Chinese internet giant Tencent Holdings and Sweden’s Spotify AB are reportedly in talks to take a 10% stake in each other’s music streaming companies.
The deal would come just before both of their expected IPOs and would pair the two companies in future licensing deals with major music labels.
A little side-by-side
Both companies are killing it in their respective music markets, but Spotify will likely have a higher valuation upon going public, meaning if the deal is made, Tencent Holdings would pay Spotify the difference, so they both have equal shares in their music operations.
But Tencent Music definitely brings some worth to the table as well: while the company has far fewer paying subscribers (15m compared to Spotify’s 60m), they have 700m active users compared to Spotify’s 140m.
Why is this happening?
It could be a potential “alliance” between the two music streaming giants. Tencent Holdings has been actively trying to weasel its way into Western markets, and owning a stake in their Western music-counterpart just out in front of their IPOs makes sense for shareholders.
But Spotify claims they have no plans to enter the Chinese market anytime soon, even though last year, they reportedly went through a phase of reaching out to potential Chinese investors.
“Hmmm, seems like Tencent stands to gain more than Spotify…”
Yeah, it’s looking like it.
They’ll be able to learn how to attract more paying customers to their platform from Spotify and plant the seed to dominate the Western tech-isphere.
This year Tencent has made many big investments in Western companies — or as CNBC puts it, “Trojan horse investments.” In September, they even tried to buy Spotify.
Many of their investments in companies like Tesla and Snap don’t exactly relate to their business model, but they directly rival their gargantuan fellow $500B competitors like Facebook and Apple.
