Spotify, China’s Tencent Announce Deal That Strengthens Their Negotiating Power Exponentially

[UPDATED] Spotify, China's Tencent Holdings and its subsidiary Tencent Music today announced joint equity investments, strengthening the ties and the bargaining power of the two most popular music streaming platforms in the world.

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China's Tencent and Spotify will acquire new shares representing minority equity stakes in each other for cash, the companies announced today. In addition, Tencent will invest in Spotify through secondary purchases.

Following these transactions, Spotify will hold a minority stake in TME, and both Tencent and TME will hold minority stakes in Spotify. Previous reports had placed these stakes as high as 10%.

Both streamers are seeking to improve their position prior to individual public stock offers which are likely to come in the first half of 2018. In addition to opeining up new potential opportunities fro both companies, the deal aligns the two music streaming services in future licensing negotiations with major labels and music publishers.

Spotify is the world’s largest music streaming service and China's Tencent, which owns a majority stake in TME, operates the most popular social platforms in China. TME is an early mover in authorized digital music and is the largest online music services company in China. It provides a catalog of digital music services including streaming, online live broadcasts and karaoke to hundreds of millions of users.

“Spotify and Tencent Music Entertainment see significant opportunities in the global music streaming market for all our users, artists, music and business partners" said Daniel Ek, CEO and Founder, Spotify in a statement. "This transaction will allow both companies to benefit from the global growth of music streaming.”