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CHINA (PRC FIRMS): An Introduction to Media & Entertainment

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TMT: Media & Entertainment (PRC Firms)
Practice Area Overview in Chambers GCR 2022

Under the influence of COVID-19, online entertainment has experienced a meteoric rise in popularity and revenue. E-commerce, online teaching, live webcast, short video and other new media business models have ushered in a new round of rapid development. All current signs point to the future of media and entertainment being digital, and the content of online entertainment is becoming more cross-combined with the characteristics of information, networking and education.

As the scale of internet platforms expands, the "digital economy (or digital platform economy)" has burst out with great energy economically, but it has also caused some legal and social problems such as market monopoly, disorderly expansion and savage growth. More specifically, a series of non-compliant acts have been reported, including restricting competition, winner taking all, price discrimination, divulging personal privacy and violating consumers' rights and interests. In 2021, the Chinese government intensified its efforts to regulate the platform economy and crack down on all kinds of non-compliance acts in the market. Key events related to the media and entertainment field are as follows:

1. Investigation into major internet/e-commerce platforms' “choose one from two” policy, which punishes merchants who operate online stores on both rival platforms 

On April 10, 2021, Alibaba was fined approximately CNY18.23 billion, which accounted for 4% of the group's total sales in the previous year, for abusing its dominant position in the online retail platform service market in China and entering into exclusive cooperation agreements with merchants to exclude competition.

2. Anti-monopoly enforcement of online music platforms

On July 24, 2021, the State Administration for Market Regulation released the punishment results of Tencent Holdings' acquisition of China Music Group: a fine of CNY500,000 and Tencent has been asked to rescind the exclusive copyright agreement within 30 days from the date of promulgation of this decision, stop the payment methods of copyright fees such as high advance payment, and prohibit the implementation of MFN terms and other measures to restore the state of market competition.

3. Anti-monopoly enforcement in the field of online game streaming platforms

On July 10, 2021, the State Administration for Market Regulation banned the merger of Tencent's Huya and Tencent's Douyu, two key gaming streaming platforms, through its merger control.

In the same vein, the media and entertainment industry in China is undergoing a period of rapid and monumental change in legislation. Lawmakers, government authorities and entrepreneurs are hard at work to keep up with ever-changing technology. Accordingly, it is critical for both potential and current participants in this industry to understand how legal trends may impact the viability and sustainability of proposed operations.

To ensure the healthy and orderly development of the media and entertainment industry, China enacted a series of laws over the past year. For example, the Civil Code of the People's Republic of China came into effect on January 1, 2021. The third revision of the Copyright Law was passed and came into effect on June 1, 2021.

The Civil Code enhances legal protection for personal rights, expanding the scope of protection for the right of likeness, specifically including the rights and interests related to the pen name, stage name and voices of natural persons into the scope of legal protection, and further clarifying the protection of personal information and privacy. As a result, celebrities have a greater ability to defend their rights when they are infringed. For example, unauthorized production, use, or disclosure of a celebrity's likeness, even if not for profit, constitutes an infringement of the right of likeness under the Civil Code.

The revised Copyright Law effective from 1st June 2021 highlights the following changes related to the media and entertainment area: (a) It revises the definition of “works” and changes the provision of the forms of works in different fields from closed to open; (b) It replaces the concept of “cinematographic works and works created by virtue of an analogous method of film production” with that of “audiovisual works” to adapt to the emergence of new genres of works; (c) It enlarges the concept of broadcasting rights reasonably by adding “communicate to the public a work by wired means”, thus covering all “non-interactive communication” behaviours such as webcast, scheduled website communication, and real-time rebroadcasting; (d) It vests the producer of the sound recording with the right to be paid for communication to the public by wired or wireless means or broadcasting to the public through technical equipment; (e) It also provides for punitive damages and increases the maximum statutory damages to CNY5,000,000.00. 

Due to the influence of COVID-19 and technological innovation, the development of the media and entertainment industry in China is facing challenges. Firstly, the pandemic continues to cast a shadow over the sector. This is reflected in the decline in film and television production, the increase in risks in film and television projects, the uncertainty in the offline performance market, and the slowdown in international cooperation in film and television investment and production. Secondly, industry changes bring confrontation between old and new formats. The trend of media integration challenges the film industry's product style, business model, and management system. The duopoly in the short-video industry forces other short-video enterprises to seek new opportunities in small towns and rural markets as well as overseas – an example of why competition in emerging industries still needs to be improved. Finally, changes in international relations threaten Chinese domestic firms’ operations abroad and international cooperation projects.

Nevertheless, there are opportunities that coexist with the challenges. The Chinese government has adopted proactive policies in response to COVID-19. New technologies have developed rapidly in various industries and remain highly competitive. As what the industry guidance policy encourages, innovation and production of high-quality content will be a key for media and entertainment enterprises to make a breakthrough in the next few years.