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Rolling over

April 02, 2006

IT HAS BEEN YEARS, IF NOT DECADES, since Rolling Stone was considered the bible of the counterculture. But the magazine may have won back some hippie cred with its premiere issue in China, which came out in March, sold its entire print run -- and promptly found its license revoked.

This is not a censorship issue. It's a business problem. Rolling Stone did not violate any ideological restrictions of the Communist Party; it merely got caught up in irrational regulations and manic competition, which are the main hazards in doing business in China today. In principle, China says it welcomes investors, but in practice it requires them to be contortionists and jump through hoops.

After long negotiation and preparation, Rolling Stone unveiled its first China issue with a cover featuring Cui Jian, the godfather of Chinese rock 'n' roll, and a long article on Mu Zimei, a blogger who became popular writing in lurid detail about her sex life. Nothing overtly political, and only mildly risky by Chinese standards. The issue quickly sold 125,000 copies. At the first sign of success, however, Rolling Stone's partner made new financial demands and apparently ran crying to officials, who suspended publication. What happens next is unclear.

Overall, the magazine landscape in China looks promising, like many sectors in its booming economy. A growing urban population with ever more disposable income is spending on magazines. Ad revenues grew by 18% in 2005, to roughly $600 million, and appear poised to grow for several years.

Yet Beijing, paranoid about Western infiltration, refuses to issue magazine licenses to foreigners. Instead, officials regularly look the other way when a company such as Conde Nast buys a license for an existing Chinese magazine and remakes it into Chinese Vogue. Many of the 60-odd foreign publications in China, including Rolling Stone, have used this tactic.

Trouble is, that approach requires having a Chinese partner, who is typically all smiles at the beginning of a business relationship but starts frowning when real money begins coming in. Then talk of "proper procedure" and "regulations" starts cropping up -- all negotiating ploys dressed up in legalese.

U.S. companies going into China -- such as Google and Microsoft -- wrestle with the question of how to comply with China's authorities. In a few cases, free speech is at stake. More often, hard-knuckle business tactics are at play. And sometimes the two intersect. The path to success is treacherous and requires smart negotiation and constant supervision.

It is a lesson learned the hard way at Rolling Stone, which is now mostly a symbol of celebrity culture. But every culture deserves a magazine worthy of its celebrities. Maybe they could put that on the cover of the next issue of the Chinese Rolling Stone.

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