Tencent Music Entertainment Group (NYSE:TME), the music streaming arm of tech giant Tencent Holdings Ltd, is reportedly being ordered by Chinese antitrust regulators to give up exclusive rights to music labels it uses to compete with smaller rivals in the latest step in the country’s crackdown on its tech giants.
According to a Reuters report on Monday, China’s State Administration of Market Regulation (SAMR) is also planning to fine the firm around 500,000 yuan (US$77,150) for lapses in reporting its 2016 acquisition of streaming apps Kuwo and Kugou.
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Tencent Music, China’s equivalent to Spotify Technology SA (NYSE:SPOT), has been aiming to secure exclusive streaming rights with multiple high profile labels including Universal Music Group, Sony Music and Warner Music, which collectively own a plethora of song catalogues from artists including The Rolling Stones, Pink Floyd, Taylor Swift, Lady Gaga, Kanye West, Ed Sheeran and Madonna.
Tencent had been aiming to claim exclusive rights in order to fend off competitors, however, the SAMR’s move means it will now allow its current ownership to expire, meaning the firm will now need to diversify content and market itself more effectively to attract and retain users rather than relying on sole ownership of popular songs.
The regulatory pressure also follows moved by Chinese authorities to reign in the growing market power of the country’s tech sector, with other large players such as ecommerce site Alibaba Group Holding Ltd (NYSE:BABA) and ride-hailing app DiDi Global Inc (NYSE:DIDI) also having faced regulatory investigations into their businesses.
More recently, ByteDance, the Chinese owner of video app TikTok, was reported to have pulled plans for an offshore initial public offering (IPO) after China’s regulators warned that the firm should focus instead of addressing data security risks on its products.
Shares in Tencent Music were down 2.6% at US$12.88 in pre-market trading in New York on Monday.