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Tencent Music Entertainment Group will establish a joint music label in China with Vivendi-controlled Universal Music Group, the world’s biggest music company, under their new pact. Photo: Shutterstock
Tech

Tencent’s grip on music streaming in China weakens after NetEase-Universal deal

  • The pact with NetEase lets its subscribers get Vivendi-controlled Universal Music Group’s full roster
  • Tencent Music Entertainment Group’s separate deal with Universal Music extends a current licensing agreement by multiple years
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NetEase struck a deal to license songs from Universal Music Group for the first time, a move that will further Beijing’s effort to dismantle Tencent Holdings’ commanding lead in Chinese music-streaming services.
The world’s biggest music company said it has agreed to license tunes to both Tencent Music Entertainment Group and closest rival NetEase, ending an exclusive arrangement with China’s dominant music-streaming platform. Tencent Music’s shares dropped 2 per cent in New York, but its parent gained 3.5 per cent in Hong Kong after falling two straight days.

The move gives NetEase new ammunition in a fight against Tencent.

China’s antitrust authorities had investigated Tencent’s dealings with the world’s three biggest record labels, but the investigation was suspended this year, people familiar with the matter said in February.

Tencent acquires stake in newly public Warner Music Group

The pact with NetEase lets its subscribers get Vivendi-controlled Universal Music’s full roster and the two will work on ways to let customers interact with artists.

Tencent Music’s separate deal with Universal Music extends a current licensing agreement by multiple years, and the duo will establish a joint music label in China, according to a separate statement. Financial terms were not disclosed.

Universal Music, Sony Music Entertainment and Warner Music Group Corp have all sold exclusive rights to a major chunk of their music catalogues to Tencent Music, which is backed by Sony and Warner.

Tencent Music then sublicences that content to smaller platforms, including those operated by NetEase, Alibaba Group Holding and Xiaomi Corp. Alibaba is the parent company of the South China Morning Post.
Nasdaq-listed internet company NetEase operates China’s second-largest music-streaming service, NetEase Cloud Music. Photo: Handout

Competing platforms like NetEase have to “pay two to three times the reasonable cost” for content under such arrangements, NetEase chief executive William Ding Lei said on a February earnings conference call.

Tencent Music’s revenue grew 17.5 per cent in the second quarter to 6.93 billion yuan (US$981 million), beating analysts’ estimates.

“We are excited to work together in the years ahead, to help our artists continue to achieve new levels of success in China,” Sunny Chang, chairman and chief executive of Universal Music Greater China, said in the statement.

This article appeared in the South China Morning Post print edition as: NetEase in music deal with Universal
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