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Music Streaming Heats Up: Alibaba Pumps USD 700 Million into 'Chinese Spotify'
Music Streaming Heats Up: Alibaba Pumps USD 700 Million into 'Chinese Spotify'
Be careful what you listen to. Image credit: Moose/Pexels

Alibaba Group (BABA:NYSE) has spearheaded a fresh venture financing round for NetEase (NTES:Nasdaq), placing USD 700 million into the company's music-streaming affiliate on August 6.

A day before that, the two Hangzhou-based Internet giants announced another deal: Alibaba arranged a USD 2 billion acquisition of Kaola (网易考拉), import e-commerce platform, which specializes in the trade of branded goods. According to NetEase, the marketplace will be integrated into Tmall.com.

Both corporations' CEOs (Daniel Zhang of Alibaba and William Ding of NetEase) expressed their confidence about the future of the music industry in China. 

EqualOcean considers this alliance as a potential threat for Tencent (0700:HK), which holds a huge share in the local market through its New York Stock Exchange-listed music arm (TME:NYSE). The latter saw its American stock dropping from nearly USD 18 per share (this spring) to the current USD 13 per share. Tencent Music's market cap has been hovering above USD 20 billion since the firm's stellar IPO in December 2018.

Two weeks ago, Bloomberg reported that China's antitrust regulators have launched a campaign to scrutinize Tencent's recent licensing deals with major global music labels. The firm's shares tumbled after this news. TME holds more than half of the local music streaming market, according to Internet data portal 199it.

According to the Global Music Report, prepared by worldwide music organization IFPI (International Federation of the Phonographic Industry), global revenue from streaming grew at a CAGR of around 42% over the period 2007-2017, exceeding USD 6.6 billion over the course of last year. Now, with Spotify and the like stepping onto the scene, this represents the largest revenue stream for the global industry players.

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