Spotify and Tencent Music team up with joint stake

12/12/2017

Music giants Spotify and Tencent Music are buying minority stakes in each other ahead of the Swedish firm's expected stock market listing next year.

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The aim of the deal is to increase each company’s exposure to the others core markets. Spotify, a music streaming leader in Europe and North America, and China-focused Tencent Music,

Tencent Music Entertainment Group (TME), a subsidiary of Tencent Holdings, and Spotify will buy new shares representing minority equity stakes in each other for cash, the companies said in a statement.

“This transaction will allow both companies to benefit from the global growth of music streaming,” Spotify founder and CEO Daniel Ek said.

Tencent Holding will also buy a minority stake in Spotify, the companies said, without giving details.

The size of the stakes was not disclosed in the statement and a Spotify spokeswoman declined to provide further details about the agreement.

However, a report in The Wall Street Journal cited “people familiar with the matter”, that the firms were in talks to swap stakes of up to 10% in each other.

Tencent owns a majority stake in TME, which is the dominant player in the Chinese market with music service providers QQ Music, KuGou and Kuwo.

"TME and Spotify will work together to explore collaboration opportunities," TME Chief Executive Cussion Pang said.

Spotify launched in 2008 and now provides music streaming to 140 million users globally, of which 60 million pay for its premium advertising-free subscription.

The deal gives Spotify exposure to the Chinese music consumer market, as the country is not one of the 61 regions it currently operates in.

The company is widely expected to list its shares on the stock market next year.

Although the details of the deal are unclear, it sends a signal to investors that Spotify is thinking hard about its strategy in China, said music industry analyst Mark Mulligan, managing director at MIDiA Research.

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