Tencent axes all exclusive label deals in China following antitrust clampdown

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December 12, 2018: The New York Stock Exchange is decorated for the first day of trading for Tencent Music Entertainment.

Tencent Holdings and its majority-owned music arm Tencent Music Entertainment have ended all exclusive deals held with global labels in China.

After being hit with an exclusivity ban by China’s State Administration of Market Regulation (SAMR) in July, Tencent published a statement on WeChat on Tuesday (August 31) announcing that as of August 23, it had officially written to all “upstream copyright” holders to end their exclusive agreements.

In July, Tencent was fined 500,000 yuan (approx $77,000) by SAMR and given a 30 day-deadline to give up its exclusive deals in China, following an antitrust clampdown in the nation.

TME was investigated in 2019 for striking exclusive licensing agreements with the three major record companies in China.

As reported by the South China Morning Post in July, the company, home to music streaming services including QQ Music, Kugou Music and Kuwo Music, is still permitted to keep its exclusive deals with independent artists, with a time limit of three years for such agreements.

According to Tencent’s announcement, the company is giving up the right to exclusive deals with relevant music copyright holders “except for the case where the exclusive cooperation period with independent musicians does not exceed three years, and the exclusive release period of new songs does not exceed 30 days”.

Tencent also states that the company “will continue to cooperate with the upstream copyright party in a non-exclusive way, and will negotiate with the upstream copyright party on non-exclusive cooperation matters”.

In addition to the fine and exclusive label deal ban, Tencent is required to report to China’s SAMR on “the performance of its obligations” every year for the next three years.

“Ordering Tencent to lift its exclusive copyright [deals] and other measures will reshape the relevant market competition order, lower market entry barriers, and provide competitors with fair access to upstream copyright resources,” said SAMR in a statement in July.

In April, Reuters reported that TME would be hit with a fine of at least 10 billion yuan ($1.54 billion) and that the company may also be forced to sell off its Kugou and Kuwo music apps to competitors.

Tencent Music Entertainment previously inked deals with Universal MusicSony Music and Warner Music, and these agreements enabled it to license the music from the majors for its own platforms, in addition to exclusively sub-licensing these catalogs to local rivals.

TME inked its latest licensing agreements with Universal and Warner in the past 12 months without an exclusive sub-licensing right, allowing these companies to strike separate direct deals with rival companies in China, including TME’s main competitor, NetEase Cloud Music.

NetEase inked licensing deals with Warner Chappell Music in May 2020, UMG in August 2020 and then Sony Music Entertainment in May this year.

“[NetEase Cloud Music] is willing to carry out extensive authorized cooperation with various record companies.”

William Ding, NetEase

Responding to a question about TME’s relinquished exclusivity on NetEase’s Q2 earnings call on Tuesday (August 31), the company’s CEO William Ding stated that it sends a “very clear, positive and exciting signal for the music industry”.

He added: “[NetEase Cloud Music] is willing to carry out extensive authorized cooperation with various record companies with the utmost sincerity and sufficient funds to jointly build the Chinese music market.”

Music Business Worldwide