Tencent Music is in a network of relationships and holdings with the largest music companies in the world. It has a Joint venture with Universal Music Group and an agreement to form a joint record label with the Warner Music Group. It also has license agreements with UMG, WMG, Sony music and independent label rights group Merlin. In addition, Tencent Holdings, which holds the majority of Tencent Music, is part of a consortium of investors that owns 20% of Universal Music Group and about 2% of WMG. There is no evidence that the Chinese authorities view Tencent Holdings’ holdings as problematic.
Tencent Music owns three of China’s leading music streaming apps – QQ, Kuguo, and Kuwo – and represented 77% of the country’s monthly active users in December 2020, according to Chinese research firm QuestMobile. The company posted 15% sales growth in 2020 and a 24% year-over-year gain in first quarter of 2021. Shares peaked at $ 23.18 on March 23, valuing the company at $ 51.8 billion, just below Spotify’s market cap of $ 52.6 billion.
But Tencent Music was a collateral damage in the Archego Capital Management crashed in March 2021. At around the same time, Goldman Sachs downgraded TME and lowered its revenue forecast for 2022 by 10%. Plus, streaming companies seem to have lost their appeal in recent months: Spotify’s share price has fallen 37.2% since March 23, and Netflix is 10.6% from its 52-week high on January 20. An average target price of USD 21.53 fell – 83.8% above Friday’s closing price.