What happens when Earth’s only three major record labels that didn’t partner with huge companies, finally do so? This is a question that may finally get an answer as China’s two largest tech giants have just signed a deal with the Universal Music Group (UMG).
The deal means Alibaba and Tencent will now be licensing catalogs of not just UMG, but also the Warner Music Group (WMG) and Sony Music to Jack Ma’s online retail marketplace Alibaba.
Enthusiasts familiar with the market can remember that Tencent is in charge with three of China’s most popular musical applications: Kuwo, Kugou, and QQ Music. Meanwhile, it is also in charge of WeChat, the huge and globally-acclaimed chat application.
Tencent’s music team at Tencent Music Entertainment (TME) has just sealed the deal with a licensing agreement with UMG. This means Tencent will be the ones fixing the catalogs of UMG, WMG, and Sony Music as they are licensed inside China.
This phenomenon is not new, as Spotify also tried to re-establish the record business’ growth after its launch. Some artists have also expressed objection to the company’s terms, and the same thing can happen in the East.
According to NPR, regardless of China’s strict policies when it comes to products, the country remains to be a prospective place for business. This is thanks to its huge streaming market and the country’s population.
Interestingly, people might ask just why would these music companies allow Tencent and Alibaba to broker these deals, when they can do it themselves? These labels have after all brokered deals with Apple Music, Spotify, and other services.
Part of the answer, NPR writes, may be because the Chinese government primarily desires its successes to be based in China itself. This especially applies to entertainment and technology.
It can be remembered that China has laws that govern the content some companies are able to offer to the Chinese market. Given this caveat, media companies want to establish a good relationship with the Chinese government in order to penetrate the market. This also means deals tilting to “favor” companies in China.
This is sometimes useful to companies, given the possible advantages of being able to have a Chinese market. For instance, WeChat in China has over 960 million users, with these customers getting their data service from China Mobile, which is the China-owned service. It has 849 million customers, compared to the U.S. Verizon Wireless, who only has 145 million customers in China.
Other companies who want to enter the Chinese market may need to make adjustments as well. For instance, Facebook has actually made tools last year in order to comply with how state censorship laws work in China.