Tencent Buying China Music Corp. (Report)
China’s Tencent is understood to have acquired control of China Music Corporation. The company owns two of China’s leading music streaming businesses, Kugou Music and Kuwo Music.
The transaction is understood to be an all cash affair, according to Chinese media. Terms were not disclosed. Prior to the deal Tencent was understood to be a minority shareholder with a stake over 10%.
As recently as last month China Music Corporation had reportedly been headed for an IPO in the U.S., where smaller share listings are cheaper than in Hong Kong or China and where the IPO pipeline is not blocked by China’s securities regulator. According to the Wall Street Journal it had been seeking to raise $300-$600 million.
Tencent has not confirmed the deal, but Chinese media report that it is expected to inject its own QQ Music platform into the China Music Corporation business.
Tencent owns or licenses music from local and international studios, including Sony Music and Warner Music. In January its QQ Music relicensed titles to Kugou and Kuwo, and in a swap deal, increased its own roster at the same time. In April QQ Music licensed some 1.5 million titles to another rival NetEase.
China’s music industry – where consumers strongly favor listening on mobile devices – remains fragmented. Consolidation is occurring as a result of regulatory changes which emphasize copyright owners’ interests. In the past couple of years that has encouraged more platforms to either switch off free services or reduce the amount of free content, driving users to switch to premium subscriptions and paid for services.
Tencent’s move to consolidate and strengthen its position in the music sector follows only a few weeks after Tencent agreed to pay $10.2 billion for mobile games company Supercell.
Tencent, which is listed in Hong Kong and which controls the massive QQ and WeChat social media platforms, currently has a market capitalization of US$218 billion.
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