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From Apple to ‘South Park,’ Entertainment Companies Grapple With Profit Versus Ethics in China

For analysts, it all comes down to if companies should be making moral or ethical decisions at the expense of their growth strategy.

Protesters rally in support of Houston Rockets manager Daryl Morey and against basketball player LeBron James in Hong Kong, China, 15 October 2019. Both NBA personalities have made comments on twitter regarding the protests in Hong Kong and its relationship with China in the last week, leading to both praise and outrage from different camps. Hong Kong has been gripped by mass demonstrations since June over a now-withdrawn extradition bill, which have since morphed into a wider anti-government movement.Protesters gather in support of Daryl Morey and against LeBron James in Hong Kong, China - 15 Oct 2019

Protesters rally in support of Houston Rockets manager Daryl Morey and against basketball player LeBron James in Hong Kong on Oct. 15.

VIVEK PRAKASH/EPA-EFE/Shutterstock

Apple TV+ shows are going to hit on a variety of topical themes, but don’t expect any of them to be critical of China. Apple’s upcoming streaming service made headlines late last week when BuzzFeed News reported that the company told some of its show developers to avoid angering the country, the latest news in a string of recent controversies regarding Western companies and their increasingly complicated relationships with China.

Although major American entities such as Apple, the National Basketball Association, and Irvine-based video game developer Blizzard Entertainment have done business with China for years, stateside discontent regarding those relationships has increased in the last few weeks in the wake of the ongoing Hong Kong protests. It’s creating a dynamic where companies have to choose between their morals and their bottom line – and growth, more often than not, wins.

Take the case of Apple. On one hand, China is an essential business partner for the company, as much of its tech is manufactured there, and it’s important for the two entities to maintain a profitable relationship. On the other hand, it’s apparent that if Apple continues working with China, it will be doing so in spite of its purported company values, according to Keybanc analyst Andy Hargraves.

“Their brand is about freedom, fairness and equality, and yet here they are supporting what is widely viewed as a suppressive regime,” Hargraves said. “Complying with the communist government of China is allowing them to export their view of the world to the rest of the world. The only way to settle that is to not comply, and if you don’t comply, you have to accept that you won’t do business there.”

Apple TV+ will not be available in mainland China, though the upcoming streaming service will be available in Hong Kong, according to Apple’s website. The company’s website notes that Apple media services available in China include its app store, Apple Music, Apple Podcast, and the Videos app. Apple recently removed an app from its iOS App Store that allowed Hong Kong protestors to track police.

Spokespersons for Apple, Blizzard Entertainment, and the NBA did not return requests for comment.

For Blizzard Entertainment, recent criticism has revolved around the company penalizing several professional video game players who expressed support for Hong Kong protestors, while the NBA came under fire after distancing itself from a since-deleted tweet from Houston Rockets’ general manager Daryl Morey that expressed support for Hong Kong.

Of course, not all American entertainment creators have backed off in the wake of Chinese pressure. The 299th episode of “South Park,” titled “Band in China,” which aired October 2, parodied the country’s strict censorship laws, which caused the Chinese government to ban the series in the country and scrub every mention of it from the Chinese internet. “South Park” co-creators Trey Parker and Matt Stone have since doubled down and have continued mocking the country in subsequent episodes, which is all rather remarkable since they are in the midst of a reported $500 million bidding war for the streaming rights to the show.

Though the duo declined an interview request for this article, they’ve made their thoughts on the issue clear in a string of recent tweets on the official “South Park” Twitter account, such as:

Still, “South Park” is somewhat of an outlier. For global-minded companies such as Apple, it’s financially critical for them to placate, rather than agitate, one of its most important business partners, according to Wedbush analyst Dan Ives.

“The most important thing is for China to remain a major growth market for Apple, and anything that could cause less disruption there is viewed as a positive from an investor perspective,” Ives said. “But there are negative perceptions associated with that, and Apple needs to manage that from a public perception. Most U.S. tech companies have not been successful in China, but there are a billion-plus consumers there, so there’s a lot of growth in China.”

Regardless, the recent news about American businesses taking steps to appease the Chinese government is not an indication of a new trend. American entertainment companies often allow their products to be censored or be recut for release in China, which often bans content that features graphic violence, blood, homosexuality, or other specific themes. “Suicide Squad” was reportedly banned in China due to its violence, while the country’s zombie ban allegedly stopped “World War Z’ from showing in China, among other reasons. Quentin Tarantino’s “Once Upon a Time in Hollywood” was blocked by censors a week before its scheduled release.

Last year’s “Christopher Robin” was also banned in China, as the country has a widespread ban on any and all things Winnie the Pooh-related—the anthropomorphic bear is something of a resistance symbol for Chinese citizens, who draw mocking comparisons between the character and China president Xi Jinping.

That said, if box office numbers are any indication, China is still a significant factor in the success of mainstream American films. Films such as last year’s “Tomb Raider” and “Pacific Rim: Uprising” performed better in China than they did in the United States, according to Box Office Mojo. And then there was 2016’s “Warcraft,” based on the hit strategy and massively multiplayer online Blizzard Entertainment games: The film didn’t crack $50 million at the domestic box office, but soared in China, with a total gross of over $225 million.

Warcraft

“Warcraft”

Universal Pictures

Although China has historically been a significant consumer of American media and some technology products, the balance of power is beginning to shift and doesn’t indicate that American companies are advantaged when working with China, according to Andrew Polk, a founding partner at Trivium China, which analyzes China’s political, economic, and technology sectors.

“For Apple, having an iPhone in the last 10 years instead of a phone from a cheaper, local competitor was a symbol of status as a Chinese person, but Chinese competitors have caught up,” Polk said. “The NBA has the ultimate leverage in that it is a completely unique product you can’t substitute with anything else. I think the Chinese government saw the reality of that and dialed its tone back because it knew it would force Chinese consumers to choose between the country and this other thing they really like. Most other companies don’t have that much leverage.”

Although some critics have made note of films that blatantly pander to Chinese audiences via product placements, throwaway character castings or random plot devices that bring the action to China (see: “Transformers: The Last Knight” and “Independence Day: Resurgence”), such things are comparatively benign to when American companies begin policing domestic consumers to stay in China’s good graces.

That concern has become especially relevant recently: After the aforementioned tweet from the Houston Rockets’ Morey, some NBA fans began bringing pro-Hong Kong signs to basketball games. Those signs were reportedly confiscated and some fans were kicked out.

These issues aren’t going to go away, and as China continues to bolster its economic power, American companies are going to need to begin addressing the fine line of ethical responsibility and financial profit, according to Polk.

“China’s system is creating censorship outside of China, and you also see this to some extent in the NBA with people getting kicked out of games for making Hong Kong signs,” Polk said. “For most businesses the big growth market is still Asia, centered around China, so from a business strategy, it makes sense. The question is, should companies be making moral or ethical decisions at the expense of their growth strategy, which I think is worth a debate.”

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