Tencent Music makes headlines What does this mean for the future of Music

Tencent Music Entertainment Group has been making headlines this week as they filed for IPO in the US Tuesday 10/2/2018. Big money makes for big news, and Tencent looks to have one of the biggest US valuations by a Chinese company this year. After Spotify’s record-breaking filling, the music world will have all eyes on Tencent. But what exactly is Tencent Entertainment Group, how are they as big as Spotify and what kind of long-lasting effects will the company have on the music industry?

What is Tencent Music ENT

Tencent Music develops music streaming services for the Chinese market. Their applications include; Q music, Kugo Music, Kuwo Music, and Wesing. These four are recognized as China’s top streaming apps and together claim about 800 million monthly users. Tencent Music is owned by Tencent Holdings, which maintains a majority share of the company. Tencent success in the streaming industry is huge news for the music industry. Not only because of the high number of users but because, unlike Spotify, is profitable. Something investors are sure to take note of.

Their Big IPO

As mentioned earlier Tencent Music has plans of going public in the US in a BIG way. The company set a goal to raise $1 Billion, which would put the company’s value between $25-$30 Billion according to their SEC filing. If successful this would be the third largest Chinese IPO to list in the US this year. This has inspired music industry giants to buy stakes in the company. Spotify has a 9% stake in the company while Sony and Warner have reportedly each acquired shares in the company for $200 million cash.

Tencent is Profitable

Tencent has reported profits of $263 million in the first six months of 2018 on revenues of 1.3 billion. Up 92 percent from the last year during the same period. Spotify, on the other hand, is reportedly hemorrhaging money with losses of more than $1 billion a year. One of the reasons the Chinese conglomerate is profitable is because most of the company’s income is not necessarily related to streaming music. The explosion of China’s micropayment economy has resulted in big profits for Tencent Music. Through their apps ‘virtual gift’ features, users can tip their favorite musicians.

What this means for the future

Many Western companies have attempted to incorporate similar tipping features in their apps but to little success. However, this won’t stop companies from looking for creative ways to feed the pockets of musicians without using their own money. More creative ‘tipping’ features are coming. Some will allow the users favorite artist to gift them in return for their influence when sharing their songs.

You think they’re a lot of streaming services now, just give it a couple of years. With the growing tension in the West between Spotify and the Big Three, you can bet that these highly profitable major labels will create their own streaming platform to house their own properties.

What do you think? What other effects could Tencent have on the music industry? Leave a comment below.