Tencent and China Music Group merge music business, and the new music group is controlled by Tencent

On July 15, China Music Group and Tencent Group jointly announced that they had reached an agreement to merge the digital music business. The two sides will work together to deepen China's music industry, bring better and diversified digital music services to users, and drive the healthy development of the industry with ecological co-prosperity and support for content legalization.

Original title: Tencent and China Music Group announce the merger of music business

On July 15, China Music Corporation ("CMC") and Tencent Group ("Tencent") jointly announced that they had reached an agreement to merge the digital music business. The two sides will work together to deepen China's music industry, bring better and diversified digital music services to users, and drive the healthy development of the industry with ecological co-prosperity and support for content legalization.

In this transaction, Tencent merged its QQ music business with CMC and became the major shareholder of the new music group through asset swaps. It will fully support its business development and lay the foundation for listing. CMC co-CEOs Xie Zhenyu and Xie Guomin will serve as co-presidents of New Music Group, and Tencent Vice President Peng Jiaxin will serve as CEO of New Music Group.

After the merger, products and brands such as QQ Music, Kugou, and Kuwo will maintain independent development, and the services users originally enjoy will remain unchanged and will be able to obtain more diversified choices. New Music Group will explore more innovative products and business models, promote the legalization process of China's digital music field with ecological co-prosperity, boost the vitality of music creation, and promote the development of the industry.

Co-presidents Xie Guomin and Xie Zhenyu jointly said:

"Kugou, Kuwo and QQ Music are the first-generation music platforms in China. They have witnessed and promoted the development of China's digital music industry for more than ten years. They have established a rich library of authentic music and won the support of hundreds of millions of users, explored diversified services from the four dimensions of 'listening, watching, singing and play', and created a comprehensive music experience. In the future, the three platforms will operate independently, complement each other's advantages, and enhance user experience in all aspects, further promote the legalization process in the digital music field, better promote the dissemination and promotion of music, create more value for musicians and record companies, and realize content, A digital music industry pattern with multiple wins for channels and users."

CEO Peng Jiaxin said:

"New Music Group will empower both parties to operate their products and brands independently, provide users with rich and diverse product choices, and leverage Tencent's platform resources to enhance the ability of cross-platform marketing to reach users. At the same time, we will actively explore innovative product scenarios, use the free model to promote the development of legal industry, and promote win-win results for copyright partners and musicians through value-added service charges."

Liu Chiping, President of Tencent Group, said:

"New Music Group is Tencent's flagship in the digital music industry. It combines the solid business foundation accumulated by both parties over the years and uses close cooperation in a double manner to meet the emerging market opportunities in the digital music market. I believe that the new music group will bring a richer and more diverse music experience to users and promote the legalization of digital content to help the healthy development of the industry."

Launched in 2005, QQ Music is China's leading digital music platform. Its main products include QQ music and national K songs. Its main businesses include digital music players, mobile online K songs, copyright sub-authorization and advertising. CMC owns companies such as Kugou, Kuwo, Ocean, Rainbow, and Yuanquan. Its main businesses include digital music players, live music shows, copyright sub-licensing, advertising, game intermodal transportation and other music derivative businesses.

Since then, it can be seen that Tencent has occupied a leading position in the length of online music playback in China. According to public data from an investigation agency, before the acquisition, Kugou Music was the largest mobile music provider in China, with QQ Music ranking second and Kuwo Music ranking third.

After Tencent integrates QQ Music and Ocean Music, Tencent's music business is valued at US$6 billion, and will separately seek IPO opportunities for the merged company. Tencent has its own paid music membership business and has been promoting copyright music in recent years. Integrating Ocean Music and Tencent's exclusive licensed songs, the combined company accounts for more than 60% of all available music rights. The other half of the country is controlled by Alibaba Music and Netease Cloud Music, under the leadership of the three giants that acquired Shrimp and Tiantian Music (now integrated into Alibaba Planet).

In recent years, competition among various families for copyright competition has also continued, and obtaining "exclusive broadcasting rights" is an important way to attract fans.

The competition among giants in the music field is also intensifying. On July 9, 2015, the National Copyright Administration issued the "Notice on Ordering Online Music Service Providers to Stop the Unauthorized Spread of Music"(known as the "strictest restriction order in history"), requiring online music service providers to stop unauthorized dissemination of music works, and ordered all music service providers to offline all unauthorized music works before July 31. The "strictest restrictions" not only ended the "free era" of online music, but also enabled China's online music industry to gradually move towards the track of legalization, systematization and diversification. The scale of investment in copyright by major platforms is also getting bigger and bigger.

According to the "2015 China Online Music Market Insight" report, among many music platforms, QQ Music has taken the lead in breaking through the tens of millions of copyright, with obvious copyright advantages. What is certain is that after the shareholding is completed, Tencent Music's advantages will be further expanded. According to data from the International Federation of the Phonographic Industry (IFPI), China's record music industry grew by 63.8% in 2015, becoming the second largest growth contributor after Japan. Last year, the output value of China's record industry reached US$169 million, making it the 14th largest record market in the world.

However, compared with more mature overseas markets such as Japan, South Korea, Europe and the United States, the digital transformation of China's music market has just begun. The author believes that in the future, the three platforms will operate independently, complement each other's advantages, and comprehensively enhance the user experience, further promote the legalization process in the digital music field and create more value for musicians and record companies. Not only the musicians market, but also the entire industry landscape. Provide more unprecedented opportunities. As Teacher Gao Xiaosong, the current CEO of Ali Music, said: "Song Ke and I have been in the industry for more than 20 years, and we even carry a lot of information in our pockets. From artist assistants to distribution agencies, in this 'personal-intensive industry', every role benefits from information asymmetry." Gao Xiaosong feels that this can be called a "Stone Age business method."

In recent years, boosted by the wave of mobile Internet, domestic Internet music platforms have joined forces with many record companies and musicians to launch legalization actions, continuously promoting copyright standardization in the music industry; innovative marketing models such as digital albums have also been tested for the first time, exporting music to the industry. A benchmark case for value mining. Compared with more mature overseas markets such as Japan, South Korea, Europe and the United States, the digital transformation of China's music market is in the ascendant. For example, various music ecological development models such as music social networking, music e-commerce, O2O performances, and fan economy are all in the bud. There are huge market opportunities in the future.

Editor: Nancy