Chinese regulators have barred Tencent from arranging exclusive music rights agreements.
The Chinese government has been stepping up anti-trust action against several large tech companies. It imposed a record $2.75 billion fine on Alibaba, China’s Amazon equivalent. Then regulators turned their eyes on Tencent and Tencent Music Entertainment Group.
Regulators fined Tencent for unfair market practices after it acquired China Music Corporation to form Tencent Music Entertainment Group. Tencent has confirmed it will abide by the government’s decision and comply with all regulatory requirements.
“The State Administration of Market Regulation (SAMR) said it had investigated Tencent’s activities in the online music broadcasting platform market in China, in which music copyright is the core asset,” a notice posted on its official website reads.
Reuters reports that the SAMR anti-trust regulator would order Tencent to give up exclusive rights to music labels that it used to compete with smaller rivals.
Tencent held more than 80% of exclusive music library resources after several major acquisitions. That increased Tencent’s leverage over upstream copyright parties and allowed it to prevent new startups.
SAMR says Tencent and its affiliated companies must on engage in exclusive copyright agreements with upstream owners of such rights. Any existing agreements with exclusive agreements must be terminated within 30 days of regulator notice. Tencent can retain exclusive deals with indie artists, as they expire after three years. Tencent also paid a fine of 500,000 yuan – about $77,150.
Tencent Music stock has taken a battering in July because of the anti-trust regulations. As Digital Music News reported last week, the stock dropped around 24% during the last month. It’s down nearly 56% in the last six-month period and down 41% since the start of 2021.
Tencent Music consists of QQ Music, Kugou Music, and Kuwo Music streaming services. It also counts the WeSing karaoke app under its umbrella, which is massively popular in China. Tencent Music reported a 42.6% year-over-year paid subscriber increase.
But rumors of anti-trust regulations hitting Tencent have lingered since April. It’s unclear if further anti-trust regulations will force Tencent Music to sell off some of its holdings. For now, the $77,000 fine and losing its exclusive library seems to be the limit of what SAMR is willing to do.
On the news of the anti-trust action, Tencent Music stock is down to $10.51 at the time of writing. That’s down 2.41% since the announcement of the penalty and loss of exclusive music rights broke on Saturday.