Tencent Music Entertainment Group

Tencent Music Entertainment Group is the leading platform of music entertainment in China. It has four highly innovative music apps in China under its possession- QQ Music, Kugau, Kuwa and WeSing. Having over 800 million monthly active users, Tencent Music is the biggest platform of its type in the whole world, let alone China.

The mission of Tencent Music Entertainment Group is to use technology to upraise the music’s role in the lives of people by making them able to create, enjoy, share and interact with music. To enable music lovers to discover, watch, listen, sing, perform and socialize around music, the Tencent Music Entertainment Group comprises online karaoke, online music and music-centric live streaming services.   

Online music services

This aspect of Tencent Music compares it to the likes of Spotify. With the help of Kugou Music, QQ Music and Kuwo Music, the company offers twenty million tracks secured through two hundred labels, including the “Big Three” that are Sony Music Entertainment, Universal Music Group and Warner Music Group. The company also has China Record Group and Emperor Entertainment group and these groups have great value in the domestic market.

Online karaoke

How big of a thing karaoke is in Asia is something that can’t be understated. In its simplest form, users are given the authority of recording their own performances and watching others on the WeSing stage. Tencent Music Entertainment Group claimed that at the end of June, it had an astonishing 40 billion connections between the customers of WeSing. The content which is being produced here, afterward, is available for other stages, strengthening its music library for Kuwo, Kugou and QQ.

Live music streaming

This aspect, by employing Kuwo Live and Kugou Live, sees live-streamed performances by artists.

Social entertainment

 This music-centric social network when bundled together further provides an opportunity to flog virtual products such as online gifts that users buy and send to live performers or karaoke. Tencent music then becomes a source of a bit of income for the content providers as it shares a bit of virtual sales with the users or artists that receive them. This whole thing increases engagement.

You may not know this, but 70% percent of the revenue of Tencent Music comes by selling premium memberships and virtual gifts and the rest of the 30% comes through its online music services.

What’s the reason behind Tencent Music listing in the US?

Tencent Music is listing in the US so that it can have access to global capital markets and also can get recognition in financial markets. By listing in the US, Tencent Music will grab the attention of investors and analysts and what’s more, its value is likely to increase after listing alongside Spotify.  

Comparison between Tencent Music and Spotify

Tencent Music and Spotify are the world’s biggest music streaming platforms. Over the years, both platforms have gained tremendous success.

Tencent Music, formed from the combination of Kuwo, Kugou and QQ Music, is China’s market leader. On the other hand, Spotify, introduced in Sweden, is the largest paid music streaming service.

In China, last quarter, online music platforms of Tencent Music served 657 million cell phone active users. Tencent Music’s social entertainment platform with the help of which users can stream live karaoke performances achieved 256 million mobile active users. 55.5 million paid users were served combined with two platforms.

Last quarter, Spotify served 286 million active users. In comparison with Tencent Music, Spotify reaches a smaller audience overall, however, Spotify served 130 million paid subscribers.

Now, if we talk about the overall aspect, then Spotify is better than Tencent Music and no one can deny that fact, however, some factors give Tencent Music an edge over Spotify. Let’s discuss those factors.

More diverse revenue base

Spotify earns around 90 percent of its revenue from music service subscriptions and the rest of the earning comes through ad-supported music streaming. On the other hand, if we talk about Tencent Music, then it earns 30 percent of its revenue from online music services. This revenue earned by Tencent Music is believed to mainly consist of subscriptions that begin with only 1.21 dollar per month, but things such as sublicensing of music to other content providers, ad-supported music services and digital downloads are also covered.

The majority of the other 70 percent revenue of Tencent Music is earned from the purchase of virtual gifts that are related to Tencent Music’s popular online karaoke and live-streaming services. What’s more, selling premium memberships that are related to these services and hardware such as microphones, headsets and speakers also gets the company some more revenue.  

Limited competition

While Spotify is the biggest music subscription platform, still it has a lot of tough competitors. Apple Music, Amazon Music, Alphabet’s YouTube premium, Tidal and Pandora Music all are giving a hard time to Spotify because each of them offers almost all the acts that Spotify is offering.

On the other hand, Tencent Music faces less competition and this is because Tencent Music has exclusive licensing deals with Sony, Warner and Universal. Now, Tencent Music has approved that it will happily sub-license some part of its content to music services, and with that being said, there is always a risk that one day regulators would pressurize Tencent Music to sub-license even more content, the exclusive deals of Tencent Music currently give a major competitive edge. These deals are the biggest reason why the 4 best music apps in China are claimed by Tencent Music.

Tencent Music is supported by a tech giant

Even though Spotify has partnerships with some bigshot tech companies, it is also engaged in a serious competition against 3 United States tech giants. These 3 tech giants provide almost the exact same content as Spotify provides, however, in comparison with Spotify, the marketing costs of these tech giants are low.

Tencent Music isn’t facing any competition from tech giants of China and as a matter of fact, it is supported by one of the biggest tech giants of China. Now with the support, Tencent Music gets a variety of benefits and the biggest benefit is Tencent Music’s services integration with Tencent’s WeChat mobile and older QQ social platforms. As of Q2, Tencent Music got a hold of 803 million monthly active users for QQ and 1.06 billion monthly active users for WeChat.

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