Boyden Executive Search

With deals like Tencent’s $3.4 billion purchase of 10% of Universal Music Group it is clear that, with lots of help from streaming, the music industry is back.

The International Federation of the Phonographic Industry estimates that recorded music sales were nearly $24 billion in 2001. By 2014 they plummeted 40%, to just over $14 billion. Much of the blame went to internet piracy. But in time, the very technology that was the industry’s bane emerged as its saviour – with the rise of streaming music services. Companies like Sweden’s Spotify and France’s Deezer have bested the pirates, and helped reverse the fortunes of the music industry, which has seen its revenues rebound by 34% from their low point in 2014.

Spotify is the world’s biggest music streaming service, with over 100 million paying users. The company was valued at $27 billion in its April flotation. At present Spotify and Apple Music dominate the global music streaming market, accounting for more than half of it. But the music streaming market is growing quickly, as many others including Google and Amazon roll out their own services and compete for subscribers.

In China the biggest music streaming industry player is Tencent Music Entertainment, the massive digital conglomerate’s streaming subsidiary. Its total user base is nearly three times that of Spotify, though it has far fewer paying users at about 35 million. Newer entrants include ByteDance, best known for the social media app TikTok, which launched its Resso music streaming service in India and Indonesia last month.

In addition to helping the music streaming industry grow, the multiplying number of music streaming services is giving a boost to firms in other segments of the entertainment industry – such as Universal, from which streaming firms must license the music offered on their platforms. In fact, Universal’s revenue grew by 24% last year. By purchasing a share in it, Tencent stands to profit from both sides of the business.

Investing in other firms is very much in keeping with the modus operandi of Tencent, which has stakes in hundreds of firms. The company has been expanding its presence in the Western entertainment industry on various fronts. It is now the world’s biggest video game company. According to The Economist, gaming accounted for about two-fifths of Tencent’s total revenue of 313 billion yuan ($47 billion) in 2018.

This website uses cookies to ensure you get the best experience on our website.  Learn more