China Literature, which is both China’s leading online bookstore and owner of one of the country’s top TV producers, swung from profits of $55 million a year ago to net losses of $465 million in th…
Its regulatory filing was a massive mea culpa, cataloging management failures across both business sectors. Earlier this year, China Literaturew faced a near revolt from authors worried by its planned changes at the online library. That prompted the sidelining of several senior managers and the parachuting in of Edward Cheng Wu, CEO of Tencent’s film business Tencent Pictures, in March.
Cheng’s comments on the literature operations were abject. “We failed to take full care of our writer’s feelings and support our writers adequately through our incentive program, and some of our writers expressed concern about previous versions of the writer’s contract,” he said. “Last year, we launched our free reading app Feidu as a supplement to our paid reading products.
Worse was to come in the IP division, which spans New Classics Media and sales of physical books. Both sides of its business were hurt by the various coronavirus lockdowns across China. The company booked $622 million of impairment losses relating to the October 2018 acquisition of New Classics Media. These were offset to the tune of $175 million by earn out payments that it will not now have to make. Other long-term investments needed a further $35 million of impairment charges.
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