The logo of the Chinese Tencent Music Entertainment Group can be seen next to headphones on this illustration image from March 22, 2021. REUTERS / Florence Lo / Illustration
HONG KONG, Jul 12 (Reuters) – China’s antitrust agency will instruct the music streaming arm of Tencent Holdings Ltd (0700.HK) to give up exclusive rights to music labels it has been competing with smaller rivals, two people aware of the matter said on Monday.
The State Administration of Market Regulation (SAMR) will also fine her 500,000 yuan ($ 77,150) for failing to report the acquisition of the Kuwo and Kugou apps, people told Reuters – a lighter penalty than the forced sale announced earlier this year .
SAMR, Tencent Holdings and Tencent Music Entertainment Group (TME.N) did not respond to Reuters’ requests for comment.
The move is the latest move to contain the economic and social power of China’s once loosely regulated internet giants. The campaign, which began late last year, included a record 18 billion yuan fine against e-commerce company Alibaba Group Holding Ltd for abusing its market position.
In April, Reuters reported that SAMR wanted to fine Tencent Holdings at least 10 billion yuan and that the social media leader advocated forbearance. Reuters also reported that SAMR had told Tencent Music that it may have to sell Kuwo and Kugou.
Instead, SAMR will no longer ask for a sale and will impose the maximum fine of 500,000 yuan if the 2016 app purchases are not properly flagged for antitrust review, people said Monday.
“Personally, I think that this sentence is neglected and even a blessing for Tencent. The acquisitions would obviously have reduced competition in the market and should have been vetoed, ”said You Yunting, a lawyer at DeBund Law Offices in Shanghai.
“Tencent Music’s dominant position will not be affected enough,” said You, an antitrust commentator.
Reuters has failed to determine whether Tencent Holdings will face further antitrust fines beyond the expected ruling on Tencent Music, China’s dominant music streamer.
On Saturday, SAMR said it would block Tencent Holdings’ plan to merge China’s two largest video game streamers – Huya Inc (HUYA.N) and DouYu International Holdings Ltd – on antitrust grounds, confirming an earlier Reuters report. Continue reading
EXCLUSIVITY
Tencent Music, China’s equivalent of Spotify Technology SA (SPOT.N), had pursued exclusive streaming rights with labels such as Universal Music Group, Sony Music Group and Warner Music Group Corp (WMG.O) to fend off competition.
It became the subject of a SAMR investigation in 2018, which was discontinued the following year after the company agreed not to renew some of its exclusive rights, which normally expire after three years, Reuters previously reported.
Still, it retained the exclusive rights to the music of a number of acts, including Jay Chou, one of the most influential artists in the Chinese-speaking world.
Following the recent SAMR ruling, Tencent Music will at least retain the rights to music from some domestic indie acts, a person with knowledge of the matter told Reuters on Monday.
The loss of exclusive rights means that Tencent Music will likely have to redouble its efforts to build a more interactive and lively community to connect with its users. The company has also diversified its content through long shows and live talk shows to attract more paying users and advertisers.
Tencent Music faces a growing challenge from ByteDance, which is using its Douyin app – its Chinese version of TikTok – to promote music backed by sophisticated algorithms.
($ 1 = 0.1543 Chinese Yuan Renminbi)
Reporting from Pei Li; Editing by Tony Munroe and Christopher Cushing
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