Tencent Music is under investigation by China's competition regulator over those exclusivity deals it has with the majors, according to a report by Bloomberg.
The exclusivity deals have been an unusual feature of the Chinese digital market for years. Record companies often do a deal with a single digital firm which then not only gets access to that label's music for its own service (or services in Tencent's case) but also becomes the exclusive distributor of that catalogue in the Chinese market.
Which means that when new companies enter the streaming market in the country, rather than going around the labels to negotiate licensing deals, for a large slice of the catalogue they must go and negotiate with their competitors. Which, needless to say, has proven tricky.
Tencent was the pioneer of this approach and has exclusivity arrangements with all three majors. The original motivation for the global music firms was that, by getting into bed with one big web company, they could incentivise said company to do what was necessary to kickstart the then still flagging Chinese digital music market. And that strategy basically worked. Of course, the mega-advance cheques Tencent handed over also made this strategy attractive.
Some of Tencent's rivals – and in particular NetEase Cloud Music – started negotiating their own exclusivity deals with other labels. Partly to give their services an edge from a consumer perspective. And partly to increase their negotiating power when trying to access the catalogues Tencent controlled (basically "you give us X or we won't give you access to Y").
Posted on: 29/08/2019Categories: News from CMU Online
