Tencent, Now Biggest In Chinese Tech, Touts Digital Music as Gov't Announces $30 Billion Venture Capital Fund
Tencent is now the country's biggest tech company, and its government wants more of the same.
A day after Tencent, the Chinese internet services company which has invested heavily in entertainment, edged out Alibaba as the the country's largest tech company (with $247 billion and $241 billion market caps, respectively), China has announced the formation of a $30 billion venture capital investment fund. The money is earmarked for "forward-looking, strategic and fundamental industries," Meng Jianmin, vice chairman of the State-owned Assets Supervision and Administration Commission (SASAC), said in an announcement posted to the state-owned news agency Xinhua.
(Disclosure: Tencent has content distribution deals in place with Billboard and sister publication The Hollywood Reporter.)
Unsurprisingly, the country has a labyrinthine structure of investments and state-owned companies -- "150,000 state-owned firms, with over 100 under central government control," according to today's announcement. Where this $30 billion will trickle down is all-but impossible to track, much less predict. But given the country's seeming openness to cultural exchange, digital entertainment including music will no doubt collect a few shekels.
Ten years after a Billboard feature on the music industry in the country, which described a woefully stalled environment around copyright protections and cultural freedom, much has improved while much has stayed the same. The International Federation of the Phonographic Industry described the country as "performing at a fraction of its potential" in its 2015 global analysis, but also pointed towards a 63.8 percent rise in music sales and a 68.6 percent increase in digital revenues. The country has 680 million people accessing the internet.
Tencent is (now) held up as the example of the country's digital entertainment potential. In its most recent earnings report, released yesterday (Aug. 17), monthly active users were up 6.6 percent year-over-year, reaching 899 million on QQ, the company's central digital platform. Overall revenue was up 48 percent, to $10.2 billion.
"Growing our digital music business," the company writes in its earnings report, "via integrating QQ Music with CMC [China Music Corporation, which Tencent acquired in July], which operates another leading music streaming platform. We believe there is tremendous growth potential in the China digital music industry, and look forward to the integrated operations facilitating users to discover more music, artists to reach out to more fans, and the music industry to create new products and business models."
Tencent has licensing deals in place with Sony Music and Warner Music Group. Warner Music also purchased Gold Typhoon, a Chinese entertainment company, in 2014 to bolster its operations in the country. Universal Music Group, the world's largest label, signed a forward-thinking licensing deal with search giant Baidu back in 2011.
Of course, there are barriers as well. As Ed Peto, managing director of Beijing-based music industry services company Outdustry Group, told Billboard in late 2015 when asked about a new requirement that placed cultural policing responsibilities at the feet of music streaming services, is a result of the Chinese government's inability to enforce its own rules. "Originally it was up to the content providers to clear their catalogues with the Ministry of Culture. When it became clear that the MoC didn't have the technological or administrational capacity to manage this process, the onus then moved downstream to the service providers."