Will Chinese Company Tencent Buyout Spotify?

Tencent

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Heres something that will effect us all, or at least the ones who stream music and dont illegally download it.

Spotify has been loosing money since they opened in 2006, we all knew this wasnt good. Spotify may boast high annual salaries for their employees paying them over $168,000 a year but that isnt that great when you see Spotify reported a loss in 2015 of over $194 million, jumping way up from the $28 million in 2010 they lost.

Chinnese company Tencent has been making billions since 1998 in multiple vertical technology markets like social networks, instant messaging, mass media, web portals, e-commerce, web browsers, Antivirus software, multiplayer online games, electric cars, partnerships with HBO and much more. It doesnt matter that Spotify is beating Apple Music by about 30 million paid subscribers, compared to Chinas new music streaming service QQ music the 30 million Spotify listeners are only breadcrumbs.

Tencent recently bought out QQ Music and China Music corporation, and now QQ Music is better known as China’s Spotify, who is already turning massive profits in the music streaming industry says Wu Weilin, the general manager of the music division for Tencent.

We always said that music streaming is the future, we just didnt think it would potentially be in the hands of a Chinese company. Also check out Facebook is close to being dethroned by Tencent as the world’s No. 1 social network.

Will Tencent (QQ Music) Buyout Spotify?

But why is Spotify sinking and QQ Music’s riding high? The answer lies in taking a closer look at parent company Tencent, an e-commerce and tech giant in China. On top of all the above mentioned areas Tencent operated in, they also have the following below:

Active Users

QQ Music and China Music Corporation’s KuGou both claim to have over 800 million users each. TenCent doesn’t focus only on the music streaming industry, but also manages a social network, a gaming platform, and the highly popular messenger WeChat with over 700 million active users. All of these other places of reach gives Tencent a huge advantage when negotiating deals with record labels as they have an extended reach with the Chinese markets. Spotify’s unprofitability can be mostly due to the high royalties it has to pay to the music industry. In 2015 Spotify paid out over $1.7 billion on royalty payments.

Tencent seems to be dominating China’s online music market with streaming. Despite having claimed to have over 800 million users, about half of those are active monthly users for QQ Music, which makes for a substantial active user base of 400 million, 4 times the current size of Spotify’s active monthly user base.

Unlike Spotify, QQ Music also offers other music services, like selling concert tickets, as well as offering an ad-free listening subscription of just 10 Chinese Yuan. Given that the average Chinese laborer earns 62,029 Chinese yuan a year, which is roughly just over $9,300 a year, 10 Chinese Yuan is really cheap.

Will Tencent buyout Spotify with their new aquired company QQ Music?

Tencent Criticism

Some have criticized Tencent’s software and services as remarkably similar to those of competitors. Tencent founder and chairman Ma Huateng (Pony Ma) famously said, “To copy is not evil.” Former CEO and President Wang Zhidong of SINA.com said, “Pony Ma is a notorious king of copying.” While Jack Ma of Alibaba Group stated, “the problem in Tencent is no innovation; all things are copies.”

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