Indie labels sign landmark deal in China – and, unlike majors, they’re not going exclusive with Tencent

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The story of the recorded music industry’s recent relationship with China has been, up until now, a fairly consistent one.

Over the past few years, Universal, Sony and Warner have all signed exclusive licensing agreements with the market’s media giant, Tencent.

These agreements, which have no doubt all come with nice fat advance checks, ultimately give Tencent sub-licensing control of these companies’ music libraries in the territory.

This means that the $500bn+-valued corporation, which just so happens to own the market’s biggest music streaming platforms, is ultimately in control of where major label-owned music ends up.

(Last year, under pressure from the Chinese government, Tencent signed a licensing deal with its biggest rival in the region, Alibaba, which ensures it is actively sub-licensing the repertoire – but the widely-held assumption was it didn’t do so gleefully.)

Now the independent label sector has struck a landmark deal in China and, unlike the major record companies, has shunned any opportunity to sign an exclusive licensing agreement with a major platform.

Instead, digital agency Merlin – which says its combined membership commands over 12% of the global digital recorded music market – has signed non-exclusive partnerships with Tencent as well as its rivals, Alibaba and NetEase.

This means that indies represented by Merlin have agreements in place with China’s five leading digital music services: NetEase Cloud Music (NetEase Cloud Music), Xiami (Ali Music Group), QQ Music, Kugou and Kuwo (all Tencent Music Entertainment).

Merlin says that each partnership is uniquely structured, with ‘incentives to build new infrastructures to promote future growth and provide accurate usage reporting, alongside substantial marketing opportunities for participating Merlin members’.

Between them, the services are said to reach an estimated audience of half-a-billion people, offering high-fidelity repertoire to paying service subscribers, and delivering low-fidelity versions to users of free-to-access ad-supported tiers.

“I am delighted that NetEase Cloud Music, Ali Music Group and Tencent Music Entertainment share Merlin’s confidence and aspirations to develop a new market narrative, and to lay the foundations and infrastructures of a more open, transparent and equitable future.”

Charles Caldas, Merlin (pictured)

Charles Caldas, Merlin CEO, said: “This is an exciting new chapter for Merlin. For the first time, repertoire from the world’s leading independent record labels will be legitimately available across China’s five most prominent music services. I am delighted that NetEase Cloud Music, Ali Music Group and Tencent Music Entertainment share Merlin’s confidence and aspirations to develop a new market narrative, and to lay the foundations and infrastructures of a more open, transparent and equitable future.

“Above all, Merlin members are now uniquely positioned to benefit from a set of truly transformative partnerships that will accelerate growth in one of the world’s most exciting and fast-evolving markets.”

Mathew Daniel, VP International, NetEase Cloud Music, said: “This is a significant step forward for music licensing in China – we are pleased to be working with Merlin as it leads the independent music community to better nav-igate, promote and monetize their music in China. With the largest consumption of international music in China being via NetEase Cloud Music, this will open up a new audience base to these artists whilst introducing more great music to our users.”

A spokesperson for Ali Music’s copyright division said: “Ali Music has been focused on the development of independent music for many years, having launched pioneering initiatives such as the ‘Searchlight Project’ to support music creators.

“Now, through a strong partnership with Merlin, Ali Music will provide a new development opportunity for independent music from around the globe.

“This deep, multi-faceted partnership between Merlin and Ali Music, covering copyright monetisation, promotion of content, supporting and development of independent musicians and much more, will provide a better platform and experience for independent musicians and fans of independent music.”

Merlin has partnered with China-headquartered industry services company Outdustry to implement and manage the deals on an ongoing basis from their Beijing and Shanghai offices. Merlin will also employ its own on-the-ground resources.

Merlin acts on behalf of more than 20,000 independent record labels and distributors from 53 countries, including the likes of Beggars Group, Secretly Group, Domino, Sub Pop, Epitaph, Entertainment One, Kobalt Music Recordings, [PIAS] and INgrooves.Music Business Worldwide

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