Rivals Alibaba, Tencent Ink Music Licensing Deal

Chinese rivals Alibaba Group (BABA) and Tencent (TCEHY) inked a music licensing deal in a rare bit of collaboration as Tencent Music gears up to go public.

In a joint announcement covered by the South China Morning Post, the companies said Tencent Music and Entertainment Group will license music from Sony Music, Warner Music and Universal Music to Alibaba. In return, the Chinese e-commerce giant’s Ali Music Group will license exclusive content it acquired from Rock Record to Tencent, operator of the WeChat messaging app. The report noted that even though Tencent’s streaming music apps are the leaders in the country, the deal appears to be on an equal footing. It also comes as a bit of an about face. In 2015, WeChat banned Xiami, the music streaming service owned by Alibaba, from the platform. That prompted users to share music directly instead of over WeChat. The ban was later rescinded after it cause a lot of problems between the two rivals, reported the Post. (See also: Tencent to Invest in Flying Taxi Startup.)

Making Music Together

In the statement, the two Chinese heavy hitters said their newfound friendship will let the music industry move ahead with protecting copyrights and encouraging more original music to be produced. The two want consumers in China to start paying for the music they stream, which could be a uphill battle given that piracy is rampant in the country. That in turn makes it difficult for the companies to make money off of charging for music. Alibaba and Tencent will still offer their free music apps, noted the report. (See also: Alibaba Gets Full Control of Ticketing Co. Damai.)

The deal between the two comes as Tencent Music is looking to sell a minority stake in the company as it gears up to launch an initial public offering. The company, which is 62.45% owned by Tencent, is in talks to sell the stake to strategic partners including record labels, reported Bloomberg earlier this month. It is hoping to get a valuation of $10 billion. It already has big-name artists as partners including Taylor Swift and Beyonce and has its content deals with Universal Music Group, Warner Music Group and Sony Music. What’s more, Tencent has arrangements with Beijing-based Huayi Brothers Media Corp. and South Korea’s YG Entertainment, which are among the most powerful record labels in China, reported Bloomberg.

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