TikTok signs joint venture deal to end US ban threat

by Alex Pigman, with Luna Lin in Beijing

TikTok said Thursday it has signed a joint venture deal with investors that would allow the company to maintain operations in the United States and avoid a ban over its Chinese ownership.

The move caps a lengthy tussle over the hugely successful video-sharing app in the world's largest economy, where TikTok says it has more than 170 million users.

According to an internal memo seen by AFP, TikTok CEO Shou Chew told employees that the social media company and its Chinese owner ByteDance had agreed to the new entity.

Oracle, Silver Lake and Abu Dhabi-based MGX are on board as major investors, the memo said. Oracle's executive chairman Larry Ellison is a longtime ally of US President Donald Trump.

"The US joint venture will be responsible for US data protection, algorithm security, content moderation, and software assurance," Chew said in the memo.

"It will also have the exclusive right and authority to provide assurances that content, software, and data for American users is secure."

Chew told staff that half the US venture will be held by a consortium of new investors including Oracle, Silver Lake and MGX -- which will have 15 percent each.

Affiliates of existing ByteDance investors will own a touch over 30 percent of the venture, with Bytedance retaining just shy of 20 percent, the maximum ownership allowed for a Chinese company under the terms of the law.

TikTok Global's US entities will manage global product interoperability, and certain commercial activities, including e-commerce, advertising, and marketing, according to the memo.

Chew noted that there is more work to be done ahead of the January 22 closing date for the deal.

Ellison amassing media?

The new set-up is in response to a law passed under Trump's predecessor, Joe Biden, that forced ByteDance to sell TikTok's US operations or face a ban in its biggest market.

US policymakers, including Trump in his first presidency, warned that China could use TikTok to mine data from Americans or exert influence through its state-of-the-art algorithm.

Trump has delayed enforcement through successive executive orders, most recently extending the deadline into January.

The deal largely confirms a September announcement by the White House that said a new venture had been agreed with China and would meet the requirements of the 2024 law.

"If I could make it 100 percent MAGA I would, but it's not going to work out that way unfortunately," Trump told reporters after the TikTok announcement in September.

Trump in September had specifically named Oracle boss Ellison, one of the world's richest men, as a major player in the arrangement.

Ellison has returned to the spotlight through his dealings with Trump, who has brought his old friend into major AI partnerships with OpenAI.

Ellison has also financed his son David's recent takeover of Paramount and is involved in his son's bidding war with Netflix to take over Warner Bros.

Bytedance impact

Beijing's foreign ministry spokesman Guo Jiakun did not directly address reports of the deal, reiterating Friday that "China's position on the TikTok issue is consistent and clear".

Bytedance did not immediately comment, but experts said it was a compromise that had averted the blow of losing access to the lucrative US market.

"Keeping the US operation live is itself a victory" for Bytedance, Li Chengdong, founder of Chinese technology consultancy Dolphin, told AFP.

Settling the issue allows Bytedance to focus on new ventures including artificial intelligence projects, and could help it move towards an initial public offering (IPO), Li said.

Zhang Yi of technology research firm iiMedia said the US market was of "paramount importance to TikTok" but warned the deal did not guarantee smooth sailing going forward.

"The US side could still leverage its regulatory power... to impose unfair demands on TikTok," Zhang said.