NewsCorp China sale could signal new strategy for Murdoch

The news that NewsCorp has handed a controlling stake of its Chinese channels to the CMC equity fund should not be too much of a surprise. Last year, Star TV scaled back its Hong Kong operations, in a signal that its China ambitions were fading and that it saw India as a better prospect.

Try as he might, and he certainly tried, Murdoch was unable to build in China the media presence he imagined in the early 1990s. A combination of an uncompromising Chinese Government and some ill advised political and commercial decsions now appear to have drawn the curtain on NewsCorp’s China play.

Murdoch’s stuttering China story is well known, beginning in 1993 when he bought a majority stake in satellite operator Star TV, shortly before China banned satellite dishes from all but a small minority of homes and hotels.

In the years that followed, Murdoch tried a number of entry strategies, including a short-lived joint venture in faraway Qinghai province that attempted to circumvent restrictions on foreign content, as well as a general cosying up to various Chinese leaders. In recent years, though, it became increasingly apparrent that Chinese TV no longer appealed to him as it once did.

Murdoch’s decline in China has run in neat parallel to the country’s media and adspend growth. The coveted advertising dollars that Murdoch hoped to divert from the state-owned broadcasters have mushroomed. In this at least he cannot be accused of misreading the country’s potential.

But while traditional broadcasting may have ultimately been a failure for NewsCorp, there is another door, one that appeals to the all-new digital evangelical in Murdoch, that might be creeping open.

Under the guidance of Murdoch’s wife Wendi, and recognising the growth of China’s online media, NewsCorp has over the past decade invested in a number of digital properties. Most significant of these has been the company’s activities in the social networking space with MySpace China.

But there have also been several low key moves such as the US$18 million NewsCorp invested into online ad network AdChina in 2009. While these may be small deals in the context of the global NewsCorp media conglomerate, they nonetheless suggest a new avenue for Murdoch’s - and his wife’s - China business.

By focusing on the downstream benefits of China’s digital growth and  scaling down ambitions of a media empire - and at the same time avoiding the kind of regulatory headaches that plagued NewsCorp’s 17 years in the country - Murdoch could well be finally on the right track in China.

This article was originally published in the 26 August 2010 issue of Media.