Tencent Music Ordered to Give Up Exclusive Online Music Licensing Rights, Benefiting Competitors

(Source: ACG)

The Chinese State Administration for Market Regulation (SAMR) announced Saturday that Tencent Music will face a string of punishments in the interests of safeguarding market competition in the audio streaming sector.

The antitrust regulatory body ordered Tencent and its affiliated companies to relinquish exclusive music licensing rights within 30 days, cease using payment methods for copyright fees such as high prepayments, and to not require upstream copyright parties to offer conditions superior to competitors without justifiable reasons.

Tencent was also ordered to report its fulfilment of these obligations to the SAMR annually over the coming three years, allowing regulators to strictly supervise its implementation according to law. In addition, Tencent was slapped with a fine of 500,000 yuan ($77,000).

Tencent and the China Music Corporation held about 30% and 40% of the market in 2016, respectively, according to the SAMR announcement. Tencent has gained a higher market share and owns more than 80% of the exclusive music library resources by merging with its major competitor.

This is the first case in which legal measures have been taken to restore market competition since the implementation of China’s Anti-Monopoly Law.

SEE ALSO: Tencent Music to Give Up Exclusive Music Rights as Chinese Authorities Intensify Antitrust Push

Tencent responded that it will maintain healthy competition in the market, formulate rectification measures within the required time period, and complete the changes according to the requirements of the penalty.

At the same time, Netease Cloud Music expressed in a statement that it supports the SAMR’s decision, and will for its part operate in compliance with laws and regulations, banning the behavior of inflating copyright prices.

Domestic media outlet Leidacj noted that the Tencent Music Entertainment Group (TME) is the product of a digital music business merger between China Music Group (CMC) and QQ Music under Tencent in 2016. TME, a company that went public in the US in 2018, is valuated at $18.28 billion as of July 23, lower than its valuation at the time of listing.

On the consumer side, Tencent Music owns the exclusive copyright of some famous Chinese musicians. Therefore, some music lovers need to pay on several platforms to hear the music they like.

On the market side, Tencent Music has signed exclusive copyright agreements in the Chinese mainland with the three major international music companies, namely Universal Music, Sony Music and Warner Music, allowing them to sub-license the relevant content to other platforms. As a result, other music platforms need to pay two to three times more than the reasonable price if they want to purchase the copyrights.

Nowadays, copyright competition has changed, which is undoubtedly good news for other competitive platforms, and the cost of consumers will be further reduced. For this reason, in the secondary market, many investors believe that breaking the exclusive copyright situation with Tencent Music will help Netease Cloud Music go public independently.

According to another source, Bytedance set up its own music division in early 2021. Zhu Jun, vice president of product and strategy at ByteDance and former head of TikTok, recently took over the business and led Resso, an overseas music product by Bytedance.