Spotify China Partner Tencent Music's Global Ambitions

Spotify China Partner Tencent Music’s Global Ambitions

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BEIJING, China (Hypebot) — Tencent is building a global streaming empire. Back in December 2017, Tencent Music did a 10% equity swap deal with Spotify and now it has led a $115 million investment round for India-based streaming service Gaana. India may only be a small subscription market, with just 1.1 million paid subscribers at the end of 2016, but it one dominated by local players and has massive free streaming potential. Tencent now has major streaming stakes that give it reach across Asia, Europe and the Americas. The key missing parts are the Middle East and North Africa (Anghami is probably waiting for the phone to ring). Right now, Tencent has a streaming foothold in the world’s three largest countries:

  1. China: population 1.4 billion. 100% ownership of QQ Music, Kugou, and Kuwo which together account for 70% of subscribers
  2. India: population 1.3 billion. Undisclosed ownership of top three streaming service Gaana
  3. US: 330 million. 10% ownership of leading subscription service

What Tencent is doing is building a global network of strategic positions in the streaming market that individually might not have global influence, but, collectively could be brought to bear to in an impactful way. Much like John Malone’s Liberty Media, Tencent is taking minority stakes in a strategically selected portfolio of companies. This provides it with the ability to exert some degree of influence and extract some benefit without the risk and resource required for a majority ownership. Minority stakes can also be used as beachheads for majority ownership further down the line.

In some respects, Tencent does not have a huge amount of choice in the matter. Last year the Chinese government placed restrictions on the amount Chinese companies could spend on overseas companies, in order to slow the outflow of capital from China. But, rather than let this be a hindrance Tencent is now using the policy to shape a bold internationalization strategy. Coupled with other minority investments (12% in Snap Inc., 5% of Tesla) Tencent is positioning itself to be kingmaker in the future of digital media.

By Mark Mulligan of MIDiA and the Music Industry Blog 

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