Universal Music signs Tencent deal for China expansion


China may just be the most fascinating digital-music market of 2017: a status enhanced by yesterday’s announcement of a partnership between Universal Music Group and tech giant Tencent’s Music Entertainment group (TME for short).

The deal will see TME distributing UMG’s music on its QQ Music, Kugou and Kuwo streaming services, as well as sub-licensing its catalogue to other music services in China.

Universal artists will also benefit from promotion across Tencent’s non-music services, while the pair are promising to work together “to develop artists, to innovate business models and to reinforce a robust copyright protection environment”.

The potential scale here is clear: TME claims to be serving music up to 600 million monthly active users, although that conflicts slightly with the presentation by China expert Ed Peto at our recent NY:LON Connect conference, when he suggested that the entire Chinese online-music market was around 502 million people.

In that speech, Peto noted that QQ Music had a 39% market share in terms of users, while Kugou had 28.8% and Kuwo 9.6% – so 77.4% for Tencent overall.

Allying that dominance with the world’s biggest music label group will surely spark some concerns, although this isn’t the first such deal for Tencent.

In late 2014, it announced a similar distribution and licensing partnership with Warner Music Group, while in October 2016 it also renewed its strategic distribution partnership with Sony Music.

Adding Universal undoubtedly reinforces Tencent’s power in the market, but what that means for other streaming services – as well as for other labels – will be important to watch.

Stuart Dredge

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