UMG has some major plans to capitalise on China’s growing music market

Last month, the IFPI labelled China as the next great global opportunity (Global Music Report). Now, Universal Music Group has inked a multi-year licensing agreement with China’s leading digital music platform, Tencent.

Tencent Music Entertainment Group (TME) can now distribute music from UMG’s roster on its streaming platforms, QQ Music, KuGou and Kuwo. The three platforms have an overall user base of 600 million monthly active users and claim more than 15 million paying subscribers.

In addition, TME is now UMG’s master distribution and licensing partner to exclusively sub-license its content to third-party music service providers in China.

What’s more, the two conglomerates are set to erect Abbey Road Studios China which is linked to the iconic London studio, where The Beatles recorded almost all of their records.

Sans Abbey Road Studios China, the agreement is similar to the deals inked by Tencent with Warner and Sony Music, making UMG the last of the majors to team with TME. Crucially though, the deal gives Tencent control of the recorded music repertoire in China from all three majors.

With over 1.63 billion people, China is the globe’s biggest country and second biggest economy. But it has long struggled with digital piracy, and is yet to break into the world’s Top 10 music markets (it ranked 12 in 2016 after a 30% rise in streaming).

Tencent’s major drawcard to the industry is its clampdown on piracy through offering a repertoire of 17m songs across its three major digital platforms. While Tencent’s conversion to subscription is still less than 3%, the deal is a giant step towards legitimised and monetised business models.

Universal Music Group Chairman and CEO Sir Lucian Grainge said:

“Given recent developments in technology and the commercial environment there, now is the right time for an innovative strategic partnership with a leading Chinese company like Tencent that can meaningfully accelerate the development of the country’s entire music ecosystem and, in turn, inspire growth in creative and commercial opportunities for all artists.”

Michael Nash, head of digital for Universal Music, said:

“The digital opportunity in China’s music market is truly extraordinary, with over half a billion people enabled with smartphones. Chinese consumers are clearly embracing licensed services, fuelling an expansion of China’s music economy.”

This article originally appeared on The Industry Observer, which is now part of The Music Network.