Tencent and NetEase: monopoly is being further busted with Sony Music deals

Sony Music Entertainment (SME) announced May 17 that it has signed both a new direct China digital distribution deal with NetEase Cloud Music and a multi-year extension of its existing agreement with Tencent Music Entertainment (TME).


Sony’s NetEase deal is the latest to shift power away from TME in China’s streaming industry and make the space slightly more competitive. It comes amidst a government antitrust probe of TME and its parent company Tencent Group.


For years, TME elbowed out competitors with exclusive digital distribution contracts with the three major labels, Universal, Warner and Sony. It would then sub-license those catalogues out to competitors like NetEase — often for double or triple the original price.


The arrangement provoked a 2018 antitrust investigation of Tencent, which resulted in a commitment from the firm to drop some of its exclusive contracts at the end of their three-year duration. The probe was suspended in 2019.


Last May, NetEase signed a strategic partnership with Warner Chappell Music to access the lyrics to the latter’s catalogue of songs. Last August, NetEase managed to sign a direct licensing agreement with Universal Music Group (UMG), signaling the first shake-up of the major labels’ previous one-and-done approach to the Chinese market.


The new antitrust investigation of Tencent currently underway hones in on TME in particular, Reuters said, and will likely result in a fine of at least $1.54 billion (RMB10 billion). TME may be forced to give up even more of its exclusive music rights contracts, and potentially sell off its music apps Kuwo and Kugou.


In March, TME renewed its multi-year licensing deal with Warner Music.


SME music is currently available via TME’s platforms such as top streamers QQ Music, Kugou Music, Kuwo Music and online Karaoke platform WeSing. Additionally, it will now be available on certain connected devices such as smart speakers, TVS and in-car audio systems.