Universal Music Group has signed two important, direct licensing deals in China – one with Tencent Music Entertainment, and the other with TME’s biggest competitor, NetEase Cloud Music.
In addition to announcing these deals today (August 10), UMG has also taken the wraps off a new as-yet-unnamed JV label, which it is launching with TME.
This label, says TME, “will be dedicated to reaching audiences across China through cultivating, developing, producing, and showcasing highly talented domestic artists and their premium original music”.
The fact that Universal has signed two, rather than one, multi-year licensing deals for its catalog in China this time round is highly significant for the global music industry.
In recent years, UMG, like other major music rightsholders, has signed a single, exclusive licensing deal in China with TME – owner of Chinese digital services such as QQ Music, Kugou Music and Kuwo Music.
TME has then sub-licensed Universal’s catalog to other services like NetEase Cloud Music – a model which hasn’t been without controversy.
NetEase was certainly no fan: in February this year, NetEase CEO William Ding suggested that his music service had “been overpaying the content cost twice, three times or even more” as a result of Tencent’s sub-licensing of major music catalogs, which he called an “unfair setup”.
In the case of Universal, this so-called “unfair setup” now appears to have expired.
As a result of its dual new deals, UMG’s catalog will once again be licensed for QQ Music, Kugou and Kuwo, as well as for TME’s online Karaoke platform, WeSing, along with other live streaming and expanded digital services.
NetEase Cloud Music, meanwhile, said its new deal with UMG will see both companies “work together to create innovative campaigns and initiatives that will allow music fans in China to engage with both domestic artists from China and UMG’s international talent from around the world”.
“Through this partnership expansion, we look forward to cultivating the growth of the dynamic and expanding music entertainment industry in China, taking our shared love and pursuit of new music, to new levels that will benefit all.”
Cussion Pang, TME
Cussion Pang, TME’s Chief Executive Officer, said, “I am delighted to announce this landmark win-win strategic cooperation with Universal Music Group. Supported by our hundreds of millions music lovers, powerful promotional channels, extensive user insights, as well as well-rounded digital music services, we have been a valuable partner for the industry to engage with music lovers.
“Through this partnership expansion, we look forward to cultivating the growth of the dynamic and expanding music entertainment industry in China, taking our shared love and pursuit of new music, to new levels that will benefit all.”
William Ding, CEO of NetEase, said, “The partnership further strengthens NetEase Cloud Music’s position as a go-to platform for high-quality international music and marks a great step forward for China’s music industry as a whole.”
“We are confident that the partnership will bring wider choice not only for music lovers and artists, but also for the industry.”
William Ding, NetEase
He added: “As leaders in music-based entertainment, UMG and NetEase Cloud Music share a commitment to encouraging creativity and innovation, respecting the power of artistry and exploring wider opportunities for the appreciation and enjoyment of the world’s most iconic, edgy and influential music.
“We are confident that the partnership will bring wider choice not only for music lovers and artists, but also for the industry.”
That same consortium is currently mulling whether to add to its stake in UMG, with the option to acquire a further 10%.
This adds narrative intrigue to Universal’s new JV label with TME – although it’s not the first time the latter company has struck such a deal.
“Together we can build an international pioneering music label to produce new music loved by the younger demographic, bringing in iconic music stars, innovative music works, and more breakthrough music genres to the global music market.”
Of the new Universal label, TC Pan, TME’s Group Vice President of Content Cooperation, said, “Universal Music Group and TME are excited to share the same passion and vision when it comes to the music industry.
“Together we can build an international pioneering music label to produce new music loved by the younger demographic, bringing in iconic music stars, innovative music works, and more breakthrough music genres to the global music market, ultimately providing music fans in China and around the world with a spectacular music entertainment experience.”
Universal has enjoyed success on both TME’s services and NetEase Cloud Music in recent times.
Taylor Swift, for example, sold the equivalent of over a million units of her album Lover in China when it was released on all services last year – more than double the previous week-one record for an international album in the market.
Swift’s more recent album, Folklore, sold 740k equivalent units in its first week in China in July, UMG has confirmed.
“We look forward to working together with TME to help create compelling new experiences for fans across all TME platforms, and to expand on the opportunities available to UMG’s global and domestic family of artists in China.”
Discussing the new TME deal today, Adam Granite, UMG’s London-based, EVP of Market Development, said: “We are pleased to extend and evolve our licensing agreement with TME for the Chinese market. We look forward to working together with TME to help create compelling new experiences for fans across all TME platforms, and to expand on the opportunities available to UMG’s global and domestic family of artists in China.”
Granite added of the NetEase Cloud Music agreement: “We are delighted to enter into this licensing agreement with NetEase Cloud Music in China, and look forward to working together to create new opportunities for UMG’s domestic and international artists to reach music fans, and premium subscribers across the country through NetEase.”
According to TME’s most recent financial results, its digital music services reached 657m Monthly Active Users on mobiles in Q1 (the three months to end of March).
NetEase Cloud Music, meanwhile, surpassed over 800m registered users at the end of last year (registered users – including dormant users – and active users are obviously two different metrics).
Today’s news of Universal’s new direct licensing deals with NetEase and Tencent Music comes less than a month after UMG announced a new global licensing deal with Spotify.
Soon after that announcement, Spotify told investors that, after June 30, it had “signed license agreements with certain music labels and publishers and podcast agreements with creators. Included in these agreements are minimum guarantee and spend commitments of approximately €3.6 billion over the next three years”.
Judging by previous trends, it appears likely that the lion’s share of that money will be going Universal’s way.
“We look forward to working together to create new opportunities for UMG’s domestic and international artists to reach music fans, and premium subscribers across the country through NetEase.”
Adam Granite, UMG
Tencent controls 9.1% of Spotify, with three-quarters of that stake owned by Tencent Holdings and the remaining quarter by TME. In turn, as of October 2018, Spotify owns a 9.1% stake in TME.
Spotify has previously stated that it has no plans to launch in China, and therefore no plans to compete with TME’s services in the territory.
Discussing the new TME deal, Sunny Chang, Universal Music Greater China’s Chairman and CEO, said: “The extension of this agreement provides our roster of artists access to significant further opportunities in China, building on new momentum in the Chinese music market. China has grown to become one of the world’s leading music markets, driven by the adoption of streaming by more and more Chinese music fans.
“UMG is excited to continue working together with TME to continue to deliver UMG artists and their music to this rapidly growing population of passionate music consumers. Furthermore, we look forward to working with TME together on our new music label in China to develop talented artists and bring their original music to a global audience.”
“UMG is excited to continue working together with TME to continue to deliver UMG artists and their music to this rapidly growing population of passionate music consumers.”
Sunny Chang, UMG
Commenting on the NetEase Cloud Music deal, Chang added: “At UMG, we are committed to delivering premium listening experiences to music fans in China for our domestic and international artists. Through this agreement with NetEase Cloud Music, we can only build upon the many great successes that we have accomplished together across the platform.
“We are excited to work together in the years ahead, to help our artists continue to achieve new levels of success in China.”Music Business Worldwide
