News that Apple is having to close its iTunes Movies and iBooks services in Mainland China comes only seven months after the services were launched in the Middle Kingdom. And only one month after China brought in new laws that restrict foreign media.
Apple hopes the closures are temporary and says it is trying to restore the services as soon as it can. But that statement looks like a forlorn piece of corporate face saving.
Rather, the takedowns appear to be further proof that the Chinese government is taking ever more control over the Internet within its own borders. And in doing so it is restricting media, free speech, and any conduit that might carry the seeds of dissent or challenge to Communist Party rule.
Economic and social development in China are often said to take two steps forward and one step back. In the past couple of years, as far as media is concerned, matters appear to be taking one step forward and two steps back.
When the new law was unveiled in February it was unclear just how much of a step – backwards or forwards – it represented. Drafters had spent several years coming up with the document, which was double the size of the 2002 text it replaced, but much of it appeared to be codification of existing practice.
The regulations already specified that literature, art, science, and their digital reproduction were all covered. Games and pornography were the new additions to the content formats specified as being controlled.
The regulators were not targeting social media. They have both legal and highly advanced technological means for controlling and deleting aberrant online blogs, comments and user-generated content. Nor were they targeting news services. There is an existing separate law for news. They were targeting unapproved published content – ranging from entertainment through to scientific – coming in from abroad.
The regulations specify more licensing requirements and compliance personnel. And they impose more controls on publishing and media joint ventures. The ceiling for foreign ownership was effectively set at 25%. And government has to approve the joint venture agreement.
With that in mind it is little surprise that online streaming giant Netflix has found it impossible to enter China – the company once talked of going it alone, but a minority stake in a joint venture seems its only possible option now – and the closure of the iTunes movie service is less surprising than the fact that it was ever being allowed to launch.
Viewed over a three-year period, Chinese regulators have moved to bring evolving forms of media under harness in much the same way as they regulate conventional media; books, cinemas, newspapers, TV channels.
As streaming video has emerged as a powerful platform, nimbler than most state and regional TV broadcasters, the Chinese companies that supply it have successively had their wings clipped. When it online video was immature and few citizens had smart phones, the sector was freewheeling. Now, that devices and video apps are ubiquitous, content imports are increasingly limited and censored.
“The Apple case is not good news for the wider entertainment industry,” says one Asian media analyst. “In the last six months we’ve seen a number of deals lose their value. As releases and broadcasts are held back, some of our clients are beginning to ask if selling to China is worthwhile.”
One other element of the new law is clear and difficult to dodge. Servers and technology are required to be located in China. That may give the authorities the ability to snoop on users, or more simply to give the government greater leverage over the foreign media company.
Currently Facebook, Google and Twitter have refused and are among the American media currently blocked in China. Yahoo, partially connected to China’s Alibaba, remains visible in China.
Three years ago, Google was notable in refusing to open its search operations to Chinese censorship and as a result had to close its operations in the People’s republic. It retreated and instead took its Chinese-language operations to Hong Kong, which has separate jurisdiction and different laws on media and freedom of speech.
Earlier this month, in a presentation to the U.S. congress, Apple revealed that it had received 1,005 requests for client information on 2,413 devices from Chinese authorities in the second half of 2015. It said that it had complied in roughly two thirds of cases.
Apple also revealed that the Chinese government had asked for its source code and that company had refused. So the closure of iTunes Movies and iBooks could be punishment.
But dealing with the setback is tricky for Apple. Not only does it manufacture a large proportion of its hardware in China, the country has become its top growth market. With phone sales booming, China contributed 53% of Apple’s revenue growth in the last fiscal year and 70% of revenue growth in the December quarter.
That is a big incentive for Apple not to make too public a fuss over its content businesses.