Leading music streaming service Spotify and Chinese internet giant Tencent are investing in each other. Tencent Music, the music arm of Tencent, and Spotify will reportedly “swap stakes” and become minority shareholders in each other. Tencent is expected to make a secondary investment in Spotify too, to compensate for the difference in valuation between its music arm and the European streaming service. The deal allows Spotify to bump up its valuation prior to an IPO early 2018. For Tencent, this helps create more opportunities outside its home market, China. Also Read - Spotify Greenroom Clubhouse-like live audio room is here: How to download and get started?Also Read - PUBG Mobile’s Indian version Battlegrounds Mobile India must be banned: AP MLA writes to PM Modi
“This transaction will allow both companies to benefit from the global growth of music streaming,” Daniel Ek, Founder-CEO of Spotify stated. The company last valued at $8.5 billion (in 2015) is likely to fetch a valuation of $20 billion when it goes public next year. It has more than 140 million customers of which 60 million are paid subscribers, according to FT. This year it has cut fresh licensing deals with three major labels Universal Music, Sony Music and Warner Music. Spotify already reaches 61 international markets and is likely to expand further. Also Read - You can now download albums on Spotify desktop app: Here's how
Tencent Music, on the other hand, is focused on China. It leads the market with more than 500 million monthly active users on its three apps QQ Music, Kugou and Kuwo that occupy more than 70 percent of the market. However, only about 15 million of these are paying subscribers. But given the rate of growth in China’s music streaming market, more and more customers are likely to adopt paid services. China s recorded music market grew 20 percent last year, above the global average of 6 percent. “Tencent Music and Spotify will work together to explore collaboration opportunities,” Tencent Music CEO Cussion Pang stated.
Tencent has in the recent past ramped up its investments in Western markets in a clear move towards global expansion. Last month, it invested a massive $2 billion in Snap Inc, the parent of Snapchat to own a 10 percent stake. Reports suggest that Tencent would lead the resurgence of Snapchat and take the competition to Facebook and Instagram. Prior to that, in March, Tencent acquired a 5 percent stake in Elon Musk’s Tesla, and both will jointly build driverless car technology. Last year, Tencent had also pumped in $8.6 billion in Finnish mobile games developer Supercell. Surely the $470 billion internet behemoth is spreading out its bets.