Tencent Holdings, through its QQ Music Service, is merging its music-streaming business with China Music Corporation.
Under the deal, valued at US$2.7 billion according to The Wall Street Journal, a new company will be formed in which Tencent will have a controlling stake.
Data from market research company iiMedia Research shows that China Music Corporation’s KuGou and Kuwo music services hold 28 per cent and 13 per cent market share respectively, while QQ Music holds 15 per cent.
Tencent says the merger paves the way for an initial public offering (IPO) for the new company. While QQ Music, KuGou and Kuwo will be under one umbrella, each will continue to provide services independently via a “freemium” model.
There will be free services, with users paying to access premium features.
The iiMedia data shows that China had 449 million users of mobile-music services in the first quarter of this year. KuGou and QQ Music both claim to have more than 800 million users, and internet companies like Alibaba and Baidu are also active in music services with Baidu Music and Alibaba’s Xiami.
With the Chinese government taking a firm stance on copyright infringement, more companies have signed licensing deals to become legitimate music-service platforms. Tencent signed deals with Sony Music and Warner Music in 2014 to exclusively distribute their content in China, while Alibaba has signed a music distribution deal with German music-rights company BMG.