Asian Tech Press (Sep 1) -- Tencent Music Entertainment Group (NYSE:TME), the music streaming arm of Tencent Holdings Ltd (700: Hong Kong), announced Tuesday that it has given up its exclusive music licensing rights after Chinese regulators issue an order.
Tencent Music released a statement on Tuesday evening local time on its WeChat official account platform about giving up its exclusive rights to license music copyrights.
The statement said it had sent relevant letters to all upstream copyright holders with whom the company had entered into exclusive agreements, informing them of the need to terminate their contracts on schedule. As of August 23, 2021, the vast majority of these exclusive agreements have been terminated as scheduled.
The company sent a statement on August 23, 2021 to those upstream copyright holders that failed to terminate their agreements on time, expressly relinquishing its exclusive music licensing rights and informing the relevant upstream copyright parties that they could license music rights to other operators on their own.
It means that Tencent will continue to cooperate with upstream copyright holders in a non-exclusive manner. And Tencent made this decision at the behest of the State Administration for Market Regulation (SAMR), China's top market regulator.
In January 2021, based on complaints, the SAMR launched an investigation into Tencent's 2016 acquisition of a stake in China Music Corp. for suspected violations of the law regarding concentration of business operators. The acquired party owned the well-known music platform KuGou as well as Kuwo.
On July 24, 2021, the SAMR issued the Decision on Administrative Penalties for Tencent Holdings Limited's Illegal Implementation of Concentration of Undertakings in the Acquisition of Equity Interests in China Music Corporation.
According to the Decision, Tencent was required to rescind the exclusive agreements it had reached with upstream copyright holders within 30 days, stop paying high prepayments and other copyright fees, and not to ask upstream copyright holders to grant it better conditions than its competitors without valid reasons. These measures are intended to restore the state of market competition.
The Decision mentioned that Tencent and China Music Corp. had relevant market shares of around 30% and 40% respectively in 2016. Tencent gained a higher market share by merging with its main competitors in the market, and the entity held more than 80% of the exclusive music resources after the concentration. Tencent's acquisition of China Music Corp. further weakened market competition.
In addition to requiring Tencent to relinquish its exclusive music licensing rights, the SAMR imposed a fine of 500,000 yuan ($77,342) on Tencent and required it to report annually for three years on the fulfillment of its obligations to declare concentration of undertakings and compliance operations.
In response to Tencent's statement, William Ding, founder and CEO of NetEase Inc, said during a conference call following its 2021 Q2 earnings release, "We saw the announcement that Tencent Music has given up its exclusive rights to music copyrights. we highly expect that this is a sincere and heartfelt decision that does not contain double-dealing."
NetEase (Cloud) Music, the music unit of NetEase, Tencent Music's biggest rival in China, filed its IPO with the Hong Kong Stock Exchange in May this year, and on August 1, it passed the HKEx listing hearing. A week later, the music streaming platform decided to suspend its IPO plans.
NetEase responded that based on the consideration of the current market environment and other factors, the company's management decided to suspend the IPO, and will choose a better time to promote IPO-related matters as soon as possible.
"We also call on record labels to create a healthy industry together with an open and fair philosophy, and to open licensing. We are willing to work with the utmost sincerity, and we have sufficient funds, to start a wide range of licensing cooperation with each record company to build the Chinese music market together." Ding added.
