Baidu Takes Stake in NetEase Music

Internet giant Baidu Inc. has invested an undisclosed sum in NetEase Music, ramping up efforts to gain a larger share of the growing-yet-competitive industry.

NetEase Music, a unit of gaming giant NetEase Inc., announced Friday that it has secured new funding from backers that include Baidu, private equity firms such as China’s Boyu Capital, and New York’s General Atlantic Service Co. LLC.

NetEase didn’t disclose the financial terms, but its last funding round in April 2017 valued the music unit at 8 billion yuan ($1.16 billion).

Baidu was the pioneer in China’s online music-streaming industry, allowing users to search and download music tracks on its omnipresent search engine as early as 2002. A horde of rivals followed, including QQ Music, owned by Tencent Holdings Ltd.; Ali Music, from Alibaba Group Holding Ltd.; NetEase Music; as well as the once-popular Duomi, which abruptly terminated its service in March.

Baidu Music’s leadership, however, was threatened in 2015 by a critical government policy that cracked down on rampant unlicensed music-streaming inside the country, prompting companies to pay sky-high prices to bid for exclusive song rights for their respective platforms.

Baidu then spun off its music service that year to Taihe Music Group, which in June rebranded Baidu Music as Qian Qian Music.

Market watchers told Caixin (link in Chinese) that the latest investment in NetEase marks Baidu’s ambitious comeback to the industry, currently dominated by Tencent Music Entertainment Group, a unit of Tencent that earlier this month filed to raise up to $1 billion in a New York initial public offering.

Tencent forged its dominance in 2016 by merging its music-streaming business with market leader China Music Corp., bringing three services under one roof — QQ Music, KuGou and Kuwo.

In December, Swedish music giant Spotify Technology SA acquired a 9% stake in Tencent Music via a share swap that gave the Chinese company a 7.5% holding in Spotify.

Contact reporter Jason Tan (jasontan@caixin.com)