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Universal Music announces new deal with Tencent, but also a direct deal with NetEase

By | Published on Tuesday 11 August 2020

Universal Music

Universal Music, partly owned by Tencent, has announced a bold new licensing agreement with QQ Music, Kugou Music, Kuwo Music and WeSing, the Chinese streaming services owned by, well, erm, Tencent. What a coup!

“Through this extended partnership, Universal Music Group and Tencent Music Entertainment will further explore and expand their shared commitment to continued growth across the music market in China, in order to provide value for artists and great experiences for music fans”, the two companies said yesterday.

Under the deal, the major will continue to make its global catalogue available to the various subscription streaming services operated by Tencent – ie QQ Music, Kugou Music and Kuwo Music – as well as karaoke platform WeSing and some other livestreaming ventures.

To date, the latter have proven particularly lucrative for Tencent, with the music industry not really sharing in the revenues those service’s generate in any tangible way. It’s not clear if the new Universal deal with change that.

Beyond licensing Tencent’s existing services, the new deal also sees the two companies launch a new joint venture record label which will be, and I quote, “dedicated to reaching audiences across China through cultivating, developing, producing, and showcasing highly talented domestic artists and their premium original music”. Good times.

“We are pleased to extend and evolve our licensing agreement with TME for the Chinese market”, says Universal’s EVP of Market Development Adam Granite. “We look forward to working together with TME to help create compelling new experiences for fans across all TME platforms, and to expand on the opportunities available to UMG’s global and domestic family of artists in China”.

“I am delighted to announce this landmark win-win strategic cooperation with Universal Music Group”, added TME CEO Cussion Pang. “Supported by our hundreds of millions music lovers, powerful promotional channels, extensive user insights, as well as well-rounded digital music services, we have been a valuable partner for the industry to engage with music lovers”.

Despite the ongoing Universal/Tencent love-in, actually the much more interesting deal announced yesterday was between the mega-major and Tencent’s main competitor in the Chinese streaming market, that being NetEase Cloud Music.

To date the majors have not only licensed the Tencent streaming services, but also allowed Tencent to distribute their catalogues in the Chinese market. Which means Tencent’s rivals in China have had to try to negotiate licensing deals with their main competitor.

It was always a highly unusual and slightly controversial situation that could only really ever happen in a country like China. Though, even there, regulators have expressed some concerns about those arrangements in recent years.

Those concerns could have risen after Tencent announced its deal to buy 10% of Universal Music at the end of last year, which is possibly why now is a good time for the music major to drop the exclusivity deals in China and start dealing directly with the other streaming services in the country. And the obvious place to start is NetEase.

Confirming his company now had a direct deal with Universal, the boss of NetEase, William Ding, said yesterday: “This partnership further strengthens NetEase Cloud Music’s position as a go-to platform for high-quality international music and marks a great step forward for China’s music industry as a whole”.

“As leaders in music-based entertainment, UMG and NetEase Cloud Music share a commitment to encouraging creativity and innovation, respecting the power of artistry and exploring wider opportunities for the appreciation and enjoyment of the world’s most iconic, edgy and influential music”, he went on. “We are confident that the partnership will bring wider choice not only for music lovers and artists, but also for the industry”.

Confirming the NetEase deal from Universal’s side, the aforementioned Granite said: “We are delighted to enter into this licensing agreement with NetEase Cloud Music in China, and look forward to working together to create new opportunities for UMG’s domestic and international artists to reach music fans and premium subscribers across the country through NetEase”.

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