Fox spirits and demons: China's tech giants splash out in cartoon arms race

HANGZHOU, China (Reuters) – Growing up in the Chinese port city of Dalian in the 1990s, Zhang Hongchang spent hours immersed in Japanese cartoons like Dragon Ball and Naruto.

People walk past a booth of NetEase Comics at the China International Cartoon and Game (CCG) Expo in Shanghai, China July 6, 2017. REUTERS/Stringer

China’s home-grown cartoons paled in comparison to the Japanese anime series on television and in comic books that captured the imaginations of Zhang and his generation.

Today, Zhang is one of China’s hottest cartoonists and at the forefront of a new wave of Chinese animation that is being driven by the country’s technology and internet giants. His latest hit comic – which stars a high school student who is also a Taoist priest with secret super powers – has been viewed 160 million times online.

China’s tech firms are engaged in a cartoon arms race to develop or buy Chinese characters in an animation market expected to hit 216 billion yuan ($33.22 billion) by 2020, according to the EntGroup consultancy, trying to emulate the success of Walt Disney Co’s (DIS.N) ensemble, which ranges from Mickey Mouse to Iron Man.

A key to that effort, has been the development of artists like Zhang.

“When I started, I was copying Japanese cartoons, but slowly I got my own style,” Zhang said in the Hangzhou studio where he draws comics that are made available to readers on a platform operated by the local gaming firm NetEase Inc (NTES.O).

“I had to spend a lot time getting to understand the Chinese market and what Chinese comic readers wanted.”

Chinese tech giants like Tencent Holdings (0700.HK), Baidu Inc (BIDU.O) and NetEase are trying to figure out the same thing.

Part of the winning formula has been the use of traditional Chinese religious and cultural themes, and characters. That, and improved quality in terms of art and storytelling, helped China’s comic and animation market reach 150 billion yuan last year, according to EntGroup’s estimates.

China still lags behind the Japanese and American markets, but is catching up. Japan is the top producer of animation, while the United States dominates in terms of sales, taking a nearly 40 percent share of the global industry, estimated at $220 billion in 2016, according to a report from Research & Markets. China had around 8 percent that year.

For Chinese companies, the development of compelling series and characters could also open up new business opportunities that companies like Disney have exploited, like branded theme parks, games, movies, TV shows, lunch boxes and clothes.

“To make it work there have to be good stories, good production, and content that can resonate with consumers,” said Xu Zhiwei, animation and comic copyright senior manager at Tencent in Beijing.

Tencent is already seeing some success that could help the firm maintain rapid growth and a high valuation.

The gaming-to-social media company bought up “Fox Spirit Matchmaker”, which depicts romances between humans and demons, when it was a little-known comic, created by an artist called Xiao Xin.

The comic has been developed into an animation series that’s been viewed more than 3 billion times, Tencent told Reuters, making it one of the hottest hits on its video platform, which has over 60 million paying subscribers.

Tushan Susu, the animation’s main character, has been featured in a commercial for the fast food chain KFC (YUM.N) (YUMC.N). Tencent is now looking to create a television series and a video game using Fox Spirit characters.

LOCAL HEROES

China’s tech giants play an outsized role in Chinese entertainment. Tencent, the search company Baidu, and Alibaba, the e-commerce giant, control most of the top online platforms from movies to sport, and are dominant in social media and online gaming.

These firms are looking to latch on to a surging sub-culture being driven by a young generation with a taste for animation, called “dongman” in Chinese. This group is keen for more local-style heroes, according to industry executives.

They are also wealthier than their parents were, and have money to spend.

“Youngsters, especially the post-2000s, are very willing to spend money,” Geng Danhao, senior vice president at Baidu’s online streaming platform, iQiyi, said at an event in Beijing.

Zhang Tuo, a 21-year-old college student in Sichuan, said he had spent more than 7,000 yuan on comic-related merchandise, from plastic figurines to t-shirts. His favorites are local comics like Spiritpact and Monster List. Tao Jie, 20 a student in the southwestern city of Chengdu, said Chinese cartoons had improved in terms of story lines and animation technique. The use of local tales was also an attraction, he said.

“A lot of the Chinese comic and animation are developed from online novels that I have already read. I like them because I’m already a fan of the stories,” said Tao.

That shift has been helped by supportive government policies to ensure that peak-time television slots are kept for domestic animation.

The big tech firms are starting to spend, though not yet at the level of Disney, which bought Pixar Animation Studios for $7.6 billion, as well as Marvel Entertainment, and the Star Wars producer Lucasfilm Ltd for around $4 billion each.

Tencent has invested in more than a dozen comic and animation companies since last year, according to public records, while its film arm launched a “100 animations” project to support domestic productions.

Baidu’s iQiyi (IQ.O), is also splashing out on domestic comics, planning to spend 200 million yuan to sign Chinese artists and develop local characters, which comes on top of an earlier investment in 10 animation projects, the company said in May.

Alibaba and the news aggregator Toutiao have snapped up production companies and launched animation platforms on their own sites. NetEase signed a deal last year with Disney to create Marvel style superheroes, but with Chinese characteristics.

Luo Qiandan, marketing director of NetEase Comics, said the firm was using big data from its platform to analyze what comic consumers wanted and would feed this back to artists.

It was also adopting other elements such as Chinese brush painting techniques and religious themes.

“Everybody is trying to use Chinese elements and Chinese style,” she said.

Reporting by Pei Li in BEIJING, Adam Jourdan in SHANGHAI and Anita Li in HANGZHOU; Editing by Philip McClellan

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Apple Admits to Sticky MacBook Pro Keyboards, Will Fix Them for Free

MacBook and MacBook Pro laptop owners with flaky keyboards can get them fixed for free and receive refunds for out-of-warranty repairs they have already made, Apple said today. The company has extended the warranty for keyboards for nine affected models released starting in 2015 to four years from the usual one year.

In a statement provided to Fortune, an Apple spokesperson said, “Today we launched a keyboard service program for our customers that covers a small percentage of keyboards in certain MacBook and MacBook Pro models which may exhibit one or more of the following behaviors: letters or characters that repeat unexpectedly or don’t appear when pressed or keys that feel ‘sticky’ or aren’t responding in a consistent manner.”

The laptop models affected rely on a new key switch design Apple introduced in 2015 with a complete revision of its MacBook laptop and brought to the MacBook Pro in an overhaul in 2016. The so-called “butterfly” keys allowed for a much lower-profile keyboard with reduced travel distance when pressed. Many users disliked the feel compared to standard “scissor” switch laptop keys. Beyond finger feel, the shorter travel distance also increased the likelihood that trapped grit—even small particles of dust—could lodge in place, preventing a key or keys from working.

The cost of out of warranty repair can be as high as $700, as keys can often not be repaired singly. Replacing the keyboard as a whole requires swapping out the entire top side of the main laptop body.

Apple currently faces three lawsuits over the keyboard flaw. Its offer to pay for repairs to the keyboard already performed may affect these suits, but no settlements were announced today.

It has been impossible to date to know how rare the problem is, as Apple doesn’t disclose rates of repair. In October 2017, technology journalist Casey Johnston wrote about her pervasive problem with a MacBook Pro’s keyboard, and said Apple repair technicians (known as Geniuses) repeatedly chalked it up to dust. Johnston spoke to an anonymous source at a company that provides MacBook Pros to its users, who said the problem was extensive but below 5% of laptops.

Apple posted special cleaning instructions for laptops with butterfly key switches in 2017, but no other information. Jason Snell, editor of Six Colors and former editor-in-chief of Macworld magazine, wrote in April 2018, “Apple’s relative silence on this issue for existing customers is deafening.” Snell called for a recall if the problem was pervasive as it seemed.

In April 2018, Johnston wrote a follow-up story that even after a replacement of her first keyboard, problems arose again, and she sold the laptop back Apple. She recommended against purchase of any butterfly-key models. (This reporter owns a 2015 MacBook with the butterfly design, which had its keyboard replaced in 2017 under a three-year paid warranty extension due to the key faces wearing off across all its most-used keys.)

Apple said affected customers can receive service at no charge via a retail Apple Store, through Apple’s mail-in repair program, or through an Apple-authorized service provider. If a laptop has other damage that has to be fixed before the keyboard can be replaced, Apple said in its service program page that a charge may apply.

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Amazon Employees Want Jeff Bezos to Stop Selling Rekognition to Law Enforcement, According to Report

Amazon employees are asking CEO Jeff Bezos to stop selling Rekognition facial recognition technology to law enforcement, and to kick the data mining company Palantir from Amazon Web Services, according from a report from Gizmodo.

In the letter circulating the company, which was obtained by Gizmodo, employees wrote that they are “troubled by the recent report from the ACLU exposing our company’s practice of selling AWS Rekognition, a powerful facial recognition technology, to police departments and government agencies.”

Rekognition was released in 2016, and according to an Amazon blog post from that year, Rekognition can scan and recognize images including people, pets, scenes and objects.

“You can use Rekognition in several different authentication and security contexts,” the blog post explains. “You can compare a face on a webcam to a badge photo before allowing an employee to enter a secure zone. You can perform visual surveillance, inspecting photos for objects or people of interest or concern.”

In a May letter to Bezos, the American Civil Liberties Union along with more than three-dozen other organizations demanded that Amazon stop selling Rekognition services to law enforcement agencies. The ACLU also released documents and a report criticizing Amazon’s marketing to law enforcement, and Rekognition’s use at a police department in Orlando, Florida and the Washington County Sheriff’s Office in Oregon.

The letter from Amazon employees to Bezos also cites President Donald Trump’s “zero tolerance” policy at the U.S. border as a cause for consternation.

“In the face of this immoral U.S. policy, and the U.S.’s increasingly inhumane treatment of refugees and immigrants beyond this specific policy, we are deeply concerned that Amazon is implicated, providing infrastructure and services that enable ICE and DHS,” the letter reportedly states.

Amazon employees also called for the company to not provide services to companies — like Palantir — that partner with Immigration and Customs Enforcement. Fortune contacted Palantir for comment.

Employees are not alone in voicing their unease. Earlier this week, 19 Amazon shareholders wrote a letter (which was posted publicly by the ACLU) to Bezos about Rekognition. It reads in part:

“In addition to our concerns for U.S. consumers who may be put in harm’s way with law enforcement’s use of Rekognition, we are also concerned sales may be expanded to foreign governments, including authoritarian regimes. Without protective policies in place, it seems inevitable the application of these technologies will result in Amazon’s Rekognition being used to identify and detain democracy advocates.”

When reached for a comment, Amazon pointed Fortune to a blog post written by Dr. Matt Wood, general manager of artificial intelligence at AWS, following the release of the ACLU report:

“Each organization choosing to employ technology must act responsibly or risk legal penalties and public condemnation.” Wood wrote. “AWS takes its responsibilities seriously. But we believe it is the wrong approach to impose a ban on promising new technologies because they might be used by bad actors for nefarious purposes in the future. “

The Amazon employees’ letter is the latest in a trend of employees at large tech companies sharing ethical concerns about the use of products. Employees at both Google and Microsoft have recently objected to contracts with the Department of Defense and ICE, respectively. Google said it would not renew its contract with the DoD. Microsoft discussed its contract with ICE in an email to employees.

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