Easy like Sony Music – Major China music app NetEase sidesteps Tencent

By Elles Houweling

NetEase, one of China’s leading music streaming service providers, has struck a deal with Sony Music Entertainment to license music directly from the international music conglomerate. This move comes as a blow to Tencent Holdings which has long held supremacy in China’s music streaming industry.

Under the agreement, NetEase will make Sony Music tunes available to mainland Chinese users for the first time. A press release also states that “the companies will work together to explore innovative collaboration opportunities across the music value chain to bring elevated music experiences” to its users.

Previously, the three major international music companies – Universal Music, Sony Music and Warner Music – signed exclusive deals with Tencent Music in mainland China, giving the Chinese tech giant the decisive power to sublicence relevant content to other platforms such as NetEase, Alibaba and Xiaomi.

At a NetEase conference last year, CEO William Ding said in response to music copyright-related issues that the exclusive sales model of the three major international record labels had caused companies such as NetEase to pay two to three times more than the reasonable price.

Under the new agreement, Sony Music will have separate deals with NetEase and Tencent. The parallel deals follow similar arrangements made between Universal Music Group and the two Chinese streaming platforms in August last year.

This new move comes as yet another setback to Tencent Holdings, which has been facing heightened scrutiny from Chinese authorities in recent months. In March, Chinese officials slapped the company with a $77,000 antitrust fine for its investment in edtech company Yuanfudao.

A Reuters report showed that the company may expect a much more expensive fine later this year as part of the country’s antitrust crackdown. Part of the investigation focuses on its music spinoff, the report said, and regulators have informed Tencent that it should give up exclusive music rights.

On Monday, Tencent Music revealed a 6.4% decline in monthly mobile music users – excluding users on social media – in the first quarter, even as revenue rose a better-than-estimated 24%.