China Electronics Wholesaler

China publishes "blacklist" of video Web sites

By Sophie Taylor Thu Mar 20, 2:22 PM ET

SHANGHAI (Reuters) - Chinese video-sharing Web siteTudou.com, backed by a unit of venture capital heavyweight IDG,received an official government warning Thursday under newrules to curb pornographic, violent and political content. ADVERTISEMENT

Industry insiders said the move could scare away futureinvestors in the sector.

Venture capital firms such as Sequoia, IDG and SteamboatVentures have poured into the Internet sector in China -- bysome estimates now the world's biggest Web market -- in searchof the next YouTube, which was acquired by Google Inc.

But Beijing said late last year that only state-owned orstate-controlled companies can apply for licences to broadcastor stream video online.

A lack of clarity over those definitions and uncertaintyover how strictly they would be enforced has left the industryconfused.

Tudou, one of China's most popular video sites whoseservice was temporarily suspended last week, said it hadreceived an official warning before the statement came outThursday.

"We're working hard to upgrade our systems to catcheverything that needs to be caught," Vice President Dan Brodysaid by phone from Taiwan.

Tudou's investors include Granite Global Ventures, IDGChina and JAFCO, and its users publish more than 40,000 newvideos each day, according to its Web site www.tudou.com.

"This is just a reminder that everyone has to stay on theirtoes and keep their content clean," added Brody, a formerGoogle executive.

BLACKLIST

Several of China's popular video Web sites, which include56.com and Youku.com, have won backing by foreign venturecapital heavyweights. But some industry players warned thatforeign investors may become wary of throwing money into thecountry's fast-growing Internet sector.

"This would certainly make the investment communitynervous, until the current situation clears up for companies onthe blacklist," said Victor Koo, chief executive of video siteYouku.com and former president of portal Sohu.com Inc.

Among three lists released on China's government Web sitewww.gov.cn Thursday, Tudou figured on the top of a list ofcompanies which had received an official warning.

A second list ordered some lesser-known Web sites to ceaseoperation and a third listed companies operating without acontent licence.

In China, an administrative punishment typically startswith a verbal warning, followed by a written warning, andeventually suspension of operations.

China's government, keen to avoid stoking socialdiscontent, keeps a tight watch over the media and often blocksor censors popular Web sites and forums where dissent may brew.

This latest sweep of the Internet by Beijing echoes itsprevious campaign to force Web sites to apply for Internetcontent licences, and may be a prelude to putting in place asystem for standardizing video content, industry watchers said.

Some add they also expect a "whitelist" of officiallysanctioned Web sites to come out, which foreign investors maysee as safer investment targets.

"We are certainly very concerned about this matter and arekeeping a close eye on developments," said one executive at aprominent foreign venture capital firm who asked not to beidentified.

China, which had 210 million Web users at the end of lastyear, has since overtaken the United States as the world'sbiggest Internet market by number of users, according toBeijing-based research firm BDA.

Reuters/Nielsen