Sony Music Diversifies Digital Distribution In China In Tencent Deal

Sony Music Entertainment (SME) announced Monday, May 17, that it has signed both a new direct China digital distribution deal with NetEase Cloud Music and a multi-year extension of its existing agreement with Tencent Music Entertainment (TME).

Sony’s NetEase deal is the latest to shift power away from TME in China’s streaming industry and make the space slightly more competitive. It comes amidst a government antitrust probe of TME and its parent company Tencent Group. TME announced its quarterly results on Monday and acknowledged that regulators are taking a growing interest in its business.

For years, TME elbowed out competitors with exclusive digital distribution contracts with the three major labels, Universal, Warner, and Sony. It would then sub-license those catalogues out to competitors like NetEase — often for double or triple the original price.

The arrangement provoked a 2018 antitrust investigation of Tencent, which resulted in a commitment from the firm to drop some of its exclusive contracts at the end of their three-year duration. The probe was suspended in 2019.

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