo! is not obliged under Chinese Law to hand over information to the authorities. I won’t reprint the post for you – please pop over to Peking Duck and take a look – but it suggests that because Yahoo! is HK based, and because HK law does not require Yahoo! to hand over such information, then Yahoo! just did it for some other reason.

Now, as someone who is neither an attorney nor a law professor, but who has had frequent cause to counsel others (within my scope of competence) on China’s regulatory environment, I have to disagree, for the following reasons, ranked strongest to weakest:

1. Yahoo! actually has operations in China, albeit managed now by Jack Ma and his capos over at Alibaba. Certainly that unit falls under the purview of regulations on the mainland, not the SAR.

2. Regulating the Internet is a strange phenomenon. The fact is, it doesn’t matter where your company is domiciled (i.e., has its offices). If a competent regulatory authority has the ability to restrict your business – i.e., who views your site, uses your services, clicks on your ads – you are, in fact, regulated by that country. Yahoo! could easily find itself blocked in China and its business shut down. This implies a level of regulatory authority over Yahoo!, albeit only over local commercial operations, that would oblige Yahoo! to comply to local regulations if it wants to continue its business.

3. China has established a precedent for its authority over companies providing telecommunications services into China but not domiciled in China. China’s tax laws stipulate that a Chinese company operating in China and paying a foreign service firm NOT operating to render services must withhold from their service fees a 15% tax that is payable to the government. In other words, even a company with no presence in the market delivering a telecom link or television by satellite to a Chinese company is subject to Chinese tax law. My company, an advisory services firm, is domiciled in Hong Kong, but every time I render services to a client in China, I get hit with the 15%.

4. Chinese law is not just what is on the books. In the words of my esteemed mentor, Jeanne-Marie Gescher (a British barrister) and Luka Lu (a Chinese attorney), China’s structure of laws consist of three things:

> Statutes, administrative rules and regulations, and their attendant clarifying documents either passed by the National People’s Congress or other competent authority (the Written Law);

> Policy, or those sets of both formal pronouncements and informal decrees from the most senior levels of government and the party that establish the general tone and direction of the government.

> Administrative interpretation, or the set of both informal and formal decisions made by ministries and other specialist organs of government that take into account statutes and policy and actually create the guidelines for action in the form of implementation rules and unwritten but understood frameworks around specific issues.

Given the above, I would say that Jerry Yang is indeed right, that he is in fact subject – de facto or de jure – to Chinese law.

You can argue the morality of what Yahoo! did – and I do – but I have to agree with the thinking that if Yahoo! choses to do business in China (as it does both really and virtually), it is compelled to comply with the law.

Wharton Interviews Lenovo (To the Shame of B-Schools Everywhere)

In the Hutong
Late Saturday Night
Watching “Deadwood” on HBO Asia

Wharton professors Micheal Useem and John Zhang interview Lenovo marketing boss Deepak Advani and manage to make all three of them look ridiculous.

Useem (who, again, I deeply respect as an organizational studies expert) and Zhang hurl such clearly softball questions at Advani that they make themselves look like they are somehow beholden to the PC maker. Advani, for his part, obliges by sticking to his PR-briefed messages. It was like going to Dodger Stadium and expecting to see a showdown between a great hitter and a great pitcher, and instead watching batting practice.

What They Asked

They asked questions like:

Useem:  Following Lenovo’s acquisition of the IBM PC line, could you talk about the kind of leadership you need to exercise under the new Chinese ownership?

and

Given that you have worked on both sides of the Pacific, what are some significant leadership styles or approaches that are similar or different from those of the U.S., and how do you use them to bridge an international gap?

But the mother of all questions, and the one that REALLY should have set off a hardcore line of questioning, was:

What role does the IBM image play in the Lenovo marketing? Is it helpful or a hindrance?

Good Lord! Don’t these guys at Wharton read up on anything before an interview? What image? Lenovo just tossed out the IBM brand name like it meant nothing, and these guys are asking what role it plays? NONE!

What They SHOULD Have Asked

There were a lot of questions that should have been asked right up front, and a lot of answers that came from Advani that should have brought follow-on questions.

1. Lenovo just made a decision to drop the IBM brand name from its computers. Given the clearly recognized value of the IBM brand, what motivated the company to make such a decision?

2. What role did you have in the “drop IBM” decision?

3. What level of access do you get to Yang Yuanqing? How regularly do you speak?

4. Lenovo is losing market share – and indeed it’s leadership – in China. What are you doing to reverse the slide in the one market in which investors expect Lenovo to retain leadership?

5. Are you making changes to your China team? Why not?

6. Lenovo as a brand is largely meaningless outside of China. What are you doing to change that?

You get the point. Real questions. Substance.

At the very least I would have questioned some of the things Advani said.

“I remember in your [Useem’s] leadership class that you would say, in the context of Apollo 13: “Failure is not an option.” We are in the sort of situation where we are energized to make this thing work.”

That’s almost a revelation of a company with their backs to the wall. Nobody asked “what makes this such an energizing situation?” No probe. No question. They just let it slide.

“Both the old Lenovo and the old IBM PC division differentiated themselves in the marketplace through innovation”

Lenovo an innovator? I would have asked “Oh, really? And what were some of Lenovo’s innovations, and if they really mattered, why have their market share and sales figures kept sliding.” Or, if you want to accept what he said, the next question I would have asked would have been “innovation is great. Do you really have a sales force that can sell innovation sufficiently to get a return on investment on it?”

“And we are both focused on honesty and integrity in all our dealings.”

I would have asked “given the recent allegations in the Washington Post that Lenovo’s competitors are compelled to engage in unethical business practices in doing business in China, are you concerned that such behavior might extend to your own organization? What steps are you taking to ensure they do not?”

How about “you are bringing together two separate cultures. You can’t have two different cultures under one roof. Which culture is going to give way, Lenovo or IBM? Or are you going to create something new? What is it?” No, wait. There may not be a P.R. approved answer to that one.

Why Didn’t They Ask Those Questions?

Again, it’s shocking that two men who hold senior positions in academia would fail to probe in their interview. Certainly, this is a standard to which they would hold their MBA students. But I can think of a few possibilities. Here are some facts for you to consider:

  1. Deepak Advani is a 1998 graduate of Wharton.
  2. Lenovo has just done a deal with the University of Pennsylvania (Wharton’s parent institution) to provide a deal on computers to Penn and Wharton, faculty, staff, students, etc. No specifics of the terms of the deal are mentioned in the June 9 press release.
  3. Lenovo would be an important donor to the school.
  4. Lenovo is a potentially important recruiter to the school.
  5. Lenovo is an important source of paid MBA students to the school.

Reach your own conclusions.

In the meantime, this is the third time I’ve had to call Wharton on it’s analysis of China. C’mon, guys. You’re better than this.

Stupid Tech Tricks, Volume 1

In the Hutong
Sunday Morning

The folks at PR Newswire have introduced podcast press releases .

Question for journalists out there:

1. When was the last time you got a story out of a press release?
2. Do you really want this service?
3. Do you own an iPod?
4. Is this really what you want to use your iPod for?

This strikes me as another technology-based solution to a problem that doesn’t exist, a gratuitous use of technology that only proves it’s sponsor doesn’t really understand technology.