Tencent (TCEHY) dominates music streaming in China. Now rival tech titan Alibaba (BABA) is forging an alliance that could help it knock the leader down a peg.
Alibaba is picking up a minority stake in NetEase (NTES) Cloud Music, a freemium streaming service, for $700 million.
Alibaba already owns its own music streaming app called Xiami. And the company has partnered with NetEase in the past to share music libraries.
But the latest deal, announced Thursday, significantly strengthens the relationship between the two and that could be bad news for Tencent Music (TME), Citi Research analysts wrote in a research note on Friday.
Tencent
Music had 652 million monthly active users and 31 million paying
subscribers in the three months to June 30. The social networking giant
has developed a stronghold in the market through its popular streaming platforms QQ Music, KuGou and Kuwo.
NetEase said in its most recent earnings report that
its cloud music platform has more than 800 million "users," though the
Citi analysts pegged its monthly active user count at 139 million as of
July. NetEase ranks fourth among active users after Tencent's three
services, the analysts added.