Gaana Raises $115 Million, Led By Tencent, as Indian Streaming Market Heats Up

City of Hyderabad, India
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City of Hyderabad, India

Two months after swapping shares with Spotify, tech giant Tencent is again venturing outside its Chinese comfort zone by leading a $115 million investment in Indian music streaming service Gaana. The capital infusion marks the first time Gaana has raised outside money, which will be used to develop AI-based features and add oomph to its Spotify-like offering -- a paid subscription service, as well as an ad-based free tier.

Gaana doesn't break out its user numbers but CEO Prashan Agarwal said in a statement that the company has only scratched the surface in the world's second most populated nation (1.3 billion). "We have penetrated only 5-6 percent of India," he said. "Over the next few years, we want to take this to 20-30 percent."

Demand is growing in India for legal streaming, with Gaana leading the pack, followed by Saavn and several global players like Apple Music and Google Play. Amazon Music made its debut this week, with company global expansion exec Sean McMullan calling India a "big priority for us." The world's leader in streaming music, Spotify, has yet to launch there.

Martin Lau, president of Tencent Holdings, said, "as more affordable mobile data plans are driving smartphone penetration in India, we believe growth in the music streaming market will accelerate. By investing in and collaborating with Gaana, we look forward to bringing more innovation and better experiences to all Indian music lovers."

Tencent's music subsidiary, Tencent Music Entertainment, 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. In December Tencent and Spotify formally agreed to buy minority equity stakes in each other. More recently, Tencent joined with Sony Music to create a new Asia-based dance music label, Liquid State.