Chinese tech giant Tencent Holdings' plan to expand into other businesses is now in full swing. The company has already made substantial investments into other industries and now the firm is reportedly making moves to get into the record labeling gig.
Reports have revealed that Tencent is apparently now in preliminary talks to purchase a substantial stake in one of the world's largest music company, Universal Music Group.
Universal Music is considered to be part of the industry's "big three" music companies, alongside Warner Music and Sony Music.
The company, which is owned by French media conglomerate Vivendi, currently represents big-name artists such as Lady Gaga, Taylor Swift, Rihanna, and Lana Del Rey.
According to reports citing sources close to the matter, Tencent is aiming to buy a 10 percent stake in the company. The amount that Tencent is willing to pay for the 10 percent stake in the company essentially values the music label at around $33.6 billion. Vivendi revealed in a statement on Tuesday that under the deal, Tencent will be given a one-year call option to acquire another 10 percent at the same price and terms.
Tencent's planned acquisition is likely a part of the Shenzhen-based company's big bet on the growing music streaming industry in China. The company is already making huge investments in its streaming subsidiary, Tencent Music Entertainment, which now boasts over 20 million tracks. The company was able to accumulate a substantial amount of tracks through various licensing deals with domestic and international music labels.
Both Tencent and Universal Music Group already have a standing relationship. Two years ago, Tencent was able to enter a licensing agreement with the music label. The deal allowed Tencent to stream music from the label's portfolio on its various music streaming platforms, including Kuwo, Kugou, and QQ Music.
In a statement released Tuesday, Vivendi revealed that it was also exploring additional strategic partnerships with Tencent for various commercial applications. The company explained that it and Tencent are aiming to capture various opportunities that have recently been opened due to digitalization and the opening of relatively new markets. Apart from Tencent's 10 percent stake, Vivendi is reportedly planning to sell up to 50 percent of Universal Music Group to other interested investors.
For the first half of 2019, Vivendi reported that Universal Music Group was able to make revenues of around $3.66 billion. This was an 18.6 percent increase from revenues in the same period last year.
Some of the label's best performers during that period included new albums from Billie Eilish, Ariana Grande, and King & Prince. The company also made substantial profits from the sale of the soundtrack album from the movie "A Star is Born."
