Tencent Axes All Exclusive Label Deals In China Following Antitrust Crackdown



Tencent Holdings and its majority-owned music arm, Tencent Music Entertainment, have terminated all exclusive deals with global labels in China.

After being hit with an exclusivity ban by China’s State Administration of Market Regulation (SAMR) in July, Tencent released a statement on WeChat on Tuesday, August 31, announcing that as of August 23, it had officially written to all “upstream copyright” holders. to terminate their exclusive agreements.

In July, Tencent was fined 500,000 yuan (approximately $ 77,000) by SAMR and 30 days to renounce its exclusive deals in China, following an anti-trust crackdown in the country. .

TME was investigated in 2019 for entering into exclusive licensing deals with the three major record companies in China.

As reported by the South China Morning Post in July, the company, which hosts music streaming services including QQ Music, Kugou Music and Kuwo Music, is still allowed to keep its exclusive deals with independent artists, with a three-year limit for such deals.

According to Tencent’s announcement, the company waives the right to exclusive agreements with music copyright holders “except where the period of exclusive cooperation with independent musicians does not exceed three years, and the exclusive release period of new songs does not exceed 30 days “.

Tencent also states that the company “will continue to cooperate with the upstream copyright party on a non-exclusive basis and will negotiate with the upstream copyright party on matters of non-exclusive cooperation.”

In addition to the ban on granting a fine and an exclusive label, Tencent is required to report to the Chinese SAMR on “fulfilling its obligations” every year for the next three years.

“Order Tencent to lift its exclusive copyright [deals] and other measures will reshape the order of competition in the relevant market, lower barriers to entry into the market and provide competitors with fair access to upstream copyright resources, ”SAMR said in a statement. in July.

In April, Reuters reported that TME would be fined at least 10 billion yuan ($ 1.54 billion) and that the company could also be forced to sell its Kugou and Kuwo music apps to competitors.

Tencent Music Entertainment has previously signed agreements with Universal Music, Sony Music and Warner Music, and these agreements have enabled it to license the music of the majors for its own platforms, in addition to exclusively sub-licensing these catalogs to local rivals.

TME has signed its final licensing agreements with Universal and Warner in the past 12 months without the exclusive right to sublicense, allowing these companies to enter into separate direct deals with rival companies in China, including TME’s main competitor. , NetEase Cloud Music.

NetEase signed licensing agreements with Warner Chappell Music in May 2020, UMG in August 2020, and then Sony Music Entertainment in May of this year.

“[NetEase Cloud Music] is ready to conduct extensive authorized cooperation with various record companies.

William Ding, NetEase

Responding to a question about forgoing TME exclusivity during NetEase’s second quarter earnings call on Tuesday, August 31, company CEO William Ding said it sends a “very clear, positive signal. and exciting for the music industry “.

He added: “[NetEase Cloud Music] is ready to conduct extensive authorized cooperation with various record companies with the utmost sincerity and sufficient funds to jointly build the Chinese music market.

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