TENCENT’S U.S. IPO PLAN SIGNALS INCREASED OPTIMISM
Listing will let American investors bet on Chinese market for musicstreaming services
TENCENT Holdings Ltd’s plan to spin off its online-music business and list shares in the United States is the latest sign that the long-beleaguered recording industry is staging a comeback.
The move will let American investors bet on the Chinese market for music-streaming services, which have brought new life to a business that’s been plagued by piracy.
Tencent’s growth in China also mirrors inroads by partner Spotify Technology SA in the US, where streaming has helped music sales grow at their fastest rate since the 1990s.
For record labels, the resurgence has helped them rebuild after years of decline. The demise of physical media and free-downloading sites ravaged the industry. And the arrival of iTunes and legal downloading options in the early 2000s did little to stem the slide. But now streaming appears to have given music sellers a formula they can live with.
Tencent, China’s largest social media and gaming company, is still working on terms of its spinoff proposal, which it announced in a filing to the Hong Kong stock exchange on Sunday.
The announcement follows a similar move by Tencent last year in Hong Kong with its online reading business, China Literature Ltd. Its music platforms — QQ Music, KuGou and Kuwo — are becoming important vehicles for pop stars such as Katy Perry and Rihanna to reach a Chinese audience, alongside homegrown artists like Jason Zhang and Joker Xue.
“The payment ratio will increase for digital music consumption in China in the long run,” said He Saiyi, an analyst with Huatai Securities. “Tencent Music dominates China market: it owns the most digital music copyrights in China and has the most vibrant online music communities.”
Tencent Music Entertainment Group had picked banks to advise on planned IPO in the US that could raise at least US$1 billion (RM4.03 billion), said sources in May.
In the US, recorded music sales rose 17 per cent to US$8.5 billion last year, with streaming accounting for almost two-thirds of the total.