(Bloomberg) -- Tencent Music Entertainment Group, controlled by China’s biggest social network operator, is seeking new funding at a $10 billion valuation ahead of an initial public offering, people familiar with the matter said.
The operator of karaoke and Spotify-like streaming apps plans to sell about 3 percent of its shares to strategic partners, including record labels, one of the people said, asking not be identified as the details are private. Tencent Holdings Ltd., owner of the WeChat messaging service, held about 62.45 percent of the music group at the end of last year.
By forging an equity link with record labels, Tencent Music would be securing its right to hold on to vital streaming rights in China’s increasingly heated music market. Tencent spun out its music division after merging it with China Music Corp. to win over a larger slice of a domestic streaming market forecast to reach 4.37 billion yuan ($664 million) of subscription revenue by 2018.
The company, which competes with products from Alibaba Group Holding Ltd. and NetEase Inc., is scooping up content to cater to users who turn to the web for entertainment and want services tailored to personalized preferences. Tencent Music has deals in place to distribute songs from artists including Beyonce and Taylor Swift after signing up with some of the world’s largest record labels, including Universal Music Group, Warner Music Group and Sony Music.
Some of the other most influential record labels for the China market include Huayi Brothers Media Corp. and Korea’s YG Entertainment, both of which have distribution deals with Tencent. Shares of Huayi Brothers rose as much 0.9 percent in Shenzhen while Tencent Holdings dropped 0.9 percent in Hong Kong.
Tencent Music declined to comment in an emailed statement.
Tencent Music makes money via subscription, advertisement, and sub-licensing its content to other companies including Netease.
Ming Pao reported in April that Tencent Music was planning for an IPO.