SM Entertainment act Red Velvet. Photo Credit: TV10
Thats according to coverage surfacing out of China, where NetEase Cloud Music has reportedly sued SM for market abuse. As described by Technode and others, the claims center on exclusive licensing terms and are scheduled to head to trial just two days from now, on Wednesday the 6th.
Beyond this overview, concrete details about the actual allegations are few and far between at present. But itll be worth tracking the complaints outcome and its impact on Chinas increasingly lucrative music market.
NetEase Cloud Music rival Tencent Music Entertainment (TME), which operates QQ, Kugou, and Kuwo, remains the largest streaming company in the nation of 1.4 billion. Adding another layer of complexity to the NetEase v. SM dispute, TME and its namesake parent havent hesitated to expand their K-pop reach as of late.
On one side, said reach refers to investments. Most conspicuously, it was only in May that Tencent moved to purchase a sizable piece of SM Entertainment from Hybe, thereby becoming SMs second-largest stakeholder. Of course, ahead of BTS much-anticipated comeback, that deal was strategically significant on multiple levels.
Tencent also owns parts of YG Entertainment as well as Kakao Entertainment and is reportedly looking to scoop up interests in leading Korean ride-share platform Kakao T and gaming company Nexon to boot.
On top of those and different holdings, Tencent Music, now reporting north of 123 million paid users, is uniquely suited to unlock domestic revenue for international acts.
In the K-pop arena, this important capability isnt confined to straight streaming. Q1 2025 saw TME spearhead exciting new offline initiatives, including aespas first-ever exhibition and BABYMONSTERs debut pop-up store in mainland China, besides kicking off a merch partnership with K-pop icon G-Dragon.
Stated briefly: Between Tencents SM investment and TMEs growing list of K-pop initiatives, the NetEase Cloud Music licensing hurdles dont exactly come as a surprise. Nor does the related complaint; DMN reached out to SM for comment but didnt receive a response in time for publishing.
However, investors dont appear particularly concerned about the action. SM shares (KOSDAQ: 041510) dipped when word of the dispute first surfaced but rebounded by nearly 5% during todays trading, finishing at $98 (�135,600) a pop.
Bigger picture, this isnt the first time Tencent Music has faced regulatory scrutiny over its exclusives. In September 2021, the company said itd nixed the relevant pacts in response to an antitrust penalty that reportedly centered on major-label releases.
