Tencent share price down, inks exclusive distribution agreement with Sony

Chinas technology giant Tencent Holdings Ltd announced on Tuesday that it had reached a distribution deal with Sony Music Entertainment.

Asias second biggest Internet company said it had struck a deal with the Japanese company, which would give Tencent the exclusive rights over the online distribution in China of Sony Musics library, which includes artists like Daft Punk, Bob Dylan and Beyoncé among others.

Shenzhen-based Tencent will use its QQ music platform to distribute the songs, in both free and paid mode, where free users could only listen to songs, while paid ones could download them as well. QQ has more than 820 million active users every month. Additionally Tencent would let other local music streaming services to also provide Sonys music portfolio, the companies said in a joint statement.

Its seems that Chinas big Internet companies, including Tencent, the online retailer Alibaba Group Holding and web-services provider Baidu, have stepped up their game in order to win the countrys online users. Each company is investing in acquiring more audio and video content, to stream on its platforms in order to keep viewers entertained and prevent them from shifting to competitors.

Last month Tencent, which developed Chinas most popular messaging application WeChat, inked a distribution deal with Warner Music Group and earlier this month it struck another exclusive deal over the music portfolio of South Koreas YG Entertainment Inc.

Apart from music content, Tencent also arranged deals with Fox International Channels and HBO, to exclusively distribute the channels TV shows, including the hit-series “Game of Thrones”, in China. However, authorities are known for their strict censorship over violent and nude scenes, which could affect viewership numbers.

“China can easily become within a relatively short period of time one of the worlds largest music markets,” said Edgar Berger, CEO of Sony Music Entertainment International.

China is the biggest online market by users, however, the illegal distribution of copyright products is a common practice in the country. According to the International Federation of the Phonographic Industry, China ranks 21st by licensed digital music sales.

“We’re seeing very nice organic growth with our offerings right now,” Dowson Tong, president of Tencent’s social network group, said today by phone for Bloomberg. “By strengthening our relationship with content providers like Sony, we are going to continue to see tremendous growth.”

Tencent Holdings Ltd lost 3.49% on Tuesday and an additional 2.59% on Wednesday to close at HK$105.30 in Hong Kong, marking a one-year increase of 13.13%. The company is valued at HK$1.01 trillion. Sony Corp dropped 0.93% on Tuesday, but gained 1.46% on Wednesday and closed at ¥2 365, marking a one-year increase of 32.24%.