Tencent Music forced to give up exclusive label deals in China (report)

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

Anti-competitive watchdogs in China are set to instruct Tencent Holdings-owned Tencent Music Entertainment (TME) to give up the exclusive rights it holds to the catalogs of certain record labels in the nation.

That’s according to Reuters, whose report on the impending order follows an antitrust clampdown in China, where, in 2019, an investigation was launched into TME for striking exclusive licensing agreements with the three major record companies in the territory.

Citing two people “with knowledge of the matter”, Reuters also reports today (July 12) that China’s State Administration of Market Regulation (SAMR) will fine TME 500,000 yuan (approx. $77,150) “for lapses in reporting the acquisitions of apps Kuwo and Kugou”.

That’s a far more lenient outcome than some expected for TME.

In April, Reuters reported that China’s SAMR was set to hit TME 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.

Reuters reports today that regulators in China “will no longer require a sale [of Kugou and Kuwo] but will impose the maximum 500,000 yuan fine for not properly flagging the 2016 app purchases for antitrust review”.

However, Reuters adds that TME may or may not now face further antitrust penalties.

TME – the owner of China’s largest music streaming services – previously struck deals with Universal MusicSony Music and Warner Music that enabled it to license the majors’ music for its own platforms, but also to exclusively sub-license these catalogs to local rivals.

TME’s latest licensing agreements with Universal and Warner, each announced in the past 12 months, are also structured differently.

The firm no longer possesses an exclusive sub-licensing right, allowing these companies to also strike separate direct deals with TME’s main competitor in China, NetEase Cloud Music.

TME retained the exclusive rights to music from acts such as superstar artist Jay Chou however, and citing a source, Reuters states today that TME will also “be able to retain rights to music from some domestic indie acts” after the latest order.

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

In addition to Kugou and Kuwo, Tencent Music runs music apps in China including its flagship music platform, QQ Music, plus online karaoke service, WeSing.

In April, TME announced that its CEO Cussion Pang would be transitioning to the role of Executive Chairman of the Board of Directors, and that Zhu Liang (or Ross Liang) has been appointed as the company’s Chief Executive Officer and Board member.Music Business Worldwide