So, is News Corporation’s decision to abandon China good or bad for Sky News’ ambitions to take over the Australia Network from the ABC?

The question arises after Rupert Murdoch bailed out of China, selling control of three TV channels and a movie library to a well-connected local investment fund. The announcement came overnight and confirmed the failure by Murdoch to make headway in China, despite more than 15 years of trying through his Star satellite TV business and other ventures.

The buyer of the controlling stake in the three channels and the library is China Media Capital, only set up last year. In China this deal would have the approval of the central government, which, under different leaders in the past 15 years, constantly frustrated Murdoch and other foreign media groups from getting too big a foothold in China’s huge domestic market.

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The fact that Murdoch has abandoned the biggest market in the world for India, will be noted in China and in other Asian markets as Sky News attempts to wrest the Australia Network from the ABC.

News Corp indirectly controls a third of Sky News through BSkyB in London, while it also controls the management of the Foxtel pay TV platform. For all intents and purposes, they are one and the same when it comes the advancement of the Murdoch corporate interest, which in this case is grabbing control of Australia Network and putting it into Sky News, and then rebroadcasting it on Murdoch’s Star satellite platform across Asia.

Star doesn’t have a self-generated news; it has Fox from the US and the UK centred Sky News. But it doesn’t have the strong international outlook that the BBC, ABC, or CNN has. News needs what purports to be a regularly, daily news service to give it clout and credibility across Asia for Star, and especially in India where News has grown as it has retreated from China.

These restrictions saw News Corp shift emphasis of its Asian operations to India in the past year in a major restructure of Star TV, which for all intents and purposes is an India-focused business, as the annual report filed with the Securities and Exchange Commission revealed:

“The Company’s international cable operations’ revenues increased 18% as compared to fiscal 2009, primarily due to higher advertising revenues at STAR, as well as higher net affiliate and advertising revenues at FIC. The higher advertising revenues at STAR were primarily due to the strengthening of the advertising market in India and improved performance at the regional channels.”

China clamped down on foreign media owners’ expansion in 2005 by restricting their ownership of local TV stations and other media outlets. Rival CNN was also hit (Time Warner).

The Reuters report contained this great quote from a US analyst; “Financially this is negligible for News Corp but strategically it’s a big headline,” said Tuna Amobi, an analyst at Standard & Poor’s. He said News Corp, like other companies, had hit a wall and was “throwing in the towel”.

China Media Capital acquires a controlling stake in News Corp’s Xing Kong, Xing Kong International and Channel [V] Mainland China channels, along with its Fortune Star Chinese movie library.

According to various media reports, China Media Capital is a private equity fund with 5 billion yuan ($US739 million) in assets under management. It is backed by Shanghai Media Group (SMG), China’s No.2 media company and the dominant player in Shanghai, as well as China Development Bank and China Broadband Capital.

The Australia Network broadcasts to Asia and is financed by the Department of Foreign Affairs and Trade. Sky has made much of its new links with China’s Central TV in Beijing, but in a delicious irony, the buyer of News Corp’s unwanted Chinese channels and movie library signed a co-operation deal with the ABC in July. That will also be noted. News Corp will remain a partner in the businesses with Shanghai Media, but not an equal one.

And Shanghai Media Group’s July agreement with the ABC now assumes greater importance.

The ABC release said: “The agreement now positions the broadcasters with a wide range of international co-operation options from exchange of television programs, to providing mutual news gathering support and content supply, through to exploring international television program co-productions. Selected Australia Network programs will soon be seen on International Channel Shanghai, and Shanghai Media Group will have access to studio and production support in Australia immediately.”

That’s of far greater importance to Shanghai than buying a controlling stake in China-based TV networks (even if it is a government-approved form of “buying back the farm”). Shanghai Media will have access to support and facilities in Australia with the ABC, not through the News Corp agreement. And Shanghai Media will have official recognition from the government broadcaster in Australia, which matters more than helping relieve a US media tycoon of a business failure in China.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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