Spotify and Tencent Buying Equity Stakes In Each Other

Getty Images


Tencent and Spotify, two global leaders in digital music, have formally agreed to buy minority equity stakes in each other, it was announced on Friday. In a joint statement, Tencent's music subsidiary, Tencent Music Entertainment, and Spotify said they would acquire new shares in each other for cash, with the Chinese giant investing in Spotify via secondary purchases.

When those transactions are complete, all parties will hold minority stakes in each other, though they did not disclose exact figures. Over the past week, it has been widely reported that TME and Spotify will end up with 10 percent stakes in each other, though that can't be confirmed.

Spotify's current valuation is up for debate, though it has continued to rise throughout the year as the company prepares to go public. In September, it was reported that private trades in Spotify shares pegged the company at about $16 billion. Last month, Tencent surpassed Facebook to become the globe's fifth-most valuable company, at more than $500 billion.

The leader in music streaming, Spotify has 140 million active users and more than 60 million paid subscribers across 61 markets (not including China). TME runs three major music services, Q Music, KuGou and Kuwo, and is credited with helping to unlock China's potential in streaming, as well as chip away at the market's problem with piracy. Tencent has licensing deals with all three majors, most recently with Universal Music.

In comments, leaders of both companies touted the benefits of the partnership.

"Spotify and Tencent Music Entertainment see significant opportunities in the global music streaming market for all our users, artists, music and business partners," said Daniel Ek, Spotify's founder and CEO. "This transaction will allow both companies to benefit from the global growth of music streaming.”

Cushion Pang, CEO of TME, added: "We are excited to embark on this partnership with the largest music streaming platform in the world. TME and Spotify will work together to explore collaboration opportunities, with a common objective to foster a vibrant music ecosystem that benefits users, artists and content owners."