Zebeth Media Solutions

Tencent

Don’t panic — this isn’t Tencent’s first tie-up with a state-owned firm • ZebethMedia

News on Tencent and China Unicom is causing a stir in China’s tech industry on Wednesday afternoon. The gaming and social networking behemoth and the state-owned carrier have received regulatory approval to set up a joint venture, according to a government announcement. Following the transaction, Tencent and China Unicom will respectively own 42% and 47% of the firm. The development has led to concerns over even greater government influence on China’s Big Tech. Some netizens go as far as speculating Tencent will eventually be de-privatized. This reaction is expected given China has been tightening its grip on the internet industry over the past three years. Tencent’s gaming business, for instance, took a big hit when Beijing halted the issuance of new gaming permits. But a closer look at the notice suggests this new “mixed ownership” entity seems to have a limited impact on Tencent’s existing business. The entity, according to a filing in September, will center around two areas: content delivery network and edge computing. CDN refers to a geographically distributed network of servers that work together to speed up content distribution for users, whereas edge computing means processing data at the periphery rather than the center of a network. Tencent’s cloud computing arm seems most pertinent to the new JV. The enterprise-facing segment has gained new significance as a revenue driver since China’s regulatory clampdown sent chills across the consumer internet sector. And it’s indeed in the area of web infrastructure where Tencent’s involvement in the public sector has been the most active. Tencent Cloud has a page dedicated to showcasing the sort of public services it empowers. From online government services to community centers with self-serve kiosks, one can find solutions supplied by Tencent — and in fact, Alibaba, Baidu, and other tech giants we well. Beijing has been working to digitize the government apparatus for years, and what better solution providers are there than its own tech darlings? Tencent has been boasting the role of WeChat as a digital infrastructure for government services as early as 2019: The WeChat owner is no stranger to mixed ownership either. In 2017, China Unicom was seeking to raise $11.7 billion from a dozen investors — including Tencent and Alibaba — as part of Beijing’s push to revitalize state-owned enterprises with private capital, a structure dubbed ‘mixed ownership.’ Working with a state-owned entity doesn’t naturally imply a greater presence of the visible hand at Tencent. The goal of an SOE is to earn profits for the government, too. But undeniably, China’s private tech sector has been under growing pressure to align its interest with that of the state through a series of regulatory overhauls, often at the cost of their profitability. Ant Group has gone through a deep restructuring to play more like a traditional financial institution. Tencent has ramped up protection for minors and put more effort into educational games.    

Taylor Swift’s ‘Midnights’ is the priciest digital album Tencent has sold • ZebethMedia

Taylor Swift’s latest album “Midnights” has dropped, and it might be setting a new standard for China’s digital music industry. Within a day of its release, the 13-track album, priced at 35 yuan or $4.83, has racked up nearly 200,000 copies on Tencent’s QQ, one of the largest music streaming platforms in China. While $4.83 doesn’t seem much — the album starts at $11.99 on the artist’s own online store — it’s the highest price ever set for digital albums in the market, which could indicate two things: the upstream cost of making albums has risen, or Chinese users are increasingly willing to pay for online music. China’s digital music industry has taken quite a different route from the Western one. For a long time, music piracy was rampant across online and offline media, so streaming platforms like QQ came up with a variety of perks to get people to foot the bill. A lot of QQ Music’s paid users are in effect signed up for bundle deals that give them access to other Tencent-affiliated products, such as video streaming, manga, or membership to Tencent-backed JD.com’s online mall. Subscribers get all sorts of value-added services within QQ Music’s platform as well, such as hi-fi streaming, access to online concerts, and customized app layouts. It’s hard to say whether the $4.83 pricing is the new pricing norm or simply a reflection of the fandom for Swift in China. After all, the American artist is one of the few foreign celebrities who reach 10 million followers on Weibo, China’s answer to Twitter. So far only Jay Chou, the mandopop (Mandarin pop music) king whose songs are known to everyone from my generation, has matched Swift’s pricing power at 30 yuan per album copy. In the wake of Beijing’s crackdown on internet monopolies, Tencent’s bargaining power on licensing deals might have weakened. For years, Tencent Music Entertainment, the firm’s music arm, bled money on securing exclusive rights from UMG, Warner Music, and Sony Music Entertainment. That’s no longer the case. Swift’s latest digital release is also available through QQ Music’s archrival NetEase Music, for instance. The good news is an increasing number of users are paying for Tencent’s music offerings, though the penetration rate remains modest. In Q2, TME reported 82.7 million subscribers across its three music streaming apps, up 25% year-over-year; a total of 593 million people use these services every month, meaning only 14% of them are paying. In comparison, 188 million, or 43%, of Spotify’s 433 million users are premium subscribers in Q2. Spotify also has a more profitable product. Looking strictly at their music services (TME is a more profitable business overall thanks to its more lucrative live streaming platform that lives off virtual gift sales), Spotify’s premium average revenue per user (premium ARPU) from Q2 was €4.54 ($4.48). TME’s average revenue per paying user (ARPPU) was 8.5 yuan or $1.17.

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