Before it officially filed for a U.S. IPO, China's biggest music tech company already had major label investors champing at the bit. Warner Music Group and Sony purchased $200 million worth of shares in Tencent Music Entertainment Group in a deal finalized yesterday (Oct. 1). The two labels combined to take on 68 million shares in the company, according to an SEC Filing.
The decision to invest in Tencent comes at a time when both Warner and Sony have been divesting from Spotify, an obvious competitor to the Chinese company, which offers streaming among other music services. In August, Warner Music announced that it had sold all of its Spotify shares, while Sony cashed in half of its shares in late July.
Additionally, both companies have shown a vested and active interest in building up their Chinese presence. Warner recently named Andy Ma CEO of Warner Music China, while Tencent and Sony Music collaborated to launch the Asia-centric EDM label Liquid State earlier this year. The Universal Music Group, meanwhile, announced a partnership with Tencent in May 2017.
Spotify previously acquired 9.1 percent of Tencent in a stock swap last December that saw the Chinese company acquire 7.5 percent of the streaming giant.
Tencent's popularity has skyrocketed, with the company basically doubling its revenue in the first half of this year ($1.3 billion) vs. 2017 ($653 million). The company owns QC Music, Kugou, Kuwo, and karoake app WeSing. Through its various holdings, Tencent offers not only streaming, but also downloads, concert tickets, and subscriptions.