Tencent’s Problems Ripple Through the Music Biz

When Chinese antitrust regulators sneeze, the music business catches a cold.

Beijing has been cracking down on technology companies, and on July 24, the government gave Tencent Music, the country’s largest audio-streaming company, 30 days to end the exclusive licensing deals that allow it to offer songs that competitors can’t. Months before, another regulator announced an effort to curb online tipping, a major source of revenue for Tencent Music, which takes a percentage of the money that fans send to performers.

These days, however, what happens in China echoes from Stockholm to Los Angeles. Tencent Music’s share price, which hit an all-time high on March 23, fell a whopping 74.6% as of Aug. 23, wiping out $40.1 billion of market capitalization. Among its major shareholders is Spotify, which in December 2017 acquired an 8.4% stake in the company that has dropped in value by $3.6 billion in roughly five months. (Since Spotify co-founder/CEO Daniel Ek owns 16.8% of Spotify’s outstanding ordinary shares, according to the company’s 2020 annual report, that means his indirect stake in Tencent Music has fallen $597 million since March 23.) And among Spotify’s shareholders are Universal Music Group and Sony Music Entertainment.