Spotify looks east with Tencent umbilicus

Music streaming service Spotify has made a clear statement of geographical intent by entering into an equity swap with Chinese internet giant Tencent.

Specifically Spotify is doing business with Tencent Music Entertainment and in its announcement it referred to the two companies as ‘the two most popular music streaming platforms in the world.’ TME runs QQMusic and KuGou, which apparently have a combined monthly user base of 450 million users. The last time Spotify revealed its user numbers they stood at 140 million, with 60 million subscribers, but it has global reach.

The companies have announced they will acquire shares in each other but the only details offered is that they will amount to minority stakes. So somewhere between 0.000000000001% and 49.9999999999999%. Tencent is also going to buy another tranche of Spotify shares just because it can.

“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 of Spotify. “This transaction will allow both companies to benefit from the global growth of music streaming.”

“We are excited to embark on this partnership with the largest music streaming platform in the world,” said Cussion Pang, CEO of TME. “TME and Spotify will work together to explore collaboration opportunities, with a common objective to foster a vibrant music ecosystem that benefits users, artists and content owners.”

“We are delighted to facilitate this strategic collaboration between the two largest digital music platforms in the world,” said Martin Lau, Tencent President. “Both of us share the same commitment to bringing music and superior entertainment experiences to music lovers, and to expanding the global digital music market for artists and content partners.”

Spotify is expected to have its IPO next year and being so intimately joined to such a big, cash rich company will probably reassure prospective investors about its long-term future. Furthermore, since that future will chiefly involve direct competition with US tech giants such as Apple and Google, this marks an intriguing moment in the balance of economic power between east and west.