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China crisis? Indie sector voices concern
about ‘power play’ by Tencent and UMG Independents raise competition fears in growing Chinese market as major forms strategic deal with DSP
BY ANDRE PAINE
IMPALA is to formally oppose the proposed investment by Tencent Holdings in UMG, Music Week can reveal.
The decision was taken at the European independent labels trade body’s board meeting this month, amid growing concerns about the impact on competition in the streaming market. IMPALA executive chair Helen Smith said: “Even at a low level of shareholding, we believe the risk of harm for consumers and competitors from such a transaction would be a concern because of the impact in both the digital market and the music sector, with independents being squeezed further and artists also losing out.” Any competition probe could potentially draw in Spotify. The Swedish streaming giant has a stake in Tencent Music Entertainment (TME), while Tencent Holdings and its TME subsidiary have invested in Spotify. UMG has also retained its shareholding in Spotify. Smith said there were fears about the Chinese streaming giant’s option for a further 10% stake in Universal Music Group, following the initial 10% agreed with parent Vivendi. “Our view is that this type of creeping influence won’t escape regulatory scrutiny and we would expect regulators to also be concerned about the Spotify-Tencent link,” Smith told Music Week. “We believe it would be difficult for Tencent and other companies with power in a vertical market to acquire influence over the world’s biggest set of repertoire.” UMG has previously allayed competition concerns, such as its EMI acquisition in 2011. UMG/Vivendi declined to comment. Tencent did not respond to requests for comment. The strategic partnership between Tencent and UMG comes as the Chinese music market
“This type of creeping influence
won’t escape scrutiny”
Helen Smith IMPALA
Giving their ten cents: (L-R) Martin Goldschmidt, Helen Smith, Paul Pacifico
is growing rapidly. China moved from No.10 to No.7 in last year’s IFPI global rankings. Last year Merlin struck indie licensing deals with Chinese platforms, including TME’s streaming services QQ Music, Kugou and Kuwo. The UMG-Tencent deal values the major at €30 billion (£25.6bn). Martin Goldschmidt, chairman at Cooking Vinyl Group, described the potential advantage to Tencent from unique access to UMG repertoire as “dangerous”. “In China they have very much used their market power to tie up the majors and to become dominant in a way that has raised a lot of issues,” he told Music Week. “It hasn’t been that great for independents and the consumer, either. Tencent are definitely a company with an agenda – and this [deal] is a power play.” “There may be cause for concern around the
TAKE A BOW TEAM Jeff Lynne’s ELO
Management:
From Out Of Nowhere Peak Chart Position: No.1 Label: RCA
Craig Fruin (CSM Management) Marketing: Martin Harris (RCA) Digital Marketing: Lauren Fitzgerald (RCA) National Press: Moira Bellas (MBC PR)
08 | Music Week 25.11.19
Online Press: Ashley Matthews (MBC PR) Regional Press: Stasi Roe (MBC PR) Radio: Nick Goree (RCA) TV: Sarah Haddow (RCA) Publishing: Sony/ATV Music Publishing
musicweek.com
idea that such a major player [UMG] would create a walled garden for their benefit,” said AIM CEO Paul Pacifico. “We need to look carefully at the implications of such a deal.” TME has reported 661 million monthly active users for mobile music in China. It has announced expansion into South East Asia. Chinese rival ByteDance is reportedly readying a global music streaming service. Sony Music and WMG are both investors in TME, which is the subject of a Chinese competition probe over licensing with majors. “[The deals] would appear to give Tencent a pretty strong stranglehold on the digital music market in China,” said Pacifico. “I doubt that their ambitions are to remain in China,” added Goldschmidt. “They could easily expand worldwide into other markets.”
Light up: Jeff Lynne
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