Apple is facing new challenges in China. Its iTunes Movies and iBooks Store were blocked earlier this month in what was a surprise move, given that it had only been six months since these services were made available to consumers in China. So why the apparent change in China’s attitude to Apple’s online services, and what does it mean for foreign companies in the content industry?
What we can say is that this appears to be part of a broader move by the Chinese authorities to control the content accessed by Chinese consumers – and particularly foreign content. China’s new online publishing regulations, which came into effect in March 2016, have caused widespread concern among foreign companies because, in addition to greater conditions for foreign involvement in online content distribution and joint ventures, they appeared to require all online content to be stored in servers located in China. Under the new regulations, internet content publishers are also required to ensure that their content “promotes core socialist values”.
China’s internet regulations are known to provide substantial room for regulator interpretation and the bigger question has always been enforcement. With this move, it looks like the authorities are laying down a marker to indicate that they will be ramping up enforcement against foreign companies.
The stakes, of course, are high. China is Apple’s second largest market after the US and Apple has, until now, largely managed to escape the Chinese regulatory scrutiny that has hindered its international competitors in China.
So what does this mean for international companies in the content distribution industry? It means that they need to think even more carefully about their broader China strategy and the structure of their local partnership arrangements. As part of this, those foreign companies should be looking to their local partners for guidance on navigating what is becoming an increasingly complex and unpredictable regulatory framework. But above all, it confirms that even the largest and most influential of international companies will not escape China’s growing focus on internet regulation. Indeed, it was almost certainly because of Apple’s size and influence that it was targeted.