Two of the world’s most popular online music streaming services are buying shares in one another.
Spotify, the world’s largest music streaming platform and the Chinese media giant Tencent, bought minority stakes of just under 10% of each other in December 2017.
With 140 millions users all around the world, Spotify domines the Western market of whom 60 millions are paying subscribers, while Tencent, with these 3 platforms – KuGou, QQ Music & KuWo – count 15 millions subscribers on 700 millions users.
The whole issue for Tencent is to persuade these consumers to spend a few yuan per month for their music platform.
In music streaming, Tencent is in a particularly favorable position.These three platforms are the first three in the market
- KuGou, the first on the market, owes its success to China’s small towns and countryside, with very popular songs that make singing in karaoke and dancing in public squares.
- QQ Music is more classic
- KuWo is also a hit in karaoke and stands out on the live streaming of music videos
The partnership with Spotify should allow the company to expand its catalog. In September, Tencent had already reached an agreement with its local competitor, Xiami, owned by Alibaba (fifth in the market), the online commerce giant in China, to share their music rights and offer richer content to their subscribers.
Finally, for these two leaders, this investment should allow them to reinforce their catalog and their ability to negotiate licenses with music production companies : Universal Music, Sony Music & Warner Music. Morever, the goal is to “create a dynamic music ecosystem that is good for users, artists and content owners” said Cussion Pang, head of Tencent Music.
Spotify and Tencent Music each have an IPO in 2018. Spotify could reach $20 billion in value, against Tencent Music’s $10 billion.