SEPT. 5, 2014 • Last month Chinese president Xi Jinping called on the business community to create powerful media groups that possessed credible mainstream media assets as well as media based on new technology. Now one of the huge state-run entertainment enterprises, Shanghai Media & Entertainment Group, has finalized an asset restructuring to create just such a mega media operation. The new yet-to-be-named entity will be listed on the Shanghai Stock Exchange and will include BesTV New Media Co, Oriental Pearl Co. Ltd., SMG Pictures and SMG-CJ Home Shopping Co. This asset restructuring is noteworthy for the video game industry because BesTV is Microsoft Corp.’s Chinese console partner for marketing and distribution of the Xbox One, while Oriental Pearl is Sony Computer Entertainment’s partner in the country.

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Impact: So let it be written, so let it be done. China operates by its own rules, and when the government says move, things happen. It is hard for us to believe that seeing one company shepherd both the Xbox One and PlayStation 4 businesses in China will not create some consternation for Microsoft and Sony. It is one thing to be working with separate divisions of a larger parent but now one company will be deep into the business of both console makers. Another factor is this new media entity will end up with a tremendous lock on the Chinese market where building, marketing and distributing video game systems and services are concerned. A few years down the line the company could use those intellectual and market assets to market its own modern console. Our take is that you don’t create media companies with massive scale to compete in the domestic market alone. As we have said before, the major online game companies in China have significant targets for competing internationally. This new media group that Shanghai Media & Entertainment is bringing together is probably working from the same playbook.