China to Force Tencent to Give Up Exclusive Music Label Deals: Report

Tencent Music Entertainment
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Tencent Music Entertainment

China's antitrust regulator is set to order Tencent Holdings' music streaming arm to relinquish the exclusive distribution deals with record labels that helped it become the country's leading music streamer, according to a new report from Reuters.

The State Administration of Market Regulation (SAMR) has been investigating Tencent for antitrust violations since 2019. Tencent's music arm, Tencent Music Entertainment (TME), owns three of China's top music streaming apps: QQ, Kuguo and Kuwo, which as of December together controlled 77% of China’s monthly active users, according to Chinese research company QuestMobile.

Reuters reports that SAMR will also fine Tencent 500,000 yuan ($77,150) for not properly flagging its 2016 acquisitions of Kuwo and Kugou for antitrust review. This is somewhat of a mild penalty, given prior speculation that the SAMR might force Tencent to divest its streaming platforms.

The news is part of a broader effort by China's government to regulate its technology sector. Last week, SAMR fined Tencent and four other companies including Alibaba for failing to report past merger activities for antitrust review. Tencent's penalties at the time totaled 2.5 million yuan ($385,000) related to its acquisitions of stakes in a handful of smaller mobile digital service and social network players.

Tencent may be spared from any divestment for now, but it is still unclear whether it will face further antitrust penalties. Billboard has reached out to Tencent Holdings and TME for comment.

Following reports of the latest actions taken by Chinese regulators, TME's stock price on Monday slipped roughly 5 percent on the Nasdaq stock exchange.