China’s NetEase to Spin-Off Music Streaming Division

Chinese games and tech firm NetEase has unveiled plans to spin off its music streaming business NetEase Cloud Music into a company that would have its own listing on the Hong Kong Stock Exchange. It had 180 million monthly users at the end of 2020, making it the number two online music player in China.

According to a preliminary filing with the Hong Kong exchange, NetEase would cut its holding from 62%, but still retain a majority of voting rights and treat the company (formally known as Cloud Village) as a subsidiary.

The spin-off is subject to regulatory approval and financial details such as how much fresh cash it might seek to raise, were not disclosed at this stage. However, NetEase did say that a portion of the shares would be made available to international investors.

Along with rival and market leader Tencent Music Entertainment, the company recently struck a non-exclusive licensing deal with Sony Music Entertainment. It now describes itself as “a differentiated and premium user experience in terms of music offered, and is focused on discovering and promoting emerging musicians.”

As Tencent Music has come under regulatory pressure to ease its control over the industry sector, NetEase Cloud Music has also been able to sign deals with Universal Music Group and with Warner Chappell.

Alibaba was earlier this year forced to close its online music business, Xiami. It blamed “business development-related adjustments,” and said that it will pivot to become more of a music industry service provider. That was followed by the exit of its pop culture icon boss Gao Xiaosong in March.

NetEase was one of the first Chinese companies to obtain a U.S. stock listing. It recently protected itself from the effects of the U.S.-China trade war by giving itself a secondary share listing in Hong Kong. That has been a pattern adopted by other Chinese tech firms including Alibaba and Baidu.

 

 

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