Tencent Holdings’ music unit said on Thursday that it had reached a deal to take a minority stake in US startup Wave, forming a partnership to bring the Los Angeles-based company’s popular animated live concert technology to Chinese audiences.
Virtual performances have seen fast growth during the coronavirus pandemic, as most live concerts have been canceled or postponed. Wave, a five-year-old startup, rose to prominence this year by hosting more than 50 events featuring performers such as John Legend and Tinashe. The events have been streamed on platforms including YouTube, Twitch, Facebook, Twitter, and TikTok.
The Tencent Music Entertainment Group deal comes as a wave of investment by Chinese companies into the US technology sector has gone quiet amid political tensions and tightened scrutiny in Washington of such transactions.
Under the partnership, Tencent Music will gain the right to air Wave’s concerts in which artists and fans are turned into digital avatars with the aid of broadcast and real-time gaming graphics technology on platforms including QQ Music, Kugou Music, Kuwo Music, and WeSing. Paying users of Tencent Music platforms grew 46% to 51.7 million in the July-September quarter from the same period a year earlier.
The two companies will also create virtual concerts content for Tencent Music’s own live performance brand, TME Live. New York-listed Tencent Music did not disclose how much it is investing in Wave or the stake it will get.
The venture arm of NTT Docomo and Japanese entertainment company Avex both invested in an earlier Wave funding round this year. Last month, Wave Chief Executive Adam Arrigo posted on his Facebook page that pop stars including Justin Bieber, The Weeknd, Kendrick Lamar, and J Balvin had also put money into the company.
“The collaboration with Wave marks an important step forward in our efforts to integrate technology and music,” said TC Pan, vice president of content cooperation at Tencent Music, in the company’s announcement.
The music industry sees virtual concerts as a rare opportunity for musicians to engage with fans during the pandemic and an effective way to reach a new and younger audience.
For example, a virtual Wave concert by The Weeknd, which was broadcast live on TikTok in August, drew about 2 million viewers globally. The concert raised USD 350,000 for a nonprofit organization.
“Wave is committed to bringing our interactive virtual entertainment experiences to music fans around the world, and TME is the ideal partner to accelerate these efforts,” said Jarred Kennedy, chief operating officer at Wave.
Chinese investments in US technology companies have come under growing scrutiny by the Trump administration.
Last year, the Committee on Foreign Investment in the United States, known as CFIUS, launched an investigation into a deal by China’s ByteDance which helped set the stage for its success with its TikTok short-video app — the USD 1 billion purchase of Musical.ly in 2017. Beijing Kunlun Tech in May agreed to sell gay dating app Grindr under a divestment order from CFIUS.
The total value of Chinese investment into U.S. tech companies declined about 59% to USD 1.1 billion over the first nine months of 2020 from a year before, with the deal count dropping from 55 to 38, according to a report published by tech advisory company GP Bullhound.
In addition to the Wave investment, New York Stock Exchange-listed Tencent Music is stepping up efforts to enrich its music library by acquiring content from overseas labels. Earlier this month, the company signed an exclusive digital licensing agreement with US-based independent music publisher Peermusic to distribute songs by such stars as Rihanna and Beyonce on its platforms.
Tencent and its music unit took a 10% stake in Universal Music Group a year ago. In June, Tencent Music acquired a 1.6% stake in US music label and publisher Warner Music Group valued at USD 240 million.