Tencent Buying China Music Corp. – Creating Streaming Giant

China’s Tencent is understood to have acquired control of China Music Corporation. The company owns two of China’s leading music streaming businesses, Kugou Music and Kuwo Music.

A deal that values the firm, China Music Corp., at roughly $2.7 billion and creates a dominant competitor in China’s online-music market, people familiar with the matter said. Tencent, China’s biggest social-networking and online-games company, which also runs its own music-streaming service, will boost its stake in China Music to about 60% from 16%, one of the people said.

As recently as last month China Music Corporation had reportedly been headed for an IPO in the U.S., where smaller share listings are cheaper than in Hong Kong or China and where the IPO pipeline is not blocked by China’s securities regulator. According to the Wall Street Journal it had been seeking to raise $300-$600 million.

Tencent has not confirmed the deal, but Chinese media report that it is expected to inject its own QQ Music platform into the China Music Corporation business.

Tencent, China’s biggest social-networking and online-games company, which also runs its own music-streaming service, will boost its stake in China Music to about 60% from 16%, one of the people said.

The deal turns Tencent into a clear market leader in China’s online-music market, as it brings together the country’s top three mobile-music applications owned by the two companies. CMC owns Kugou and Kuwo, while Tencent operates QQ Music. Kugou is the largest mobile-music service in China, with a 28% market share, followed by QQ Music’s 15% and Kuwo’s 13%, according to data from research firm iiMedia Research.

China’s music industry – where consumers strongly favor listening on mobile devices – remains fragmented. Consolidation is occurring as a result of regulatory changes which emphasize copyright owners’ interests. In the past couple of years that has encouraged more platforms to either switch off free services or reduce the amount of free content, driving users to switch to premium subscriptions and paid for services.

Tencent’s move to consolidate and strengthen its position in the music sector follows only a few weeks after Tencent agreed to pay $10.2 billion for mobile games company Supercell.

Tencent, which is listed in Hong Kong and which controls the massive QQ and WeChat social media platforms, currently has a market capitalization of US$218 billion.

Source: Yahoo, WSJ