Alibaba to acquire 20% of NetEase Cloud Music, say sources (UPDATE)

Huge news: Tencent is about to get some seriously strong competition in the streaming music space in China.

Alibaba Group – the giant multi-national conglomerate with a current market cap of $465bn – is set to acquire 20% of NetEase Cloud Music after making an investment in the company in the region of $2bn.

That’s according to sources close to NetEase Cloud Music, which completed a $600m Series B funding round in October last year, including backing from the likes of Baidu and General Atlantic.

If Zhejiang-based Alibaba comes through with its expected near-$2bn investment, sources say that NetEase Cloud Music will secure a go-forward valuation of around $9bn.

UPDATE: In the end, Alibaba did acquire a minority stake in NetEase Cloud Music, but for less money than expected: the firm has invested $700m, it’s confirmed, in a funding round alongside Yunfeng.

When you consider that Spotify‘s market cap on the New York Stock Exchange currently sits at around $24bn, and that Tencent Music Entertainment (TME)’s current market cap is close to $21bn, the deal would appear to put NetEase Cloud Music in contention as one of the true power players of the global music streaming market.

NetEase Cloud Music was founded in 2013 and boasts over 800 million registered users. When the firm’s $600m funding round was secured last year, according to reports out of China, it obtained a $3.5bn valuation.

Last year, NetEase Cloud Music inked a partnership with Alibaba’s Xiami music streaming service – ostensibly a rival – in order to share libraries and grow their respective repertoires.

That move was widely seen as an attempt to strengthen both platforms against Tencent Music Entertainment, owner of QQ Music, Kuwo and KuGou.

Monthly users of TME’s mobile music services hit 652m in Q2, according to its investor filings.

However, TME is currently under investigation by China’s antitrust authority, which is reviewing the company’s status as an exclusive sub-licensing partner of Universal Music Group, Sony Music Entertainment and Warner Music Group in the territory.

TME’s majority parent, Tencent Holdings Ltd, recently made a €30bn ($33bn) bid to acquire 10% of Universal Music Group from the latter company’s Paris-based parent, Vivendi.

Led by CEO Zhu Yiwen, NetEase Cloud Music enjoys a reputation outside of China for actively breaking both international and independent artists in the region.

In December 2017 Kobalt’s publishing division and its AWAL recorded music operation signed a deal to license and distribute its catalog via NetEase Cloud Music.

Kobalt boss Willard Ahdritz recently told Music Business Worldwide: “NetEase gives us data where other major players out there do not. We demand more than just a check from China; we need data, so we know who to pay.

“NetEase has more than 450 million users, and 30% of what they play is international music. That’s an interesting sign of what will happen in China; driven by the younger generation, international music will become bigger than it is today.”

Alibaba is also believed to be getting close to acquiring NetEase’s cross-border e-commerce unit, Kaola, in a separate $2bn deal.Music Business Worldwide

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