Xinhua: Trying to Save a Dying Monopoly

In the Hutong
Listening to NPR
1816 hrs

The Associated Press is reporting that the Chinese government has announced a ban on the distribution of news by foreign news agencies in China, except through Xinhua News Agency, the government-controlled local newswire. What this basically means is that Reuters, AP, UPI, Bloomberg, Agence France-Presse, Kyodo, and others like them cannot sell news content directly to China’s newspapers, magazines, television stations and websites.

Inevitably, there will be a lot of deep contemplation about what is driving China’s “media crackdown” coming out in the media. This is to be expected – after all, there is nothing the media hates more than the specter of censorship. Apart from the ideological issues, it’s just plain bad for business.

Before we get into a gigantic ideological uproar about how gosh darned wrong censorship is, let’s cool the engines and take a long hard look at what is likely behind this latest announcement.

Deja Vu All Over Again

First, let’s get something straight: while the AP article calls these “new measures,” that’s only about half right. In truth, ever since Reuters signed an agreement with Xinhua back in the 1950s, it has been explicit policy – if not actual law – that all of China’s media outlets are required to go through Xinhua in order to obtain foreign wire service content, and that said wire services could only sell to Xinhua.

All fine and good, of course, until said wire services begin seeing that content showing up in places that a) they are not getting paid for, and b) that do not credit the wire services for their content – all in violation of the agreements Xinhua signed. Said wire services regularly remonstrate with Xinhua and the government, to little or no avail.

So one can understand why on occasion said wire services start doing separate direct deals with other media when the political climate seems to allow that. At some point, Xinhua starts seeing their revenue dropping as a result, and they run to someone very senior in the government or Party to complain, after which a notice goes out reminding everyone that Xinhua is their sole agent in China, and that they have to get back in line.

These sorts of things happen periodically lately. The last one I remember was 1999 or so, but likely it has happened since.

The important thing to remember, however, is that what has been reissued is little more that a reiteration/clarification/amplification of a policy that is already in place.

Hong Kong? Phooey…

What is different about this current policy is the release of news and information in Hong Kong and Taiwan. Setting aside for a moment the fact that enforcing this in Taiwan would be…um…problematic, enforcing this in Hong Kong would be a real challenge. Despite Beijing’s ostensible jurisdiction in the SAR, somebody in Hong Kong (probably the Legislative Council) is going to start bellowing about how this is in some way a fundamental violation of the Basic Law, and this will likely turn into something of a political hot potato.

That is without even going into the question of enforcement. Hong Kong’s notoriously independent and largely unaccountable tabloid-heavy press can be counted on to flip the bird at Beijing on any measure set to limit the sources of legitimate news they can use. Hong Kong has been something of a media free-fire zone – because of legacy issues, because of Beijing’s desire to have a petri-dish for free press, and because Hong Kong’s role as a center for the media industry in Asia has been very good for the SAR and, frankly for China.

Any serious enforcement of this provision (scenes of People’s Armed Police raiding the offices of Apple Daily) would kill the goose with the added gravy of a global uproar. STAR would probably stay, but I can see a caravan of aircraft leaving Hong Kong for Singapore carrying with them the people and accouterment of a dozen or so major news organizations, taking with them Hong Kong’s dying hopes of a future as a regional media hub.

(I really can’t wait to see what Simon writes about this. I’ll bet he’s apoplectic.)

So the Hong Kong thing is liable to wind up in the bin of Really Bad Ideas. This is a classic case of what I like to call “regulatory overreach,” when a regulator gets overzealous in the drafting of some measure or another and consequently finds itself in hot water with other parts of the government. The result is usually a quiet recision of the offending clauses, and I’d bet that’s what will happen here.

Follow the Money

So why is this all happening?

The Tea-Leaf readers will look at this, nod their heads sagely, and in hushed tones suggest that this is a part of Hu Jintao’s ongoing effort to deepen his hold over the media as he continues his soft purge of Jiang Zemin supporters left in government. That might be true in part, but as with most things in China, that is at best only part of the real reason (and possibly only a political fig-leaf for the action.)

In reality, I suspect this is as much about money as politics.

The Xinhua News Agency has for a long time been the owner of a dying business model. The agency’s power was its monopoly over wire service distribution in China, but its ability to retain this monopoly has been slowly weakening as China’s media organizations build political power of their own, and as the sheer number of media outlets grows. There are nearly 10,000 publications in China, and some of the parent organizations – The People’s Daily Group in Beijing, The Wenhui-Xinmin Group in Shanghai, China Central Television, and a host of others – no longer feel the need to work through middlemen, and have (they believe) the political air cover to build their own relationships.

Add this to the growing number of Chinese who get their news from online media (many of whom reprint foreign wire service stories from other Chinese publications), and Xinhua is watching it’s biggest cash cow waste away in a dry pasture. Despite Xinhua’s efforts to diversify its business (with the purchase of AFX last year, the rechristened Xinhua Financial News became China’s global newswire), the core business is still its role as a domestic news service, and the most valuable content it (re)sells is what comes in from overseas.

The current policy announcement is thus clearly a Xinhua gambit to regain its revenue stream. The political justification for the measure is mostly a red herring – any news organization in China legitimate enough to deal directly with Xinhua would run a politically sensitive story at its own risk anyway, and the informal sources for outside information available to the media are manifold. Xinhua’s role as a critical filter for sensitive information may have been viable in the past, but it is no longer.

The fact that this was directed at the newswires, and the bold stretch into Hong Kong (the Taiwan thing was also a diversion) together suggest that the primary driver behind this is Xinhua’s revenue stream.

Back to the Smoky Room

When you look at the broader scope of media regulations that have been promulgated over the last 17 months in China, it is fair to say that the primary concern driving the overall direction of media policy in China has been a concern for maintaining political stability.

But in some cases, it is not the only – or even the primary – driver. As is the case with so many policies in China, the drivers are often diverse and complex, and it is not uncommon for entities with both commercial interests and a political mission to jump on a broader policy trend for its own material gain. The media is one sector where these sorts of things happen with regularity, but it is not alone.

To view these moves purely in their political context makes good reading, but when you understand the more subtle and complex motives at play you find opportunities to address the challenges. I suspect that the wire services will wring their hands publicly about this for a while, then get down to the quiet business of finding a way to keep Xinhua happy while keeping their own businesses growing.

Update – A sharp-eyed reader notes that according to an article in the China Daily, the rules would in fact only apply to a Hong Kong or Taiwan wire service operating in China and would only cover the distribution of wire-service copy and photos in the PRC. The same reader suggests that this is a bit redundant, as mainland media doesn’t carry much content from HK news outlets anyway. Clearly, then, the concern is over Taiwan-based newswire services.

That makes MUCH more sense than a play to try to control media in Hong Kong

Update – The AP article linked above was kindly replaced by the WSJ with a much deeper piece by Andrew Browne that echoes our key point above – this is a commercial play by Xinhua, pure and simple. Andrew also noted that this is actually a step backwards in policy, since Xinhua has been quietly allowing foreign newswires direct access to Chinese media outlets since the WTO talks in 2001. Andrew should know – he ran Reuters in Beijing during the late ‘90s and into 2000.

Of course, the nice thing about a policy (as opposed to, say, a statute) is that it’s just like an oral agreement – not worth the paper it’s written on. (With apologies to Samuel Goldwyn.)

Clarification – An eagle-eyed fellow blogger reminds me that Xinhua did not buy AFX but made a small minority investment in XFN, which in turn owns AFX and Market News International, and is editorially independent from its shareholders. Apologies to all for that – I’ll do a Google search next time.