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TME Buys into Rival without Cash

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TME buys stake in rival for songs

Tencent Music Entertainment (TME) quietly bought a significant stake in its rival DoubanFM using its songs as currency, Chinese media outlet Sixth Tone reported. With that investment, TME has become the second-largest shareholder in DoubanFM.

When the race to stockpile song rights kicked off in China a few years ago, smaller players like DoubanFM were left behind, and they lost market share. Tencent (TCEHY) was one of the Chinese companies that leveraged its deep pockets to stockpile song rights. TME was a unit of Tencent before it separated and went public in the United States in December last year. Thanks to Tencent’s music rights purchases, TME boasts a portfolio of more than 20 million songs, the report stated.

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TME seeking a stake in Universal Music

Armed with its huge library of songs, TME saw an opportunity to throw a lifeline to DoubanFM by handing it some of its song rights in exchange for a stake in the business. DoubanFM is working on its recovery, and it seems TME wants to share in its success.

In a move that could further expand its music library, TME is seeking to purchase a large piece of Vivendi’s Universal Music, according to a report from Reuters. Universal Music is the largest music label and is ahead of Sony Music Entertainment (SNE) and Warner Music.

TME’s investment moves signal a company that wants to follow in the footsteps of its parent, Tencent. According to a Reuters report, Tencent has invested in more than 700 companies, and last year 16 companies backed by it went public. In addition to TME, the other well-known Tencent-backed company that went public last year is Spotify (SPOT), which last month reported a 30% YoY increase in its fourth-quarter revenue.

TME’s first quarterly report since IPO

TME reports its fourth-quarter results on March 19, its first quarterly results since going public. Tencent, on the other hand, is scheduled to release its fourth-quarter results on March 21. For the third quarter ended September, Tencent reported a 24% YoY increase in revenue to $11.7 billion. Revenue rose 54% YoY at Alibaba (BABA) in the September quarter.

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