Spotify has announced that it is in the process of share-swapping with Tencent’s entertainment arm. In essence, the two companies will be investing in each other for minority shareholder status.
Through its subsidiary Tencent Music Entertainment Group (TME), Tencent will be acquiring shares from Spotify as part of a business deal. When the deal is finalised, Spotify will hold stock in TME, while Tencent through TME will be a minor stakeholder in Spotify.
The actual value of the share swap is not made known at this time, so we do not know how big the two companies are investing in each other. Spotify is the well-known music streaming service, with presence in over 61 countries and markets. TME, on the other hand, is currently one of the largest music service providers in China, with services ranging from music streaming to karaoke. The company serves over 450 million customers in its native country.
The share swap gives Spotify a gateway to tap into the Chinese market, which it does not have presence currently. Future collaboration between the two companies may include WeChat integration, and WeChat Pay for Spotify monthly premium services; this is especially big in China.
Spotify is also expected to offer its initial public offering (IPO) sometime in 2018. This early investment may drum up the attractiveness of said IPO for potential investors next year.