Tencent expands music streaming business with Universal Music Group pact

PUBLISHED : Tuesday, 16 May, 2017, 10:05pm
UPDATED : Tuesday, 16 May, 2017, 10:05pm

Tencent Holdings has forged a landmark licensing agreement with Universal Music Group (UMG) that is expected to significantly expand the internet giant’s digital music distribution business in China.

The multi-year deal will enable Tencent Music Entertainment Group, a unit of the Shenzhen-based company, to distribute UMG’s roster of record labels and global recording stars on its streaming platforms QQ Music, KuGou and Kuwo, according to their joint statement on Tuesday.

In addition, UMG and Tencent Music said they will work together to design, build and develop Abbey Road Studios China, a state-of-the-art recording and mastering facility inspired by the French-American firm’s iconic studio in London.

Financial terms of the joint initiative were not disclosed.

“Our partnership with the world’s leading music labels will further demonstrate our commitment to cultivating a vibrant ecosystem that benefits music lovers, artists and songwriters,” Tencent president Martin Lau Chi-ping said.

Tencent’s Joox music streaming service proves a hit across Asia

On the mainland, Tencent Music is one of the largest music platforms, providing more than 17 million songs to 600 million monthly active users. A strong advocate of authorised music distribution, the company has more than 15 million paying subscribers.

The agreement between Tencent Music and UMG has both parties working to develop artists, innovate business models and reinforce a robust copyright protection environment on the mainland.

“Given recent developments in technology and the commercial environment there, now is the right time for an innovative strategic partnership with a leading Chinese company like Tencent that can meaningfully accelerate the development of the country’s entire music ecosystem and, in turn, inspire growth in creative and commercial opportunities for all artists,” UMG chairman and chief executive Lucian Grainge said.

UMG is a subsidiary of the Paris-based media conglomerate Vivendi. It is one of the three major global record labels, along with Sony Music and Warner Music Group.

Michael Nash, the executive vice-president of digital strategy at UMG, pointed out the huge opportunity for digital music in mainland China, where there are more than half a billion people using smartphones.

“Chinese consumers are clearly embracing licensed services, fueling an expansion of China’s music economy,” Nash said.

Following its success on the mainland, Tencent has also quickly established a beachhead in key Asian markets with its popular Joox digital music-streaming service, according to a recent study from global consulting firm McKinsey.

Tencent first launched the Joox “freemium” app in Hong Kong in January 2015 to tap into the burgeoning demand for digital music across the Asia-Pacific. Its freemium business model provides basic services free of charge, while more advanced features are paid for.

While global heavyweights like Spotify launched its service earlier in Asia, McKinsey said Joox has been able to offer a larger library of local and regional content, such as K-pop, than Western competitors.