Tencent Music fined: the ins and outs of anti-monopoly in the music market

Anti-monopoly drop hammer, Tencent Music bid farewell to the era of exclusive copyright.

The first domestic online music anti-monopoly case, which has been spread for a long time, finally landed on boots.

On July 24, the official website of the State Administration for Market Regulation issued the penalty results for Tencent Holdings’ acquisition of China Music Group: a fine of 500,000 yuan was imposed, and the exclusive copyright agreement was lifted within 30 days from the date of this decision, and high prepayments were stopped. Payment methods for copyright fees such as gold and most-favored-nation treatment clauses must not be implemented to restore market competition.

In response, Tencent issued a response stating that the company will earnestly abide by the decision, strictly implement regulatory requirements, operate in compliance with laws and regulations, earnestly perform social responsibilities, and maintain healthy competition in the market. Tencent will consolidate its responsibilities, formulate rectification measures with Tencent Music and other affiliated companies within the prescribed time limit, and complete them in full in accordance with the penalty decision requirements to ensure that the rectification is in place.

Tencent Music fined: the ins and outs of anti-monopoly in the music market

It is reported that this case has become the first case in which necessary measures have been taken to restore the state of market competition since the implementation of my country’s “Anti-Monopoly Law”.

For Tencent Music, whose exclusive copyright is the most important moat, anti-monopoly measures will undoubtedly have an important impact. As for the industry, the punishment will greatly improve the phenomenon that the online music market has or may have the effect of eliminating or restricting competition caused by the concentration of operators; increasing market entry barriers ; increasing user conversion. At the same time, it is also conducive to creating a fairer competitive environment and promoting the standardized and healthy development of the entire industry.

For such punishment, industry insiders believe that this action announces that the exclusive copyright model of the Chinese music market in the past ten years will officially come to an end. At the same time, it also means that the development model of China’s online music market may usher in a complete change.

Of course, Tencent audio and music projects still living in the former market dominance, QQ music, cool dog music , cool music corps composed still have dominant position in the market. I am afraid that there is still a long way to go before the market is restored to its flourishing state.

No matter whether it is in Europe, America or Japan, South Korea, there is rarely such an exclusive copyright model. How did the special music copyright model in the Chinese market come into being? What profound impact does it have on the music market? After the anti-monopoly measures are released, how will the market trend and pattern be changed? This article attempts to discuss these important issues and clarify the ins and outs of anti-monopoly in the music market.

Removal of exclusive copyright, Tencent Music fined 500,000

Zinc Finance learned that on July 12, 2016, Tencent invested in China Music Group with its QQ music business, obtained 61.64% of the shares of China Music Group, and obtained sole control of China Music Group, which belongs to Article 20 of the Anti-Monopoly Law. The required concentration of operators.

Tencent Music fined: the ins and outs of anti-monopoly in the music market

In December 2016, the integrated China Music Group was renamed Tencent Music Entertainment Group. On December 6, 2017, the transaction completed the registration procedures for equity change.

According to Article 21 of the Anti-Monopoly Law, “If the concentration of undertakings meets the reporting standards set by the State Council, the undertakings shall report to the Anti-monopoly Law Enforcement Agency of the State Council in advance, and the concentration shall not be implemented if the concentration has not been declared.” On December 6, 2017, Tencent completed the registration of the equity change and failed to report to this agency before that. This violated Article 21 of the Anti-Monopoly Law and constituted an illegal concentration of undertakings.

After extensive research, this term focus on Chinese territory Internet audio and music broadcast put platform market has or may have to exclude or restrict competition.

The penalty documents show that when the concentration occurred in July 2016, the monthly active users of Tencent and China Music Group were 160 million and 230 million, respectively, with market shares of 33.96% and 49.07%, respectively; the monthly usage time of users was 805 million respectively. Hours and 698 million hours, the market shares are 45.77% and 39.65% respectively, and the total market share exceeds 80%. In 2016, the total sales amount of the two parties in the relevant market accounted for approximately 70% of the total revenue of the relevant market. Calculated based on the share of music copyright core resources, the number of music libraries of Tencent and China Music Group are 12.1 million and 8.21 million respectively. Among them, the exclusive music library is 3.14 million and 1.3 million, and the market share of music library and exclusive resources exceeds 80. %.

Tencent Music fined: the ins and outs of anti-monopoly in the music market

According to consumers’ choice of flow between alternative platforms, 73.6% of Tencent’s QQ Music users flow to Kugou Music and Kuwo Music, which are owned by China Music Group, indicating that if QQ Music increases prices or reduces service levels, there may be 73.6% of users flow to platforms under China Music Group, and the two parties are relatively close competitors to each other.

In summary, concentration may increase copyright resource barriers, increase user conversion costs, and market entry activity is not high.

In this regard, the State Administration for Market Regulation made a decision: order Tencent and its affiliates not to reach or reach an exclusive copyright agreement or other exclusive agreement with the upstream copyright party. If it has been reached, it must be within 30 days from the date of issuance of this decision. Cancellation, except for exclusive collaborations with independent musicians or new song debuts. The period of exclusive cooperation with independent musicians shall not exceed three years, and the period of exclusive cooperation with the first release of new songs shall not exceed 30 days.

At the same time, without justified reasons, the upstream copyright party shall not be required or disguisedly required to give the party concerned conditions superior to other competitors, including but not limited to the scope of authorization, authorization amount, authorization period, etc., or any agreement or agreement terms related to it. If it has been reached, it must be cancelled within 30 days from the date of the issuance of this decision.

In addition, according to the actual use of copyright, user payment, song unit price, application scenario, contract period and other factors, offer to upstream copyright parties, and must not increase the cost of competitors in disguised form through high prepayments, eliminate or restrict competition.

The penalty decision also shows that the State Administration for Market Regulation shall have the right to inspect the performance of the above-mentioned obligations by Tencent and its affiliates through the supervision trustee or by its own supervision within three years. Tencent shall report to the State Administration for Market Regulation on the performance of the obligations each year within three years. Do not report again.

Looking back at the history of the Chinese music market in the past ten years, the exclusive copyright model has always been controversial. This model has caused the copyright fees of major record companies to rise by nearly a hundred times in ten years. Music platforms are prosperous because of copyrights, and because they are not copyrighted. Death. From the original more than 400 platforms to the present, the main players are only left in the single digits.

Today, with the launch of the State Administration for Market Regulation, the exclusive copyright model of the Chinese music market will become history.

Under the exclusive copyright model, many platforms have withdrawn from the market

In 2016, Wang Hao , the founder of Xiami Music , announced his farewell to the music industry, leaving a parting feeling that was widely spread by the industry:

I have been involved in this industry for eight years. The original intention was to keep this industry up to date, but now the status quo of the industry is outrageously absurd. After that, it is also said in an interview several times, the record company has become a trade Easy Company , the current mode of music rights to a large extent hindered innovation in the market.

Time goes back to May 2012.

At that time, Xie Guomin founded the Ocean Music Group and signed exclusive licenses for more than 20 record companies at low prices.

Prior to this, Xie Guomin served as vice president of Sina.com and general manager of Sina Music. As a lawyer, he was keen to capture huge business opportunities in the Chinese music market where piracy was abundant at the time. Since then, Xie Guomin continued to harvest a large number of exclusive copyrights, and then obtained huge profits through copyright protection and other means.

By April 2014, when Ocean Music merged with Kugou Music and Kuwo Music to form China Music Group (CMC), this company already held the exclusive copyrights of nearly a hundred labels.

In the past few years, Tencent’s QQ Music has also begun to frequently carry out exclusive copyright arrangements. In December 2013, QQ Music announced that it had obtained the exclusive authorization of seven record companies including Jewell (Jay Chou Copyright Company). In November 2014, QQ Music became the general copyright agent of Warner Mainland China. This is the beginning of the world’s three major record companies-Universal Music, Sony Music, and Warner Music-to adopt an exclusive licensing model in the Chinese market.

Tencent Music fined: the ins and outs of anti-monopoly in the music market

In fact, the exclusive licensing model is very rare in the international market. The US, Europe, Japan and South Korea markets where the music industry is relatively developed generally use specific copyright collective management organizations (third-party non-profit organizations) to conduct unified management of copyright, unified prices, and equal authorization. This approach can be better from the root. To curb monopoly, ensure market equality, and ensure full competition.

At the same time, most countries have specialized agencies to supervise the licensing fee standards of collective management organizations, and copyright prices are open and transparent. However, in the Chinese market, the three major record companies have all implemented a “guaranteed deposit” system: the guaranteed deposit will be collected immediately after signing the contract, and then the actual usage fee will be charged according to the situation thereafter.

The original intention of the guarantee is that the platform provides basic protection for the record company’s advance funds. Spotify, the world’s largest music platform, pays 10%-20% of its total copyright expenditures every year. However, in the Chinese market, the guarantee deposit is completely out of shape, far higher than the actual usage fee, and cannot be refunded.

The issue of fair licensing and soaring copyright fees caused by exclusive licensing also completely changed the direction of the Chinese music market in the next few years.

The copyright war has heated up, and music platforms have withdrawn.

In the following years, the copyright war entered a fierce stage.

In July 2015, the National Copyright Administration issued the “Strictest Copyright Order”, which became a watershed for China’s music industry from the era of piracy to the era of authenticity. This is of great significance to the market. The music platform has since bid farewell to the era of piracy and promoted the long-term and healthy development of the industry.

In October 2015, according to government requirements, QQ Music sublicensed millions of songs to NetEase Cloud Music. However, Jay Chou and other core artist songs, which account for about 90% of the total broadcast volume on the platform, are not included in the scope of this transfer. More than a dozen music platforms, including Baidu Music and Duomi Music, have offline more than 2.2 million songs due to unauthorized access.

Two months later, Baidu Music, whose vitality was badly damaged, sold so fast that it was too fit for the wheat field . In just a few years, the cost of music copyright has risen tenfold or tens of times. Affected by this, the number of music websites has dropped sharply from 400 in 2005 to 16.

In April 2016, can not afford everyday sounds copyright war, but unfortunately Ali was acquired and renamed Ali planet . In December of that year, Ali Planet was also permanently closed due to the loss of the copyright war.

Tencent Music fined: the ins and outs of anti-monopoly in the music market

Another product under Ali’s good reputation-Xiami Music, which started with niche music, barely survived with its differentiated positioning. In September 2017, Xiami Music CEO Yu Yan also published a somewhat idealistic internal letter, stating that “I don’t want to build walls, but it will accumulate food.” Unexpectedly, after a few years, Xiami Music will also be copyrighted. No food”, fell under this high wall.

Since 2014, platforms that cannot afford and cannot buy copyrights have declined rapidly and have withdrawn from the market. At the same time, almost no new players have entered the online music market. Even the height of the limelight in recent years vibrato deft can only test the water several times, has been reluctant to formally enter the music streaming market, the music business has been in its infancy. The industry situation that used to compete for thousands of sails is gone forever.

The formation of monopoly structure attracts great attention from the country

Relying on copyright monopoly to thoroughly crack down on competitors has always been Tencent Music’s killer feature.

In January 2017, QQ Music and China Music Group merged into Tencent Music Entertainment Group (TME), becoming a giant in the music market. In April of this year, Tencent Music officially collected the exclusive copyrights of the three major record companies of Universal, Sony, and Warner, and mastered the exclusive music library resources of top Chinese singers such as Eason Chan and Stefanie Sun.

At that time, the exclusive copyright in the music market and the negative impact of unreasonable competition have attracted great attention from relevant departments. However, after the completion of business mergers and acquisitions, Tencent Music continued to increase its exclusive copyright purchases; and accelerated the integration of the upstream and downstream of the industry chain .

Tencent Music fined: the ins and outs of anti-monopoly in the music market

In September of that year, Tencent Music and Alibaba Music completed the copyright sub-license cooperation, but did not sub-license with NetEase Cloud. Previously, Tencent Music used the same trick-to sublicense it to NetEase, but not to Ali-to play the Ali’s Tiantianyou. This time, NetEase has become the suppressed party.

In December 2017, Spotify and Tencent Music each held shares to form a capital alliance. A full year later, in December 2018, Tencent Music successfully landed on the New York Stock Exchange, and data showed that its business accounted for more than 78% of China’s streaming music market share.

One of the key figures in the story of Xie Guomin, then finished in the next realization of beauty ” magnificent turn “, on 19 May resigned as Group Managing Director and co-president.

Tencent Music also has capital binding with the world’s three major record companies. This is of great significance for its control of copyright from the upstream supply chain and deeper linkage with the label. In December 2020, a consortium formed by TME’s wholly-owned subsidiary and other co-investors will exercise the subscription rights to acquire an additional 10% stake in Universal Music. So far, Tencent and Tencent Music hold 20% of Universal Music. At the same time, Tencent Music has also formed a shareholding relationship with Warner and Sony.

Tencent Music fined: the ins and outs of anti-monopoly in the music market

Also in 2020, Tencent Music successfully renewed its contracts with Universal, Warner, and Jewell, and obtained long-term authorization. In cooperation with record companies in Japan, South Korea, Taiwan, Hong Kong and other regions, its exclusive copyright share is about 90%. They are with Hong Kong Emperor, East Asia, TVB, Taiwan Jewell, Huayan, Believe Music, Fu Mao, UFO , South Korea’s SM, YG, JYP, CJ and other record and entertainment companies signed exclusive cooperation, and invested in some labels.

Tencent Music has made great strides in the copyright layout; however, the few music platforms are still leaving. In March 2018, Duomi Music, the first domestic digital music stock, was officially suspended. In February 2021, for 15 years of operation, Xiami, which served hundreds of millions of users, was officially shut down.

So far, there are only three major players in the music industry.

However, while Tencent Music has gradually become a dominant player, it has also attracted the attention of national regulatory authorities.

As early as September 2017, the National Copyright Administration issued an administrative guidance on “full authorization and avoiding exclusive copyright” on interviews with a number of mainstream record companies and online music service providers. In February 2018, under the active coordination and promotion of the National Copyright Administration, NetEase Cloud Music and Tencent Music mutually authorized music works, reaching more than 99% of their respective exclusive music works.

However, the 1% copyright of the head is still firmly controlled by Tencent Music, covering most of the popular songs.

In August 2019, Tencent Music fell into a “copyright monopoly” storm, and the State Administration of Market Supervision initiated an investigation. Although in February of the following year, the media reported that the investigation was suspended. But entering 2021, reports of related antitrust investigations began to appear in the media.

In April of this year, according to Reuters, Tencent received an antitrust ticket and was required to sell some of its music assets. Tencent declined to comment at the time. In June, the British “Financial Times” reported that Tencent Music may suffer a huge fine in the near future.

Now, the sword of Damocles has finally fallen.

How to reshape the development path in the post-copyright era?

The exclusive copyright model has profoundly changed the direction of the Chinese music market. The advent of antitrust and the end of the exclusive copyright model are another milestone event, announcing that the music market has officially entered the “post-copyright era” from the “copyright era”. How will this reshape the development path of the market? From an ideal point of view, the following important changes may occur in the market.

First, users are expected to bid farewell to the “dual APP era” of listening to songs.

In 2015, as the copyright war intensified, Song Ke, then CEO of Alibaba Music, stated on many occasions that the music market has entered the “dual app era”, thinking that users need to choose one app from the Alibaba department and the Tencent department to satisfy all of them. need. Data from QuestMobile shows that from July 2017 to July 2018, the number of overlapped NetEase Cloud Music and Tencent music apps doubled. Users need to switch apps back and forth to listen to songs, which has a significant impact on the experience and causes widespread complaints.

Tencent Music fined: the ins and outs of anti-monopoly in the music market

In the post-copyright era, users are expected to bid farewell to the fragmented music listening experience and have greater options to choose music platforms and listening methods according to their preferences.

Second, for music platforms, product innovation will become a key factor in determining development prospects.

In the copyright era, contention for copyright resources has become the core of the life and death of music platforms. Xiami’s rich playlist classification and exquisite UI design have given it a large number of fans, but the sharp loss of copyright still makes it retreat. NetEase Cloud Music has emerged in the Red Sea by relying on innovative gameplay such as social music, playlist reviews, and personalized recommendations, but it has also been suppressed by TME’s copyright.

After the copyright era, the music platform of product innovation will become crucial winning hand, with the differences in the development of the platform will have a capacity of more big think like space. In the medium and long term, small and medium innovative companies will also have more opportunities to enter the music market and promote the formation of healthy competition in the entire market.

Third, the Chinese musician group may usher in new development opportunities.

According to a previous report by Southern Metropolis Daily, the soaring copyright fees caused 70% of the copyright fees paid by music platforms to go to the pockets of foreign giants such as Sony, Warner, and Universal. Only 30% was left to domestic record companies and labels. “Copyright operations have become The bargaining chip for capital operation has nothing to do with copyright owners and musicians themselves. Even if the money is speculated at sky-high prices, the money will not reach the hands of the musicians.”

After the exclusive copyright model ends, will the copyright licensing fees of overseas record companies return to a reasonable range? At present, it is still unknown. However, the intervention of regulatory authorities may give the market a little more reason to look forward to. If it can be the case, domestic musicians will have the opportunity to get more sound music collection benefits and resources to promote the development of Chinese original music may usher in a new opportunity.

Of course, the actual situation of the current market is far from ideal.

On the one hand, the top copyright owners such as Tencent Music and the three major record companies and overseas top platforms such as Spotify have deep equity binding relationships. They have many advantages in copyright cooperation negotiations and may still have an impact on fair authorization. .

On the other hand, QQ Music, Kugou Music, and Kuwo Music are not currently split. The formed army has a strong dominant position in the industry, and the cost of entry for new players is very high. When will the market competition really show a flourishing state? , I am afraid there will be a big question mark.

Since the 21st century, the Chinese music market has undergone tremendous changes from piracy to the rapid advancement of legalization. It has experienced a huge change from a hundred flowers blossoming to a monopoly era, and it is also undergoing a new round of huge changes from copyright fragmentation to open sharing. This anti-monopoly is the starting point for the industry to open a new page. What will the Chinese music market look like in the next ten years? Everything has just begun to be written.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/tencent-music-fined-the-ins-and-outs-of-anti-monopoly-in-the-music-market/
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