Spotify and Tencent's subsidiary that handles the Chinese firm's music streaming business have disclosed their joint plans to purchase minority equity shares in each other. Spotify announced the equity investments on Friday, under which Tencent will buy secondary shares from Spotify's existing investors while Spotify will also acquire minority stakes in Tencent Music Entertainment (TME). TME also plans to purchase new shares in Spotify as part of the deal. That means once the transaction is complete, Spotify will own a minority share in TME while both Tencent and its subsidiary will possess minority shares in the Stockholm, Sweden-based music and video streaming service.
The joint press release announcing the equity investments did not go into specifics such as how much investments both Spotify and Tencent are making in each other's music businesses or how many shares they are purchasing from one another. Other terms of the deal were also kept undisclosed. The announcement came a few months after it was reported that Spotify declined an offer by Tencent earlier this year to acquire the music streaming service for an undisclosed price. The acquisition attempt was understood to be part of the Chinese internet giant's efforts to expand its music business to other territories beyond Asia, though it was not immediately clear whether or not Spotify would also be able to gain access to Tencent's customers in China if the deal pushed through. These particular equity investments, though, are expected to open business opportunities in the Far Eastern territory for Spotify as well as help Tencent further grow its music business in other parts of the world outside of its home country, where it currently operates some of the popular social platforms and the largest online music services company in China, serving up a vast selection of authorized digital music services including streaming and live broadcasts to hundreds of millions of subscribers.
It remains unclear as well what impact the equity investments will have on Spotify's plan to file for an initial public offering (IPO) on an unspecified date in the near future. The intention to go public was said to be part of Spotify's goals to be profitable, since the service has been reporting huge losses for the past couple of years and it currently relies on some private investors to raise quite a bit of funding through venture capitalism.