Tencent music and global strategic cooperation to build brand, the industry competition watershed appeared


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Written by Zhou Kai
Source: deep echo
Key points
According to “deep sound”, TME and universal have reached a three-year strategic cooperation agreement, and the two sides will jointly establish a new international trend music brand in the form of equity ratio joint venture.
Together with global, TME’s content advantage and industry leading position will be further consolidated.
As the infrastructure of the industry is gradually reconstructed under the new communication environment and business logic, copyright is not the key to determine the success or failure; how to integrate and win-win with the industry is the decisive point of competition.
The biggest suspense in the digital music industry this year has finally come to an end.
On August 11, Tencent Music Entertainment Group (hereinafter referred to as “TME”) released its financial report for the second quarter of 2020. Judging from the financial performance, TME is still on the track of steady progress. But compared with financial data, another piece of information is more worthy of market attention.
On the same day of the financial report, TME released a heavy message, and its cooperation with Universal Music Group, hereinafter referred to as “UMG”) jointly announced: Based on the long-term and deepening close partnership, the two sides renew the strategic cooperation agreement on copyright licensing for several years. QQ music, kugou music and KuWo music are the three major platforms to release UMG global high-quality music library content. The authorization of UMG in TME also includes the national karaoke, and online music live platform and other application scenarios.
This is a significant cooperation. As we all know, UMG is the largest record company in the world, and owns top-notch musicians in Europe and America, such as Taylor Swift, Ariana Grande, Justin Bieber, Katy Perry, Drake, Billie eilish, Troye Sivan and others, such as Zhang Xueyou, Eason Chen, Wu Yifan, Lang Lang, Sun Yanzi, Zhang Huimei, Wu Qingfeng, etc., as well as the works of Deng Lijun, Zhang Guorong, Wang Fei, beyond and other Chinese music library collections.
The ability and status of UMG in star making and content production can be seen.
Therefore, cooperation with UMG will further consolidate TME’s content advantage and industry leading position. More importantly, according to “deep sound”, the cooperation between the two sides has broken through the simple scope of copyright authorization and has gone deeper into the production of content. This is a major innovation: the relationship and linkage between music upstream and downstream has been reshaped, and a new music industry order has taken shape.
For the whole industry, the above changes are of great value, because for both record companies and digital music platforms, only when the industry develops forward can industry practitioners share more dividends.
The establishment of a new industrial order is the basis for all changes.
Music industry ushers in a new “system”
Why is it significant for TME and UMG to join hands with the whole industry? After carefully dismantling the cooperation content of both sides, the answer is not difficult to find. According to Shenzhen sound, we have learned from people familiar with the matter:
The term of the strategic cooperation agreement signed by TME and UMG is as long as three years;
At the same time, the two sides have also carried out a more in-depth binding. The two sides will jointly establish a brand new international trend music brand in the form of a peer-to-peer equity ratio joint venture. This is the second time that TME and head record company jointly build a brand after establishing liquid state with Sony Music.
It can be seen that the cooperation between TME and UMG is deeper than ever.
Previously, TME and UMG reached a cooperation only at the copyright level: in 2017, the two sides signed a strategic cooperation agreement on digital copyright distribution in Chinese mainland. TME obtained UMG massive quality library content and rights, operation, promotion and development of world-renowned singer resources.
Subsequently, the relationship between TME and UMG went further: according to public information, UMG has already held shares in TME. In the first half of this year, TME participated in the acquisition of a 10% stake in UMG by a consortium led by Tencent. As part of the deal, TME was granted a warrant to acquire a minority stake in UMG’s Greater China business within two years from the date of the above transaction. It means that the two sides realize cross shareholding.
Today, the two are more closely linked. The cooperation between the two sides in content co construction means that TME, the representative of the digital music platform, and UMG, the representative of the content producer, have a new way of interaction – from simple copyright authorization to subsequent cross shareholding and strategic investment. Now, the interaction between the two sides has entered the level of deep content co construction. The evolution of this series of relations can be used as a figurative metaphor: after the marriage of capital, the two sides have cultivated a deep feeling.
The in-depth interaction between TME and UMG is of great significance to the whole industry. This is mainly because, after experiencing the stormy changes brought about by the Internet, the music industry as a whole is waiting to be reborn.
In the past ten years, the era of piracy has broken the chain of operation of the era of the record industry, and the wave of legalization has gradually revived it, and the music industry has always been in dramatic changes.
In the traditional sense, the record industry is an industry with simple and clear business model and good returns: record companies discover new people through series operation, launch works, sell records, and publicize them. After gathering popularity through works, their artists magnify their commercial value through offline performances and advertising.
However, the former era of piracy weakened or even disintegrated the value of physical records, and the business model of the record industry also suffered a major blow. At the same time, the emergence of network communication mode also has an impact on the original communication order. In the emerging digital music development environment, the whole music industry is restructuring from content production, publicity to commercial realization. Among them, because the foundation of the record industry in China is relatively weak, the changes are particularly dramatic.

In the domestic market, a few years ago, copyright was once the focus of competition in the digital music industry. The underlying reason behind this was the lack of hematopoietic capacity in the industry. In depth, the essence of the lack of hematopoietic capacity was due to the iterative innovation of the business cycle, content production and distribution in the traditional record era, and the digital music industry was still in the exploratory period and had not been established healthily The new order of order.
In the past few years, all parties in the industry chain have been exploring new ways of cooperation: whether they want to build a one-stop product covering the whole music industry chain, or build a new product form with content producers as the core, it is difficult for players who have no long-term commitment to invest in the industry to get good results from the attempt to innovate.
Past experience has shown that if you want to get a return in the music industry, you must co-exist with the industry. Because of this, the cooperation between TME and UMG is more valuable: with the industrial infrastructure gradually reconstructed under the new communication environment and business logic, copyright is no longer the key to determine the outcome; how to integrate with the industry and win-win has become the decisive point of competition.
The in-depth cooperation between TME and UMG has already revealed a new watershed in the development of digital music industry. Next, the topic that needs to be discussed is: where will the competition of the industry go next?
From cooperation to symbiosis
Thanks to the continuous efforts of players from all walks of life in the industry, great changes have taken place in the state of the domestic music industry and the past.
First of all, the digital music platform represented by TME gradually reconstructs the business model under the new environment by means of paid digital music albums, online music + social entertainment and so on, and promotes the industry to return to a positive business cycle.
According to TME’s second quarter financial report, its online music users reached 47.1 million, an increase of 51.9% over the same period of last year, and the average income per paid user (arppu) increased by 8.1% compared with the same period last year. These figures are the best illustration of the positive circulation of the industry after the establishment of the new industrial order.
While reconstructing the business model of the industry, the digital music platform itself has accumulated a lot of capabilities and has the energy to reshape the whole industry.
Take TME as an example, whether it is digital albums that are becoming more and more popular and recognized by users (for example, the sales of digital albums by Jay Chou, Cai Xukun and Xiao Zhan continue to rise to record levels in 2020); or TME, which meets the needs of users during the epidemic period and helps the transformation of physical performances Live (the superstar level and high-quality super performances of want to see you, OST, Mayday, Liu Ruoying and even Eason Chan) have been held. Behind these layouts, TME has built multi-dimensional capabilities around the whole music industry.
Under the influence of industry upheaval, platform evolution, audience demand and other multiple factors, it has become the common demand of all parties to walk out of the single dimension copyright war and enter the multi-dimensional industrial chain restructuring, so as to promote the virtuous circle of the industry and generate self-supporting forces. In this process, the digital music platform, which connects the upstream content producers and the end-user side, plays an important role.
The greater the ability, the greater the responsibility. In fact, the continuous innovation of digital music platform is a beneficial attempt to make up for the industrial chain in the record age.
In the unprecedented new order of the industry, the roles of all parties in the industrial chain must also evolve to meet the requirements of the new mode of production on production relations and productivity. For digital music platform, the biggest challenge is how to better serve the organic and sustainable development of the whole industry.
The logic behind this is that although the music industry has changed in terms of media and channels, in essence, the nature of music and the demands for creating high-quality music have not changed fundamentally. With the establishment of the new order of the industry, the platform must cultivate more multi-dimensional capabilities, such as content capability, user insight, product power, and commercial liquidity ability. The threshold of industry competition is higher.
TME, which has won in-depth cooperation with UMG this time, is the best interpretation of how the platform should develop under the new order: in years of exploration, TME has accumulated the ability to discover content, distribute content, publicize content, and offline activities, which can provide more empowerment and help for content producers such as record companies.
For the record companies of upstream content producers, the value of these capabilities is far more significant than pure capital or flow: because their injection can help record companies produce more new and high-quality content, and obtain reasonable returns from the platform, thus prying more imagination space. This is obviously more attractive than simply selling stock content.
Because of this, in the new industry order, the platform that can provide more yuan and more in-depth empowerment will be more favored by copyright owners. This is also the core reason why UMG chose to deepen cooperation with TME three years later.
More importantly, the construction of multi-dimensional capabilities of digital music platform will further promote the development of the new order of the industry. This means that the players who work hard will have a closer relationship with the industry, and they can grow bigger if they go deeper.
Overall, TME and UMG’s hand in hand is a landmark event in the digital music industry. From the choice of content side, we can see that only by making friends with time and making firm investment in the sustainable development of the industry can they get real rewards.
As an industry leader, UMG’s actions to some extent represent the wind vane of the whole industry’s content producers. Its deep cooperation with TME sends a clear signal: for the digital music platform as a whole, the era of copyright competition is over. Next, who can provide better services in the era of upstream content Co construction, who can win the first place in the competition.
In the era of fierce competition, TME with a long-term vision, firm strategy and industry positioning is a valuable player in the track. The choice of UMG is the evidence that it can continue to gain the trust and recognition of its partners and continue to peer. TME also knows this and continues to strengthen it. In the past four years, TME launched a brand-new and upgraded visual image of “infinite wings”, and continued to emphasize its own brand imprint of content production capacity and user connectivity.

Starting with like-minded friends, the starting gun of the new race has been fired.
(statement: This article only represents the author’s point of view, not Sina’s position.)