CICC joins $108m round for China music streaming business

The two strategic investors are Shanghai Media Group (SMG), which led the round, and Hunan Broadcasting System-owned Mango Media. The latter is participating through the Mango Cultural & Creative Industry Private Equity Fund. CICC’s contribution comes from CICC Jiatai Equity Investment Fund Partnership II, a renminbi-denominated vehicle that primarily focuses on industry consolidation and M&A.

Launched in 2013, NetEase Cloud Music is an on-demand streaming service that claims to have 300 million users. The new capital will go towards expanding its presence in the music industry value chain, upstream and downstream. This includes investing in content and developing a patenting system, according to a statement. The company will also enter into content partnerships with SMG and Mango.

NetEase is best known for online gaming, news and entertainment websites, and email services, but it has also pushed into other internet industry segments, such as e-commerce, financial services, education, and music. Revenue from email, e-commerce and other services more than doubled over the course of 2016 to reach RMB8 billion, or 20% of total revenue.

In the past year, China has intensified its crackdown on piracy in the music industry, resulting in music streaming services coming under pressure to comply with royalty laws. At the same time, these service providers are offering additional functionality in a bid to attract more paying subscribers. They stream music free of charge and users pay a monthly fee for access to more extensive or exclusive content.

These forces, combined with Chinese internet and media groups investing heavily in content and digital distribution channels in order to develop their businesses along the media value chain, are already driving consolidation within the music streaming industry.

A significant move came last year as Tencent Holdings purchased a majority stake in China Music Corp. at a valuation of $2.7 billion. The deal brought together the country’s three leading mobile music apps – Tencent’s QQ Music and China Music Corp’s Kugou and Kuwo – under Tencent Music Entertainment Group. As part of the transaction, PAG Asia Capital swapped its shares in China Music Corp. for a stake in the new entity.

Alibaba Group has also been active, creating a single division – Alibaba Digital Media & Entertainment Group (ADMEG) – for its sports, games, literature, music and digital entertainment assets. These include video streaming platform Youku Tudou and music services Xiami and Tiantian Dongting. A RMB10 billion investment fund was launched to acquire more media and entertainment businesses.

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• Topics
• Greater China
• Media
• Expansion
• Early-stage
• China
• Growth capital
• TMT
• CICC