The music streaming arm of Tencent is further tightening its ties with the “big three” record label companies, its major licensing partners. Tencent Music Entertainment announced Tuesday that it has formed a new joint label with Warner Music Group, following similar deals with Universal Music Group in August 2020 and Sony Music Entertainment in early 2018.
The collaboration will take advantage of “Warner Music’s global resources and experience in supporting artists’ careers, as well as TME’s massive influence in mainland China’s music and entertainment market,” TME says in an announcement.
The joint label established with UMG similarly aims to bring international artists to China, one of the world’s fastest-growing music markets, and take Chinese musicians abroad.
Alongside the label deal, TME and WMG have signed a multi-year licensing agreement, an extension of their decade-long collaboration.
TME has ongoing licensing relationships with all three major record labels and some have manifested in equity relationships. In January, a Tencent-led consortium increased its total stake in UMG to 20%.
TME also operates some of China’s most popular online music services. Through its family of music streaming apps, including QQ Music, Kugou Music and Kuwo Music, TME collectively commands 622 million mobile monthly active users as of the fourth quarter.
Paying ratio remains relatively low, however, with 9% of the users paying in the quarter, up from 6.2% in the previous year.
But TME has another major revenue stream that distinguishes it from Western streaming services like Spotify: social entertainment. This category includes the karaoke app WeSing, which monetizes through the sales of virtual gifts, which are bought by users and sent to performers they appreciate. It mirrors real-life fan-idol interaction.
The segment contributed $854 million to Q4 revenue, compared to $423 million generated from user subscription and digital music sales.