China puts bite on Apple over content services
SAN FR A NCISCO/ N EW
YOK • China has shut down Apple Inc.’ s iTunes Movies and iBooks services, serving notice the world’s most valuable company is no longer immune to the long reach of Beijing’s powerful regulators.
For years, Apple was one of the few Western companies allowed to grow almost unimpeded in China. The company has been selling computers and iPhones there for years and has managed to introduce other products, including the App Store and the Apple Pay mobile payments service without interference. Six months ago, Beijing allowed Apple to roll out iTunes Movies and iBooks.
Then, last week, China’s State Administration of Press, Publication, Radio, Film and Television ordered the services shuttered, ac- cording to a person familiar with the situation. The order means Chinese consumers can’t access some of the services Apple uses to keep them wedded to its hardware. The company has become increasingly dependent on China, its second- largest market, as i Phone sales growth slows at home.
Reasons for the shutdown weren’t clear, but it’s possible China’s government took issue with content in Apple’s entertainment services.
“There is a bit of a cat-andmouse game between the tech and content providers and what’s acceptable and not acceptable in China,” said Brian Blau, a Gartner analyst.
In February, the regulator and the Ministry of Industry and Information Technology released new rules governing publication of virtually all types of Internet content in China. The regulations kicked in last month.
Apple has operated services such as the App Store in China for years and has a team that responds to takedown notices from the gov- ernment when unacceptable content is pinpointed, said a source.
John Butler, an analyst at Bloomberg Intelligence, suspects the order won’t lead to broader curbs on Apple’s China business.
“It’s probably going to be limited to these services, and there are ways Apple can pull consumers into its ecosystem other than iBooks and iTunes Movies,” he said. “It’s another example of the Chinese government policing content, and I don’t think it’s aimed at Apple. Apple is a hardware company and its lifeblood is not content.”
In a statement, Apple said: “We hope to make books and movies available again to our customers in China as soon as possible.”
While the affected services aren’t big pieces of Apple’s business, the shutdown signals a change in behaviour by the Chinese government toward the world’s largest tech- nology company.
Apple has largely avoided the kind of interference that has plagued other American firms. Google’s Web search and Facebook’s social network are inaccessible in mainland China. Last year, Qualcomm Inc., the world’s largest maker of semiconductors for smart phones, paid a US$ 975 million fine and agreed to charge Chinese companies a lower royalty rate in order to resolve an antitrust investigation by the Chinese government. Microsoft Corp., Cisco Systems Inc. and International Business Machines Corp. also have faced scrutiny from regulators in China.
Many analysts have interpreted the crackdown on U.S. firms as part of Beijing’s bid to build and support domestic companies, including Huawei Technologies Co., Tencent Holdings Ltd. and Xiaomi Corp.