Spotify, China’s Tencent Music Unit Agree to Invest in Each Other

Music streamer Spotify — ahead of an expected initial public offering in 2018 — has agreed to buy a stake in China’s Tencent Music Entertainment, which in turn will purchase an equity stake in Spotify, the companies announced Friday.

Financial terms of the deal weren’t disclosed. Last week, the Wall Street Journal reported that Spotify and Tencent’s music subsidiary were discussing trading stakes of up to 10% with each other. The deal would give Spotify a valuation of upwards of $10 billion, per the report.

“This transaction will allow both companies to benefit from the global growth of music streaming,” Spotify founder and CEO Daniel Ek said in a statement.

Tencent Music Entertainment, a unit of Chinese internet giant Tencent, also is reportedly prepping for an IPO. “Following these transactions, Spotify will hold a minority stake in TME, and both Tencent and TME will hold minority stakes in Spotify,” the companies said in a joint statement.

Spotify is expected to go public in early 2018, with reportedly planning to launch an IPO as a direct listing rather than a traditional offering of shares. That’s designed to make it easier for the company to go public but also means it wouldn’t raise new capital with the IPO.

Spotify — which has paid more than $5 billion in music-licensing fees through September 2016 — faces increased competition from Apple Music in the space. Meanwhile, Google’s YouTube is eyeing the launch next spring of a new music-streaming subscription product, dubbed Remix, Bloomberg reported.

As of July 2017, Spotify reported over 60 million subscribers worldwide for its service, which is available in 61 countries. The service streams a catalog of over 30 million songs.

Pictured above: Spotify CEO Daniel Ek

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