Universal Music Group (UMG) has made a giant move in China.
Music from the world’s biggest record company will now be distributed via Tencent Music Entertainment Group (TME) in the region via its streaming platforms QQ Music, KuGou and Kuwo.
In addition, Tencent will exclusively sub-license UMG’s content to third-party music service providers in the region.
(As we’ve previously noted, this would be a little like Spotify or Apple Music striking deals that allowed them to license major label music to its competitors in other parts of the world.)
Furthermore, UMG and TME will work together to design, build and develop Abbey Road Studios China, a ‘state-of-the-art recording and mastering facility’ linked to UMG’s iconic recording studio in London.
Despite recent rumors that Tencent was keen to acquire a minority stake in UMG, the new agreement does not involve any equity exchange.
Universal previously licensed services directly in China.
UMG and Tencent say they will work together to find new ways to develop artists, expand business models and reinforce a robust copyright protection environment in China.
Tencent provides over 17m songs to 600m monthly active users in China, and boasts more than 15m paying subscribers across its services.
“With more than 80 years of history in China, UMG has been engaged in the unique evolution of the country’s music business and I’m looking forward to working with Tencent to bring exciting new artists and services to music fans across China.”
Sir Lucian Grainge, UMG
Sir Lucian Grainge, Chairman and CEO of Universal Music Group, said, “We’re looking forward to working with Tencent as we develop local Chinese artists and repertoire, as well as global stars, in this dynamic and expanding music market.
“With more than 80 years of history in China, UMG has been engaged in the unique evolution of the country’s music business and I’m looking forward to working with Tencent to bring exciting new artists and services to music fans across China.
“Given recent developments in technology and the commercial environment there, now is the right time for an innovative strategic partnership with a leading Chinese company like Tencent that can meaningfully accelerate the development of the country’s entire music ecosystem and, in turn, inspire growth in creative and commercial opportunities for all artists.”
According to the latest IFPI stats, China’s recorded music market generated $202.2m in 2016, up 20.3% on the prior year.
The world’s 12th biggest recorded music territory, a whopping 96% of its revenues last year were digital.
Martin Lau, President of Tencent, said, “We are honoured to be UMG’s master distribution and licensing partner in China. With extensive user reach and deep industry knowledge, TME is the partner of choice for the music industry to engage with music lovers. Our partnership with the world’s leading music labels will further demonstrate our commitment to cultivating a vibrant ecosystem that benefits music lovers, artists and songwriters.”
Michael Nash, Executive Vice President of Digital Strategy at UMG, commented, “The digital opportunity in China’s music market is truly extraordinary, with over half a billion people enabled with smart phones. Our expansive new partnership with Tencent will enable UMG to fully address this opportunity, especially with the growing success of QQ Music, KuGou and Kuwo.
“Chinese consumers are clearly embracing licensed services, fueling an expansion of China’s music economy, increasing the importance of this market internationally and accelerating the development of Chinese artists for the enrichment of China’s culture and the enjoyment of audiences globally.”
“The digital opportunity in China’s music market is truly extraordinary, with over half a billion people enabled with smart phones. Our expansive new partnership with Tencent will enable UMG to fully address this opportunity, especially with the growing success of QQ Music, KuGou and Kuwo.”
Michael Nash, UMG
Cussion Pang, CEO of TME, said, “Leveraging UMG’s resources and our distribution capabilities, we can provide a rich and personalized experience to hundreds of millions of music lovers in China. This strategic agreement will further strengthen our efforts in copyright protection and shift the industry towards the paid subscription model.
“In addition, with the establishment of Abbey Road Studios China, we will work together with UMG to help local artists produce top-quality recordings for distribution in China and across the world. ”
Lang Lang, the star recently signed to UMG’s Deutsche Grammophon, commented, “I’m thrilled that UMG and Tencent are working together to create more ways for Chinese audiences to access music.
“There are so many incredibly talented musicians and songwriters working in China today and this new partnership will provide greater exposure for Chinese musical culture and heritage here and around the world. In particular, I am excited about the creation of Abbey Road Studios China, a true investment in the next generation of great Chinese artists.”Music Business Worldwide