This week we are going to talk about how China is censoring US companies. Now this might be a topic you have heard is going on. But I do not think most people realize how shocking the impact is on US businesses today. If you are in business school today, I really hope your business professors are talking to you about this topic, because this is an example of real world situations you will be faced with in the business world. WATCH NOW!
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VIDEO SUMMARY
There have been a lot of examples of China’s censorship of US companies. Now how can one country censor another country’s companies? I want to focus on one specific instance that just happened to illustrate what is going on, and why it is such a concern.
This situation has to do with a US company called Activision. Activision is one of the largest video game companies in the world. One of their top selling video games is the Call of Duty franchise. Call of Duty is a “shooter” game where you play as an American soldier on different missions. There have been several versions of the game since 2003. The most recent version being released in the next few months is Call of Duty: Black Ops Cold War. This game has some historic aspects because it features military missions taking place during the Cold War era.
Last month, Activision released a trailer for the new game showing historical news footage of Cold War conflict. This included footage of the Chinese massacre in Tiananmen Square in 1989. One week after this trailer was released, on August 21, the video was taken down, re-edited, and a new trailer was uploaded back to the internet. The trailer went from 2:02 to a length of 1:00. The edit removed the Tinananmen Square footage, as well as other foreign footage. The new trailer focuses on news footage shot in America to represent the Cold War conflict.
At first, no one in America noticed the change. The first people to notice was people in Hong Kong, who are currently experiencing a takeover by China. They noticed when the footage of Tiananmen Square went missing and reported it in the South China Morning Post and Apple Daily. Apple Daily is the same newspaper ran by Jimmy Lai. Jimmy Lai, along with multiple members of the newspaper, were just arrested as part of China’s crackdown over Hong Kong. The takeover of Hong Kong is going on right now, and people noticed that Activision edited their trailer, they reported on it, and now people around the world are talking about it. The news was trending on Twitter. The new trailer on YouTube has over 13 thousand comments and almost all of them are negative about the edits. The greatest hypocrisy of the entire situation is the trailer is titled “Know Your History” and Activision removed video footage of one of the greatest massacres of our lifetime.
For my younger viewers, let me quickly explain the Tiananmen Square massacre. This happened during the Cold War. The Cold War was a period of conflict after WWII. Europe was destroyed and there was a power vacuum with two major super-powers remaining, the United States and Russia. These countries had two very different philosophies. The United States is a democracy, and Russia is a communist tyranny. This is a huge difference. In the United States, if you do not like your leaders, you can vote them out of office. The United States has a Presidential election coming up this November. If you do not like the President, you can vote him out. In Russia, Putin has been running the country for more than 20 years. Now technically, Russia holds elections, but they do not seem to be having any impact and Russia has received a lot of criticism from the international community that their elections are unfair. In a communist country, if you criticize the government, you get thrown in jail. Please realize the difference here. Imagine getting thrown in jail in the US, if you criticized the President. It is a completely different way to live. This tension is what the Cold War was about.
China was aligned with Russia during the Cold War (and still today). They are both Communist tyrannies, ruled by one party that can never be voted out. In 1989, there was a lot of unhappiness in China. The economy was poor, there was a famine, and people were unhappy. People wanted the right to vote, and remove the failing government. People wanted Democracy instead of Communism and started to protest. The protestors, mainly college students, started gathering in Tiananmen Square in Beijing. The government sent in 300,000 troops to shut the protests down. Chinese troops fired on and killed their own Chinese citizens. The number of deaths has never been fully determined, but the more reliable sources give an estimate of around 2,000 people were shot and killed with many more wounded. These people were killed because they asked for the right to vote. This is how China deals with people who criticize the one-party Communist system.
Let us bring this back to the topic of censorship. The Tiananmen Square massacre is one of the most censored topics in China. You are not allowed to talk about it. The images I just showed you, cannot be viewed in China. This video could not be shown in China.
Now let us talk about Activision’s role in all of this. Activision is making a Call of Duty game about the Cold War. And fitting with the subject matter, they created a trailer containing footage from Tiananmen Square. One week after posting a trailer containing the video footage of Tiananmen Square, they re-edited the footage. They censored this trailer, not just for China, but for the entire world.
Now just to be clear, the act of censorship is alleged, because we do not know what went on behind closed doors at Activision. We do not know if this was a direct request from China, or who made the changes. All we know is that there was an original trailer, it was taken down, and re-edited. It is possible that the trailer was altered for reasons that had nothing to do with China, although I cannot imagine what that reason could be. But there was some business decision that was made here. Someone in Activision decided to do this, for some reason.
You should also know, this is not the first time Activision has done something like this. Last year on October 6, 2019, Activision banned a gamer name Blitzchung. This was a gamer playing in a tournament for an Activision game called Hearthstone. Blitzchung lives in Hong Kong and is directly experiencing the takeover by China. Blitzchung made a statement during an interview saying “Liberate Hong Kong, the revolution of our times.” Because of this statement, Activision banned him from the tournament and took away $4,000 in prize money. Activision claimed he broke the rules of the tournament by saying something that “offended the public.” This is a gamer, who is losing his freedom of speech from China’s takeover of his hometown, and Activision banned him for speaking up during the tournament. US Senators Republican Marco Rubio and Democrat Alexandria Ocasio-Cortez co-authored a letter to Activision pleading with the company that they should not punish their gamers for supporting human rights. After public pressure, Activision gave the gamer back his winnings and reduced the ban to six months.
For the current issue, let me offer a hypothetical situation of what could have happened to the trailer. Again, this is alleged, because we do not know what happened behind closed doors at Activision.
Imagine Activision releases the trailer with the Tiananmen Square footage. Someone from the Chinese Communist Party picks up the phone and calls the CEO of Activision. China gives Activision an ultimatum. They tell the CEO to censor the Call of Duty trailer, or they will not be able to release any video games in China.
The CEO then has a decision to make. 1) Edit out the footage 2) Lose all revenue from all Activision’s many different games in the Chinese market.
Again, this is alleged. We do not know what happened here. But something did happen. This was not something criminal. No laws were broken, but it is unethical. And we know it is unethical, because there are so many people upset about this. It looks like Activision is covering up China murdering their own people. And it looks like Activision is covering it up in order to make more money. And what is so disturbing about this is they are performing this coverup with a video game about the Cold War, and a trailer titled “Know Your History.”
Think about the hypothetical situation I laid out. Put yourself in the shoes of the CEO. If you were the CEO of Activision, and you got a call from China, what would you do? Millions of dollars are at stake. Hundreds of employees’ livelihoods are on the line that you are responsible for. What would you do? We are only talking about one minute of a trailer. Probably no one will even notice. How much money would it take for you to cover up murder?
I will tell you my opinion. I think what Activision did here was unethical. I do not think this is the end of the world for Activision. This was a bad business decision. I think they should just come out and explain what happened, and put the original trailer back up. Because otherwise, it shows that they do not care about the video game content they are selling. They are making decisions based only on the money.
I recognize that it is difficult being a global company dealing with different countries with different values. These are complex and complicated issues. But that is even more reason to have a deep understanding of your own ethics in order to make these tough decisions. And any ethical values should start with the value of human life. Just think a moment about the parents that are still grieving the deaths of their children who were murdered by the Chinese government. How are those parents supposed to feel about Activision covering up the murder of their children so they could sell a few more video games?
There is a big risk here for Activision in making unethical decisions. Shooter games are a very competitive market. Gamers have a lot of other options of similar shooter games they could buy instead of Call of Duty. If Activision is showing they do not care about their own content, why should gamers buy their game?
Activision is a publicly traded company. If I were a shareholder, I would demand answers. I would want to know who made this decision? Why? And how much money was at stake? If anything, this is a situation, that will show how this company makes ethical decisions. If Activision so easily makes unethical decisions in editing a trailer, how are they making decisions about their financial statements?
I did review Activision’s financial statements. In 2019, Activision’s net revenues for the Asia Pacific region was $909M (or 14% of company revenue). Let us assume half of this was from China. If someone was offering you a check for $450M, would you cover up murder?
Business ethics are important for a very simple reason. People do not want to do business with unethical companies. Customers do not want to buy products from unethical companies. So if a business is throwing ethics out the window to make a quick buck. They could also be setting up the company to fail in the long-term.
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Neither Zach De Gregorio or Wolves and Finance shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.