Tencent Holdings and its majority-owned music arm Tencent Music Entertainment have been ordered to relinquish any exclusive deals held with global labels in China.
Today’s news confirms our article from earlier this month, which, citing a Reuters report, stated that the competition regulator in the territory was planning to instruct TME to give up the exclusive rights it holds to the catalogs of certain record labels in the nation.
China’s State Administration of Market Regulation (SAMR) has now officially carried out this plan, issuing the exclusive deal ban as well as a fine on Saturday (July 24).
According to the South China Morning Post, Tencent has been fined the surprisingly lenient sum of 500,000 yuan (approx $77,000) by SAMR and given a 30 day-deadline to give up its exclusive deals.
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.
The company – the owner of China’s largest music streaming services – is still permitted to keep its exclusive deals with independent artists, with a time limit of three years for such agreements, according to the SCMP.
Today’s news follows an antitrust clampdown in China, where TME was investigated in 2019 for striking exclusive licensing agreements with the three major record companies in the territory.
TME previously struck deals with Universal Music, Sony 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 inked its latest licensing agreements with Universal and Warner in the past 12 months and 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.
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 its fine and exclusive label deal ban, Tencent will now have 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.”
China’s State Administration of Market Regulation
“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.
Added the statement “It is conducive to promoting a reasonable way to calculate copyright fees in line with international standards and reducing downstream operating costs.
“It is conducive to cultivating new market entrants and creating a fairer competitive environment for existing enterprises to ensure Consumers’ right to choose, [which] will ultimately benefit consumers and promote the healthy development of the online music industry’s normative innovation.”
“[We will] comply with all the regulatory requirements, fulfill our social responsibilities and contribute to healthy competition in the market.”
Tencent responded to SAMR’s decision with a statement that reads, “[We will] comply with all the regulatory requirements, fulfill our social responsibilities and contribute to healthy competition in the market.”Music Business Worldwide