Tencent Music Partners with All Three Major Record Labels

Tencent Music Strengthens Partnerships with Major Record Labels

Tencent Music Entertainment (TME) is reinforcing its relationships with the leading record label companies – often referred to as the “big three” – which serve as its primary licensing partners.

On Tuesday, TME revealed the formation of a new joint label in collaboration with Warner Music Group. This follows previous agreements established with Universal Music Group in August 2020 and Sony Music Entertainment in early 2018.

Leveraging Global Resources and Local Influence

According to TME, this partnership will capitalize on Warner Music’s extensive global network and expertise in artist development. It will also utilize TME’s substantial reach within mainland China’s dynamic music and entertainment landscape.

The joint venture with UMG shares a similar objective: to promote international artists within China, a rapidly expanding music market, and to facilitate the international exposure of Chinese musicians.

Licensing Agreement Extension

In addition to the joint label, TME and WMG have formalized a multi-year licensing agreement. This agreement represents a continuation of their decade-long collaborative relationship.

TME maintains ongoing licensing arrangements with all three major record labels, and these relationships have, in some instances, evolved into equity stakes.

Notably, a consortium led by Tencent increased its overall stake in UMG to 20% in January.

TME’s Dominant Market Position

TME operates several of China’s most widely used online music platforms. Its suite of streaming applications, including QQ Music, Kugou Music, and Kuwo Music, collectively reached 622 million mobile monthly active users by the end of the fourth quarter.

While user engagement is high, the proportion of paying subscribers remains relatively modest, at 9% during the quarter, an increase from 6.2% in the prior year.

Social Entertainment as a Key Revenue Driver

TME distinguishes itself from Western streaming services, such as Spotify, through a significant secondary revenue stream: social entertainment.

This segment encompasses the karaoke application WeSing, which generates revenue through the sale of virtual gifts. Users purchase these gifts to show appreciation to performers, mirroring traditional fan-idol interactions.

Social entertainment contributed $854 million to TME’s Q4 revenue, exceeding the $423 million generated from user subscriptions and digital music sales.