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Tencent Music Under Investigation By China’s Regulators

China’s State Administration of Market Regulation, in short, its antitrust watchdog, is now reviewing the Tencent Music’s deals with Warner Music, Universal Music Group and Sony Music Entertainment.

Music Press Asia: China's tech giant Tencent in talks with Vivendi to buy 10% stake of Universal Music Group whose artists include Marion Jola (pictured above), Ariana Grande and Lady Gaga.

Music Press Asia: China's tech giant Tencent in talks with Vivendi to buy 10% stake of Universal Music Group whose artists include Marion Jola (pictured above), Ariana Grande and Lady Gaga.

Report – China’s antitrust regulator is currently investigating Tencent’s exclusive deals, according to a report in Bloomberg published on August 27, citing concern over its music-licensing practices and possibility of threatening a competitive music market. 

In less than a month after a statement from Vivendi announcing its talks of parting 10% of Universal Music Group to Tencent, Tencent Music Entertainment Group is now back in the headlines. China’s State Administration of Market Regulation, in short, its antitrust watchdog, is now reviewing the firm’s deals with Warner Music, Universal Music Group and Sony Music Entertainment.

These deals have allowed Tencent to purchase exclusive rights to license the record labels music catalogs, often at a premium explained as “twice as expensive”, before sublicensing them back to rival music streaming services in China including Baidu, Alibaba and ByteDance.

According to insiders within the industry, the investigation — a reminder to China’s tolerance of the new economy champion’s gimmick may be declining — may have uncovered substantial motives that could ultimately bring an end to “exclusive licensing deals it forged with the world’s biggest record labels”.

Tencent holds licensing deals with UMG, Sony and Warner Music and has launched an IPO in December 2018. Sony and Warner Music already own shares in Tencent Music, therefore its investment in UMG would soon extend its monopoly to all three major labels.

Last year, Tencent Music was expected to pay around 4.37 billion RMB ($USD620 million) in royalties to record labels, a surprisingly low rate of just over $USD1 per existing user per year — Tencent’s second quarter this year reported a rise of 5% users, to 654 million Mobile Monthly Active Users (MAUs) and 31 million paying users.

On Aug 6, Vivendi confirmed that Tencent has put in an offer for 10% (worth over $USD3 billion) after a preliminary equity valuation of $USD34 billion on a fully-diluted basis of UMG. If the deal is finalized, Tencent would also have a one-year call option to acquire an additional 10% of UMG at the same price and terms.

Tencent Music is also home to other leading music streaming services including QQ Music, Kugou Music and Kuwo Music, Joox; and mobile application WeSing.

Photo credit: Indonesian singer Marion Jola is signed under Universal Music Indonesia has recently released her latest album self titled “Marion”. She launched to fame with single “Tak Ingin Pisah Lagi” which received over 19 million views on YouTube alone since its release in May 2019.

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