Tencent Just Became The Top Dog In China’s Online Music Market

Tencent has upped their stake in China’s leading music streaming company, China Music Corp., giving them the controlling stake in a company worth approximately $2.7 billion USD.

China Music Corp. (CMC) oversees two of the country’s most popular streaming services, Kugou and Kuwo, which merged resources with Tencent’s QQ music following the internet giant’s initial investment.

According to sources who spoke to the Wall Street Journal, Tencent’s stake has risen to 60 percent from 16 percent. CMC will operate as a subsidiary of QQ Music, and the combined business will be valued at approximately $6 billion USD. Chinese media reports suggest the transaction was a cash purchase.

Prior to the deal, CMC had been planning an IPO in the range of $300-600 million USD, though those plans have been halted.

China has recently stepped up the regulatory requirements for online music streaming platforms, forcing the services to comply with royalty laws and crack down on piracy. The move has caused rapid consolidation in the market, favoring the companies with deeper pockets.

Tencent’s latest acquisition puts them at the helm of what is now undoubtedly the largest music streaming empire in the country. Not only do the services under the partnership boast a large combined user base, they are also well distributed. Kugou and Kuwo have a significant audience in China’s underserved third and fourth-tier cities, giving Tencent access to an up-and-coming demographic of untapped users.

Alibaba and Baidu, Tencent’s two largest contemporaries in the Chinese market, have also worked on consolidating their respective music assets over the past year. In December, Baidu announced a merger between Baidu Music and traditional music company Taihe Entertainment Group. Last year Alibaba made a series of investments under their newly-created Alibaba Music Group.