On July 15, Chinese internet giant Tencent revealed its plans to merge with China Music Corp (CMC), the country’s top music-streaming firm, in a deal worth approximately $2.7bn. The strategic move will see Tencent increase its current stake in CMC from 16 percent to 60, thereby becoming the leading player in China’s online music industry.
CMC is a vital piece in Tencent’s puzzle to form a dominant digital music platform in China, given that CMC owns two of the three biggest mobile music apps in the country (Kugou and Kuwo, with market shares of 28 and 13 percent respectively). Having the two widely successful apps in tow, together with the second biggest – QQ Music, which Tencent already operates – the merger will enable Tencent to own 56 percent of the total market. The new, combined company will also own 60 percent of all music rights in China.
The merger will enable Tencent to own 56 percent of the total market
CMC had been preparing for an initial public offering (IPO) in the US later on this year prior to the announcement, a decision that has now been put on hold. However, there is some talk of Tencent proceeding with an IPO the near future, with estimates of the capital that may be raised ranging between $300m and $600m.
According to iiMedia, as reported by the Wall Street Journal, there were almost 500 million users of mobile music services in China in this quarter alone, a figure far exceeding the total population of the US. Being the world’s biggest mobile market, China’s potential for continued growth in various areas – such as social media, online games and of course, music streaming – is enormous.
With Tencent now being the market leader in all three industries, its dominance of the mobile industry continues to swell at an exponential rate along with the uptake of mobiles by the country’s bulging population.