Yesterday (May 23), Xunlei, a company known as the Pirate Bay of China, filed for a US listing. This is its second try; it scrapped plans for a US IPO in 2011 due in part to concerns about rampant pirated material on its site.
Though the listing was largely unexpected, it’s the timing of Xunlei’s listing that’s raised some eyebrows.
Just days ago, on May 19, photos of a visit to Xunlei’s Shenzhen offices by Li Changchun—former head of media and propaganda, and one of China’s most powerful men—set the Chinese tech media a-buzz as they made their way around the web.
Li’s visit, in and of itself, isn’t strange; as China’s media czar, he frequently visited tech companies, including multiple visits to Huawei and Lenovo. Those events were widely reported in the media. That’s typical; not only do companies’ PR people want to boast about being singled out (pdf, p.10), but visits from Communist Party bigwigs typically confer approval and status that are certainly newsworthy.
No, what’s strange is that this time, hours after Li’s visit to Xunlei grabbed headlines, the articles disappeared—a sign that censors had instructed web editors to take the stories down. (Here’s one that remains, at least as of this writing.)
Why pull the articles? That’s even more puzzling. There was nothing in copies of stories we saved before they were zapped that indicated anything unusual about Li’s visit.
One obvious guess is that Li and the Party didn’t want him associated with Xunlei due to its tarnished reputation. True, it no longer operates Gougou, its most notorious search engine for pirate content. Xunlei’s core business has shifted to Kankan, a subscription-based portal offering supposedly licensed videos and games—sort of like Hulu meets an arcade—putting it in competition with much bigger and more prominent content-streaming sites like Youku Tudou, Tencent and Sohu. The fact that it recently landed big investments from tech leaders like Xiaomi and Kingsoft spiff up its reputation all the more (that said, Google has apparently parted with the 2.8% stake it held back in 2011).
However, it’s not clear whether Xunlei’s sordid past is entirely behind it, either. Xunlei still operates, and likely earns ad revenue from, the bit-torrent client that facilitates the user-to-user exchange of both pirated and pornographic material—one of the things that helped scuttle its 2011 IPO plans. Alleged copyright infringement on both Kankan (p.137) and Xunlei’s other platforms have invited 366 lawsuits (p.16) against the company since 2011, including 72 of them in 2013 and four so far this year.
That brings us to the other strange aspect of Xunlei’s timing.
Not a month ago, the Chinese government cracked down hard on exactly that sort of thing. It very publicly punished Sina, a leading internet company, and a web video company called Qvod, as well as disciplining more than 100 other internet sites. But not Xunlei. While that might seem surprising given its reputation, the company has somehow dodged even the lightest reprimand in similar crackdowns in the past.
Unlike in those previous crackdowns, however, Xunlei did, seemingly voluntarily, clean up its act somewhat. The day after Qvod’s investigation was announced, Xunlei disabled certain downloading functions and deleted the video libraries of some subscribers (link in Chinese). While that content was presumably illegal, its deletion nonetheless violated the terms of Xunlei’s user agreement, say media; an estimate posted on Tencent Digital tallies the refunded membership fees Xunlei would owe at around 400 million yuan ($64 million) (link in Chinese).
That’s not to say any of these events are necessarily connected. It does look, from the outside, as if Xunlei enjoys some sort of protection from official sanction. And if it does, that may or may not have something to do with its relationship with Li Changchun. And even if that’s the case, it’s not so unusual; having good “government relations” is a widely recognized asset among Chinese companies (e.g. while Tencent is thought to have central government support, Alibaba has the backing of the Hangzhou provincial government). Still, the fact that media were ordered to scrub evidence of his visit there is intriguing.