Tencent Music Deepens Merlin Partnership, Adding WeSing Karaoke

China’s online music giant Tencent Music (TME) has announced that it has renewed its 2018 multi-year licensing and cooperation agreement with Merlin, the global digital rights agency.

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“As part of the renewal, TME and Merlin will deepen their longstanding strategic partnership, explore ways to drive the creation of music value, and enhance the music experience for TME’s users” the companies stated.

Under this agreement, Merlin will also now license into TME’s social community, WeSing, a dynamic online karaoke service in China. In addition, Merlin’s renewed partnership will continue to include TME’s QQ Music, KuGuo, and Kuwo music streaming services.

“Merlin has the world’s top musicians with a strong appeal among Chinese music fans. This collaboration not only creates a ‘music express’ for Chinese lovers of global music, but also enriches the overseas music library of online karaoke for users ” cheered TME’s TC Pan.

Indeed, Merlin members account for more than 15% of the global digital music market, representing tens of thousands of labels and hundreds of thousands of artists across the world.

Shares in Tencent Music are up 26% year-to-date, and the stock scores a bullish Strong Buy Street consensus. That’s with 4 recent buy ratings vs 1 hold rating. Meanwhile the average analyst price target of $18 indicates 20% upside potential lies ahead.

“Tencent Music is the leader in China’s online pan-audio entertainment market… We believe the company’s dominant leadership position, its focused strategy to drive paying-user growth, and new initiatives such as audiobooks, podcasts, and new ads programs, make it a high-quality asset for investors to own” explains Needham analyst Vincent Yu.

As a result the analyst has now initiated coverage on TME with a Buy rating and a $17 price target (15% upside potential). As the company shifts to a pay-for-streaming model over the next few years and limits free music access by implementing a paywall, he expects to see its paying ratio climb.(See TME stock analysis on TipRanks).