It was revealed earlier in the year that Universal Music Group (UMG) owner Vivendi was selling up to 50% of the company. Initial reports named the likes of Google, Alibaba, Liberty Media, Apple and Verizon. Now it’s been revealed that Chinese-based Tencent has bid for a stake Universal Music’s business which could see it own up to 20% of the operation.
The CEO and Chairman of Universal Music, Sir Lucian Grange calls the bid an ‘exciting development’. UMG’s owner Vivendi, is a French media conglomerate which also owns Gaming company ‘Gameloft’, Media brand ‘Dailymotion’ and leading communications group ‘Havas’.
Meanwhile, Tencent is known as the solution to everything digital in China, from banking to social media, music, games and search engines. Among their applications is WeChat, China’s answer to WhatsApp, Facebook, YouTube, Online Banking, Spotify and more rolled into one app.
Tencent is also the worlds largest Gaming Company, owning stakes in Epic Games, Ubisoft, Riot Games, Clash of Clans, League of Legends and Activision – among the titles it owns 40% of Fortnite.
Music is a major focus for Tencent, having formed a sperate entitiy Tencent Music Entertainment (TME) among their apps include QQMusic, Kugou Music, Kuwo Music, WeSing and Ultimate Music. The focus of which is split between online music, online karaoke, and music-centric live streaming services.
Financial Times reports the platforms have 800m monthly active users – that is four times as many people using Spotify. However Spotify isn’t scared of it taking over, it owns 9 per cent of Tencent Music, and Tencent owns a 7.5 percent stake in its Swedish alternative. The deal would reduce licensing costs for TME and be a hit to China’s competitors NetEase, and ByteDance (TikTok), while also giving the company a seat at the table when competitors need to renew licenses.
The deal amounts to a $3 Billion (USD) investment which would see Tencent Music Entertainment own a 10% stake, with the option to buy a further 10% stake at the same terms. In a statement, Vivendi announced they “hope that this new strategic partnership could create value for both Tencent and UMG.” It would not only help raise Vivendi a significant amount of cash, but the partnership would likely see Universal Music better monetise the fast-growing markets Tencent influences.