Tencent plans online music business spin off
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Tencent plans online music business spin off

Chinese internet giant Tencent, widely hailed as the country’s dominant force in social media and online gaming, has announced plans to spin off its online music streaming service. That’s a sign, according to Bloomberg, that “the long-beleaguered recording industry is staging a comeback.” Tencent’s musical evolution also “mirrors inroads” by Spotify in the U.S., where streaming services have helped to rebuild record labels after “years of decline” pushing music sales to grow at their fastest rates since the 1990s.

Tencent’s share price has risen over the last five days

graph 1007 tencent

SOURCE: Yahoo Finance

Tencent did something similar with its online reading business last year, and its streaming music platforms (QQ Music, KuGou and Kuwo) are becoming crucial pipelines for western stars like Katy Perry and Taylor Swift to enter the Chinese cultural scene along homegrown stars.

He Saiyi, a Huatai Securities analyst, released a research report on Monday, in which he wrote: “The payment ratio will increase for digital music consumption in China in the long run. Tencent Music dominates the China market: it owns the most digital music copyrights in China and, in our view, has the most vibrant online music communities.”

In the American market, music sales rose 17% last year, making it the fastest pace of growth in 23 years. If China is about to see similar growth, Tencent is in a great position. The company dominates the online content world that includes not just recorded music but messaging and karaoke apps, games, and video streaming platforms. It also has licensing deals with over 200 international and domestic record companies.

According to The Financial Times, Tencent’s music business could be worth as much as $30 billion. Given that Spotify currently has a market value of $31 billion, that’s a sign of just how big Tencent’s music business already is.

Disclosure

Dominion holds Tencent in its Global Trends Ecommerce Fund.


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