Tencent(s)

 

Earlier this year, K-Pop all-girl sensation Blackpink received the Tencent Music Entertainment Award for Best overseas group. That would be overseas as in — outside of China: Tencent Music happens to be the leading music corporation in mainland China, owning and operating exclusive rights on about 80% of all music available on the Chinese market. This juggernaut emerged from the 2016 acquisition of the China Music Corporation by Chinese tech giant Tencent, owner of QQ and WeChat, two of the leading social media platforms in the country, amounting to hundreds of millions of active users — each.

You may be a giant, that still does not make you invincible — especially in a country where the authorities have a particularly wide reach. Last week, China’s official regulatory body ordered Tencent Music to relinquish exclusivity on its catalog, deeming its position on the market to be overly monopolistic. Although the company quickly answered that it would comply with the official request, its shares nevertheless stumbled on the Hong Kong stock exchange in fear of what was to come.

There are many interesting sides to this bit of information:

• on the surface, regulators’ decision appears to be a fairly sound one: after all, Tencent Music does control an incredibly important part of the music business in China, operating several streaming services with an unparalleled exclusive catalogue. Breaking that position would seem like a positive action for users, as other companies could offer similar services, perhaps with better conditions;
• there is however a clear political message underlying the official economic one: Tencent Music was cleared for merger back in 2016 although every indicator pointed towards a monopolistic position, given that Tencent’s then-QQ Music division and China Music Corporation both amounted to 30-40% of the overall market. Conversely, recent pushback from Chinese authorities against a possible TikTok IPO overseas sounds eerily similar to this scenario: it seems fairly obvious that the Chinese government wants to ensure it effectively controls the nation’s most powerful tech corporations, those powerful enough to hold political weight…
• interestingly, Tencent Music’s monopoly over Chinese streaming services is not as strict as you may think. For one, the company signed contracts with the world’s leading music labels, including all 3 majors (Universal Music, Sony Music, Warner music) and many more. Moreover, Spotify (i.e. the world’s leading streaming service) controls a significant chunk of the company’s shares, amounting to nearly 50% in 2018. In other words, it’s not quite Tencent Music against the world, more like Tencent Music with the world…

At the end of the day, the Tencent Music story is yet another example of the Chinese government flexing its muscles when confronted with tech corporations of ever increasing magnitude. We have yet to find out how the full story will unfold; in the meantime, let’s hope Chinese music fans will get more/cheaper music out of this…