Tencent and Universal Music to take Chinese artists international under joint label

Digital home entertainment titan Tencent continues to drum up its music ambitions. On Tuesday, Tencent Music Entertainment, majority-owned by Tencent with a 55.6%stake, announced developing a brand-new joint label with its licensing partner Universal Music Group to find, develop and promote Chinese artists locally and to the world.

TME, which spun off from Tencent and went public in the U.S. in 2018, commands the lion’s share of China’s music streaming market through 3 apps– QQ Music, Kugou and Kuwo. It likewise runs other music-related businesses, consisting of live occasions and a popular karaoke app.

Although 651 million users streamed music through TME services in the 2nd quarter, just 47.1 million were paid subscribers, indicating a much lower conversion rate compared to Spotify, which did a share swap with TME in 2017.

Licensing fees use up a huge piece of streaming services’ expenses. Cultivating its own artists will offer TME more control over music material and eventually reduce reliance on content IP owners.

TME hopes that the new label will allow it to “produce new music enjoyed by the more youthful group, bringing in renowned music stars, ingenious music works and more advancement music categories to the international music market, eventually offering music fans in China and all over the world with an incredible music entertainment experience,” stated TC Pan, the group’s vice president of content cooperation.

The collaboration can potentially close “an indisputable gap between China’s music market and the rest of the world,” recommended Andrew Spalter, founder of East Goes Global, a firm bringing Western artists to China. “This collaboration further legitimizes China as the fastest-growing music market worldwide. The overall resistance in taking advantage of and collaborating within China’s music ecosystem is no longer an alternative for those who wish to be successful on a really worldwide scale.”

Brake with precedent

As part of the announcement, TME also said it signed a multi-year extension of its licensing agreement with UMG.

Concurrent with the news is, noticeably, UMG’s licensing offer with TME’s Chinese competitor NetEase Cloud Music. For years, TME had spent greatly on exclusive rights from UMG, Warner Music and Sony Music Home Entertainment.

The setup triggered an antitrust investigation into TME last year.

NetEase CEO William Ding has been a critic of special music rights.

Speaking on NetEase’s latest licensing tie-up with UMG, Ding remarked: “The collaboration even more enhances NetEase Cloud Music’s position as a go-to platform for high-quality worldwide music and marks an excellent advance for China’s music industry as a whole.”

Upgraded with expert talk about August 12, 2020.


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