Tencent Music Entertainment (TME), a subsidiary that manages internet group Tencent’s music streaming and karaoke services, agreed on Friday to exchange equity stakes with music streaming platform Spotify.
In addition, Tencent will make its own investment in Spotify by purchasing secondary shares from existing backers, having reportedly been trying to wholly acquire the company earlier this year. Figures for the repsective purchases have not been disclosed.
Founded in 2006, Sweden-based Spotify is a music streaming platform operator backed by investors including telecommunications company TeliaSonera and beverage producer Coca-Cola.
Spotify has raised approximately $1.06bn in equity funding, $526m of which came in its last round, a series G closed in mid-2015 at an $8.5bn post-money valuation.
TME had a 56% share of China’s music market through its Kugou, QQ Music and Kuwo apps, according to iiMedia Research, having acquired a controlling stake in music streaming company China Music at the start of 2017.
Spotify and TME are both expected to launch initial public offerings as soon as 2018, though Spotify could potentially opt for a direct listing, which would mean going public without issuing new shares and only allowing existing shareholders to sell shares.
TME has been tipped to float, potentially in Hong Kong, at a $10bn valuation according to Bloomberg. Tencent has already reaped $14bn in paper profits from a handful of recent IPOs including, Yixin, Sogou and China Literature.
Daniel Ek, Spotify’s founder and chief executive, said: “Spotify and Tencent Music Entertainment see significant opportunities in the global music streaming market for all our users, artists, music and business partners.
“This transaction will allow both companies to benefit from the global growth of music streaming.”
TME chief executive Cussion Pang added: “We are excited to embark on this partnership with the largest music streaming platform in the world.
“TME and Spotify will work together to explore collaboration opportunities, with a common objective to foster a vibrant music ecosystem that benefits users, artists and content owners.”
The Tencent/TME-Spotify cross-investment comes just after Bloomberg reported that Google-owned YouTube is planning to launch its own music streaming service in 2018.
The prospective service has reportedly secured the support of Warner while two other music majors, Sony and Universal, are currently in talks.