China’s antitrust regulator is set to order the music streaming arm of Tencent Holdings Ltd. to relinquish its exclusive music rights, Reuters reported on Monday, citing people with knowledge of the matter. In addition to giving up exclusive rights to music labels, Tencent Music Entertainment Group (TME) will no longer need to sell its subsidiary apps Kuwo Music and Kugou Music.
Tencent Music will receive a 500,000-yuan ($77,228) fine for previously misreporting the acquisition of the two music apps, Kuwo and Kugou. In April, sources revealed that Tencent Music was ordered to sell the two music apps. In the same month, China’s State Administration of Market Regulation (SAMR) prepared to impose a huge fine on Tencent, with two sources saying that the penalty was expected to be at least 10 billion yuan. Sources also said at that time that Tencent was lobbying for a more lenient penalty.
Authorities at the SAMR announced on Saturday that it would block Tencent‘s plan to merge the country’s top two video game streaming operators, Huya Inc. and DouYu International Holding Ltd., after reviewing an antitrust declaration.
The SAMR began investigating TME in 2018 but stopped in 2019 after the company agreed to stop renewing some of their exclusive rights, which normally expire after three years, according to previous revelations from two sources with the knowledge of the matter. TME at that time had obtained exclusive streaming rights with major record labels such as Universal Music Group, Sony Music Group and Warner Music Group.
However, TME has retained exclusive rights to music from Jay Chou, one of the most influential and globally-recognized pop singers in the Chinese music scene, along with some other famous artists, giving it a strong competitive edge over smaller players in the market.
China began to curb the economic and social power of its domestic internet giants after the introduction of new anti-monopoly laws last year. In April 2021, the SAMR imposed a record fine of 18 billion yuan ($2.8 billion) on e-commerce juggernaut Alibaba, following allegations that it had abused its dominant market position for several years.
Tencent has also encountered choppy waters of late. Plans for a merger encompassing 37% shares of Huya and 38% shares of Douyu had been underway for three years – a potentially monumental development in the market – but the transaction was abruptly halted in the wake of an investigation by the SAMR.
The SAMR, Tencent and TME did not respond to requests for comment on Monday.