Business News Digital

Alibaba invests into NetEase’s music service as rivals collaborate to take on Tencent

By | Published on Friday 6 September 2019

NetEase Cloud Music

Chinese web companies NetEase and Alibaba have announced an alliance in the streaming music domain. The competitors are presumably coming together on music services in a bid to take on their bigger rival in that sector, good old Tencent.

In a newly announced deal, Alibaba and the private equity fund of its founder Jack Ma – Yunfeng Capital – will together pump $700 million into the NetEase Cloud Music business.

Alibaba has its own music platform Xiami, but the Chinese music market is dominated by the Tencent owned services, and only NetEase Cloud Music is anyway close to the Tencent music apps in terms of user numbers.

Although NetEase will retain control of its music platform, in a statement confirming the deal Alibaba CEO Daniel Zhang said his company “looks forward to becoming a partner in the future development of NetEase Cloud Music and exploring innovative collaboration in the digital entertainment space”.

Alibaba isn’t the first NetEase competitor to invest into NetEase Cloud Music. Last year there was an investment from Baidu, a company which – despite being enemy number of the global music industry for years because of its MP3 search engine – had, at one point, been seen as the likely contender to lead the emergence of a legit digital music sector in China. But that was before the rise of Tencent’s music business.

Tencent, of course, also represents the major label catalogues in the Chinese digital sector, which further strengthens its position in a market where exclusivity deals between artists, labels and streaming platforms are more prevalent.

Although, under pressure from the Chinese government, the country’s web companies have got better at licensing each other most of the music catalogues they exclusively represent in the market, while a government regulator is also currently investigating whether those exclusivity deals should be allowed at all.

And, of course, the Tencent parent company is in talks to buy 10% of the Universal Music Group. Which, while on one level would even further strengthen its position in the music business, it might also result in Sony Music and Warner Music having second thoughts about their respective partnerships with Tencent Music.

So, there are probably some opportunities ahead for Tencent’s rivals in China and, it seems, they are currently thinking the best way to capitalise on those opportunities is together.

Alibaba’s investment in NetEase’s music service is part of a wider deal between the two companies that also sees the former acquire the latter’s e-commerce platform Kaola.