Tencent Holdings Ltd is expanding its streaming media music and live businesses in Asia to rival the industry giants, such as Apple and Spotify AB. By revenue, Tencent is the biggest online game publisher in the world. Poshu Yeung, the vice president of the international business at Tencent said in an interview that Tencent is enlarging Joox, its streaming media music service, in Southeast Asia and exploring the plan to push into the Indian market. “We tried to seek a new business which is still relevant to entertainment, and we selected music,” said Yeung, “Music is everywhere, and your smartphone is an entertainment hub. Entertainment just contains three respects: film, game and music.” Tencent has its market value of about $228 billion currently, which is one of the highest in technology field in Asia. As the growth of online game industry is slowing down, Tencent is pushing into entertainment and music fields. In July 2016, Tencent acquired Ocean Music Group, making it the biggest streaming media music supplier in China by share. Ocean Music Group was evaluated at $2.7 billion in this deal. The demand of streaming media music in Asia is increasing Currently Tencent is trying to seize the opportunity of the increasing demand of digital music in Asia. It is predicted by McKinsey that, the user number of streaming media music in Hong Kong China, Singapore, Malaysia, Thailand, Philippines and Indonesia will increase from 47 million in 2015 to 87 million by 2020. Joox has been launched in Hong Kong, Indonesia, Malaysia and Thailand. Yeung said, Tencent plans to introduce it to at least two new markets in Asia in 2017. In addition, Tencent will also release streaming media live contents in 2017, generating profits by the digital cash that users purchase for virtual gifts. Asia is the key of the expansion rather than the US or Europe, because the Asian market has some similar points in culture, said Tencent. “We have made great efforts like this in China. I hope to bring our products, knowledge and experience to these markets, so as to build the local mobile Internet market,” said Yeung. Rival Apple and Spotify Tencent’s expansion will compete with other streaming media music services with higher acceptability, such as Spotify in Sweden and Apple Music. Spotify is operating a “freemium” streaming media music service in Singapore, Malaysia, Hong Kong, Taiwan and Philippines, which provides free subscription but charges for specific functions. Spotify will also launch its service in Japan and Philippines. Since 2012, Apple has been trying to seize the increasing demand of digital music in Southeast Asian market. Now it has entered in six big countries in Southeast Asia, as well as in Hong Kong and Japan. Although Tencent’s revenue in online game increased by 27% to 18.2 billion yuan ($2.62 billion) in the third quarter of 2016, this speed fell behind that of social network and online ad departments, which increase 58% and 51% respectively. In the third quarter, the online game business accounts for 45% in Tencent’s sales, while it accounted for more than 50% in 2015. In order to enlarge the overseas market, Tencent and other investors unitedly acquire Finland’s online game developer Supercell Oy at $8.9 billion. According to International Federation of the Phonographic Industry (IFPI), the streaming media music subscription is the fastest-increasing source of revenues in music industry. IFPI said, the global streaming media music subscription and ad revenues have increased by three times, to $2.89 billion for five years. In 2015, the number of paying users of streaming media subscription exceeded 68 million, far more than 8 million in 2010. The challenge coming from streaming media music companies Nevertheless, the Asian streaming media music companies still face the challenge to seek the profit models. McKinsey said, the streaming media music content costs highly, with low ad fee, and the number of terminal users who are willing to pay for the subscription is limited. In addition, the software piracy in Asian area is rampant. All of these factors put streaming media music suppliers under pressure, who have to keep subscription fee on a comparatively low level. The world’s biggest video-to-MP3 website YouTube-mp3.org has more than 60 million monthly independent users. YouTube-mp3.org allows users to convert YouTube videos to MP3 format, according to IFPI. Yeung also acknowledged that, Tencent’s streaming media music service had not paid off. But the company makes profits by selling ads to Adidas, Dior, Samsung Electronics and OPPO. The advertisers can also make use of Tencent’s streaming media music platform to promote their products. Different from expanding online game business globally by cooperation and acquisition, Tencent tries to establish its music and entertainment businesses from the very beginning. Tencent has set up offices in Thailand and other southeast Asian countries, with more than 200 staff. Many employees are interns who are just graduated from schools. The young people are good at selecting music and localizing the contents. “This makes us more localized with correct target users,” said Yeung.
Chinese investment firm Tencent Holdings will introduce its streaming media music service Joox to AsiaSoutheast Asia to meet rising demand in the region. It's believed that the number of people using music streaming services in Southeast Asia will reach 87 million by 2020, up from 47 million in 2015. Tencent hopes the push into the Southeast Asian market will be made easier by cultural similarities across the continent. Joox is already available in Hong Kong, Indonesia, Malaysia and Thailand. The company faces stiff competition from rivals Spotify and Apple as well as the challenge of rampant software piracy.