MBW’s Stat Of The Week is a new series in which we show why a single data point deserves the attention of the global music industry. Stat Of the Week is supported by Cinq Music Group, a technology-driven record label, distribution, and rights management company.
On the surface of it, MBW’s Stat Of The Week today is, we admit, laughably simple.
It’s the number 3.
That’s precisely how many new direct licensing deals Tencent Music Entertainment (TME) has announced for its digital services with US and/or European-based rightsholders in the past five days – and we expect many more to follow in the months ahead.
The first deal, announced on Monday (August 10) was struck between TME and the biggest music rightsholder of them all, Universal Music Group.
The second, announced yesterday (August 13), was with UK-born indie Cooking Vinyl, whose catalog includes the likes of Marilyn Manson, Nina Nesbitt, The Cranberries and The Prodigy.
And the third, announced earlier today (August 14) was with Kobalt Music Group, across its vast catalogs in publishing (including clients such as Childish Gambino, Dave Grohl, Enrique Iglesias, Marshmello, Max Martin and Paul McCartney) and recorded music.
We know these deals involved chunky advance payments; Tencent Music confirmed to its investors on Monday that, as part of its UMG pact, it will pay Universal a minimum guaranteed amount in cash, and that both parties will then share earnings once TME surpasses this revenue threshold.
We also know that these deals represent a change for Universal, Cooking Vinyl and Kobalt versus their previous – now expired – setups in China, all signed in 2017.
Universal’s old deal with TME meant UMG couldn’t license its catalog directly elsewhere in China (it now can); Cooking Vinyl’s old deal was an exclusive with Alibaba’s TME rival Xiami; and Kobalt’s old deal was an exclusive with TME’s biggest competitor, NetEase Cloud Music.
But there’s also something more surprising to take heed of here – something, especially for the likes of Spotify and Apple Music, arguably more important.
All three of these deals will see Tencent Music Entertainment, which is majority-owned by Tencent Holdings Ltd, potentially join forces with western music companies to actively develop artists, together.
This goes far beyond the empty descriptors (“innovative”, “collaborative”) we’re used to seeing dress up press releases about bog-standard streaming licensing deals between labels and platforms.
This is something else.
MBW’s Stat Of The Week: Tencent Music Entertainment has announced no less than three new deals with significant music rightsholders in the past five days; all of them involve agreements (or potential agreements) to develop artists together.
Universal Music Group’s case is the most straightforward to explain.
TME and UMG announced Monday that, in addition to their licensing agreement, they would be launching a JV label in China in order to “produce new music loved by the younger demographic, bringing in iconic music stars, innovative music works, and more breakthrough music genres to the global music market”.
Tencent already has a JV label with Sony Music, Liquid State, which launched in 2018 with a focus on developing domestic and international electronic music artists in China.
Amongst other successes, Liquid State has broken the billion-stream Chinese star CORSAK.
In a nutshell, then: the world’s two biggest major music rightsholders are now busy building jointly-owned music IP with China’s nearest equivalent to Spotify, which is itself majority-owned by Tencent Holdings.
Tencent Music’s other new deals in the indie world appear to contain (less formalized) joint artist-development plans, too.
Cooking Vinyl Chairman Martin Goldschmidt said he was hopeful that his company’s new TME agreement would open the door for “collaborations of our artists with Chinese artists” – suggesting that jointly-released records between CV and TME may help the former company’s acts to reach more Chinese music fans in the future.
Kobalt’s agreement, meanwhile, contains a number of intriguing additive elements beyond a mere licensing and distribution deal.
A press statement from both Kobalt and TME today reads: “In the future, the two parties will join hands in content, to deepen the development of music IP and explore potential new artists.”
Unlike Universal, there’s no official JV record label announcement from Kobalt here. But by “joining hands in content”, there’s clearly an expectation for shared A&R responsibility – and for shared investment in artists – between Kobalt and TME on the horizon.
TME says it’s also going to help Kobalt expand beyond standard music rights into live concerts and music festivals, in addition to live streaming, “in order to effectively meet the music needs of fans all over the world”.
It is interesting to contrast these deeply intertwined, artist development-minded relationships with Spotify’s most recent deals in the music industry.
SPOT’s new multi-year global deal with Universal Music Group, for example, appears to come with a commitment from the latter company to acquire a certain amount of on-platform marketing to push its artists.
Other than that, it’s a pretty straightforward global licensing agreement.
So why aren’t record labels signing joint artist development-type deals with Spotify, Apple Music et al outside of China?
One clue: When Spotify did start getting involved in artist development and artist rights – inking direct deals with acts and launching its own indie artist distribution service – the labels didn’t like it one bit. Their turf was being encroached upon.
Following a whole lot of teeth-gnashing in Major Land, Spotify U-turned on this strategy last summer by pulling out of indie artist distribution (having already acquired a minority stake in Distrokid).
Clearly, Tencent Music’s unrivalled power to break acts (whether local or international) in China gives it unique leverage when striking joint artist-based deals with US and European labels/publishers.
Crucially, Tencent can do so while keeping its these partners comfortable.
Perhaps music rightsholders understand that Tencent is more likely to aggressively promote artists on its platforms (QQ Music, Kugou Music, Kuwo Music and We Sing) if it has a fiscal interest in said artists’ careers.
Labels and publishers in the west know very well how to develop and break acts in most parts of the world.
But in China, it appears, they might need a little help – and they’re readily signing up to get it from the country’s dominant digital service provider.
Cinq Music Group’s repertoire has won Grammy awards, dozens of Gold and Platinum RIAA certifications, and numerous No.1 chart positions on a variety of Billboard charts. Its repertoire includes heavyweights such as Bad Bunny, Janet Jackson, Daddy Yankee, T.I., Sean Kingston, Anuel, and hundreds more.Music Business Worldwide