Tencent’s dominance in music industry under spotlight as China continues to regulate big tech
Tencent has been banned from signing any exclusive music copyright agreements in the future because of anti-competitive practices.
The State Administration Of Market Regulation (SAMR) said it had investigated Tencent’s activities in China’s online music broadcasting platform market and fined the company for unfair market practices when acquiring China Music Corporation.
It said Tencent and its subsidiaries including Tencent Music Entertainment Group, the unit created from the acquisition, must not engage in exclusive copyright agreements with upstream owners of such rights, while existing agreements must be terminated within 30 days of the regulatory notice.
Tencent holds more than 80% of exclusive music library resources after its acquisitions
The SAMR also fined Tencent 500,000 yuan ($77,150). It had previously blocked Tencent’s plans to merge China’s top two videogame streaming sites, Huya and DouYu, on anti-trust grounds.
Why is this happening to Tencent?
According to Reuters, Tencent Music Entertainment Group has used exclusive rights to music labels to compete with smaller rivals.
Tencent holds more than 80% of exclusive music library resources after its acquisitions, increasing its leverage over upstream copyright parties and allowing it to restrict new entrants.
This includes the $3.36bn Tencent invested into Universal Music Group (UMG) for a 10% stake. The Chinese tech giant led a consortium to invest in the Vivendi-owned company as it seeks to continue to dominate the Chinese market, which has seen consumers quickly adapt to streaming with a willingness to pay.
China has started scrutinizing the country’s big tech for anti-trust practices and data collection practices.
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Companies such as Didi, Alibaba and Kuaishou have increasingly come under the crosshairs of SAMR and the Cyberspace Administration of China for issues like lack of privacy and safety of children using the internet, and illegal collection of personal data.
China has previously also threatened to reduce the size of Alibaba’s media properties after expressing surprise at how much reach it has gained through its media business.
This has seen Tencent and Alibaba come together to explore how they can integrate their walled gardens to ensure consumers can use services from both platforms at the same time.