News Corp reduces China TV stake

Rupert Murdoch's News Corporation is to sell a majority stake in its three Chinese TV channels to a state-controlled private equity fund, a move that has been interpreted as an admission that it has failed to build a standalone broadcast business in China.

China Media Capital, a $700m-plus private equity fund backed by the country's second largest media company, Shanghai Media Group, and the China Development Bank, will take a controlling stake in News Corp's TV assets for an undisclosed sum.

The deal will see CMC acquire a controlling stake in News Corp's Xing Kong, Xing Kong International and Channel [V] Mainland China channels, as well as its Fortune Star Chinese movie library, which includes popular titles including Jackie Chan films.

A Reuters report estimated that the three channels combined were generating no more than $50m in annual revenue while the Financial Times reckons the deal was worth about $160m.

The move is being interpreted as further evidence of News Corp pulling back from China's tightly controlled media market. Last year News Corp reorganised its Asian satellite broadcasting business, Star TV, into separate India and Greater China units, and merged its English-language operations across Asia into one unit.

In a statement News Corp said that the deal "recognises the value we have created in Star China and enables us to continue to grow it for the future".

However, analysts said that the deal was "inevitable" because China has limited foreign media companies to distributing content largely in the southern province of Guangdong, cutting out pan-China audiences.

CMC, which was launched last year, has struck its first deal as part of what is viewed as a plan to build up its media assets so that they can to compete internationally.

"This partnership is an extension of our long-term co-operation with News Corp," the China Media Corp Chairman, Li Ruigang, who is also president of SMG, said in a statement. "The entry of Chinese capital into the international media market will help facilitate its changes and development. Today's agreement represents a first step into that direction."

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