Warner to team up with China's Tencent

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Warner Music announced a partnership on Thursday with Chinese Internet company Tencent that will include streaming, in the first such deal for a major global record label in the huge market.

The Warner Music Group, whose roster of artists ranges from Prince to Coldplay, said the deal would let it distribute to Tencent's platforms across China including QQ Music, a start-up streaming service similar to Spotify.

The deal is the first for one of the three global label conglomerates in China, where international companies have long complained that rampant piracy has slashed revenues for creators of everything from music to software.

"By providing wider access to high-quality, licensed music on authorised services, the deal will create greater choice for consumers, greater value for artists and a more sustainable business for music companies and service providers," a joint statement said.

The agreement, however, will exclude applications on mobile phones. Warner said it hoped to reach its own partnerships.

The deal is the latest expansion into Asia for the Warner Music Group, which earlier this year bought Hong Kong-based Gold Typhoon, which both signs local artists and runs the China operations for international stars including Japanese girls group sensation AKB48.

For Tencent, the agreement would let the company expand more firmly into music. Its core businesses are online games and messaging applications such as WeChat, which had 468 million active users at the end of the last quarter, according to company figures.

Mr Stu Bergen, international president for Warner Recorded Music, said the company had prioritised on expansion into China, which has the world's largest population and where musical tastes are quickly evolving.

"Providing music fans with access to high quality music and the right mix of regional and global artists, will be integral to the growth of the digital music sector in China," he said in a statement.

China's economy has soared to become the world's second largest in the past two decades. But the global music industry, which is desperate to boost flagging revenues in the developed world, has seen relatively little money from the country.

Music sales were just US$82.6 million (S$106.7 million) last year in China, a fraction of the US$4.47 billion in the United States, while the second largest market, Japan, witnessed steep decline, according to the International Federation of the Phonographic Industry.

Consumer habits when buying music are far more subjective to national cultures than, for example, buying toasters. But the industry points to piracy as a major impediment in China.

The relationship between China and the three label conglomerates - Warner, Sony and Universal - began to change in 2011 when they together signed a deal with the country's largest search engine Baidu to start licensing of songs' MP3 files.

Max Hole, chairman of the Universal Music Group International, recently told a conference earlier this year in Singapore: "The traditional model of purchasing musical product, be it physical or digital, has never really existed in China on any major scale."

"The market is moving straight to one where it's all about securing access to tracks. We are in the middle of an extraordinary transition," he said.

International streaming companies, which have posted rapid growth, are yet to appear in China. Taiwan-based KKBOX started a streaming service before Spotify and focuses on Asian pop music, but has not entered the mainland.

Streaming, however, has been controversial among some artists who say they are paid too little, with Taylor Swift last week pulling her music out of Spotify.

 
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