Spotify and Tencent Holdings have jointly announced equity investments in each other in a mover that strengthens the relationships between two of the most popular music streaming platforms in the world.
The Chinese company owns a subsidiary, Tencent Music Entertainment Group, which operates three major music service providers including QQ Music, KuGou and Kuwo.
TME and Spotify will acquire new shares representing minority equity stakes in each other for cash. Tencent will also invest in Spotify through secondary purchases. As a result, Spotify will hold a minority stake in TME, and both Tencent and TME will hold minority stakes in Spotify.
The joint equity deal has the potential to make both of them more attractive to investors in anticipated IPOs for both companies. Spotify's UK revenue has increased significantly, according to latest results.
Tencent, which owns a majority stake in TME, operates the most popular social platforms in China. TME is an early mover in authorised digital music and is the largest online music services company in China.
Daniel Ek, CEO and founder, Spotify, said, “Spotify and Tencent Music Entertainment see significant opportunities in the global music streaming market for all our users, artists, music and business partners. This transaction will allow both companies to benefit from the global growth of music streaming.”
Cussion Pang, CEO of TME, said: “We are excited to embark on this partnership with the largest music streaming platform in the world. TME and Spotify will work together to explore collaboration opportunities, with a common objective to foster a vibrant music ecosystem that benefits users, artists and content owners.”
Martin Lau, president at Tencent, added: “We are delighted to facilitate this strategic collaboration between the two largest digital music platforms in the world. Both of us share the same commitment to bringing music and superior entertainment experiences to music lovers, and to expanding the global digital music market for artists and content partners.”