British music scouting platform Instrumental hits right note with Tencent deal

A British-based music scouting platform which uses artificial intelligence to assess artists' commercial potential has struck a landmark deal that will see one of China's biggest technology companies take a stake in it.

Sky News has learnt that Tencent Holdings is acquiring a minority stake in Instrumental, which was founded in 2016 by Conrad Withey and Abi Hanna, as part of a strategic partnership.

The deal will be announced on Wednesday, according to insiders.

It will deliver a major boost to Instrumental, which utilises advanced data science to discover musicians who are not distributing their work through traditional labels.

The Instrumental platform is used by a spectrum of companies in the music and media sectors to identify promising artists from the tens of thousands uploading songs digitally every day.

Mr Withey, a former Warner Music Group executive, has been described as "the Billy Beane of the music industry" - a reference to the baseball executive immortalised in Moneyball who used data to find talented players shunned by other teams.

WMG subsequently invested in Instrumental, alongside Blenheim Chalcot, the leading UK venture-builder.

Instrumental's deal with Tencent includes an equity stake in the British company, but equally importantly gives it a foothold in China - one of the world's fastest-growing music markets - through an alliance with Tencent Music Entertainment Group (TME).

That element of the deal is expected to benefit the roster of independent artists licensing tracks onto Instrumental's frtyfve-branded label services and publishing arm, enabling their music to reach vast untapped audiences.

According to data cited by Instrumental from analysts Midia Research, so-called "DIY artists" represent the fastest-growing sector of the global recorded music industry, worth $873m in 2019 and expected to hit $1bn this year.

Instrumental's platform is used by all of the world's major record labels as well as Live Nation Entertainment.

Tencent's investment in Instrumental underlines the extent to which one of the world's most prominent and valuable creative industries is being reshaped by technology.

The emergence of Spotify and numerous imitators have helped to accelerate a shake-up of the sector's historically dominant players.

Universal Music Group, the world's biggest music company, is 10%-owned by a Tencent-led consortium.

The Chinese group plans to increase its holding by a further 10% in the coming months, Bloomberg News reported earlier this month.

"Like us, Tencent have identified the power and potential of data science in the discovery and development of high potential new artists," Mr Withey said.

"This deal will allow Instrumental to accelerate our commitment to becoming an 'artist first' business, delivering insights and partnerships directly to the great talent discovered by our app.

"That includes expanding our label and publishing services but also launching new products that meet the needs of high growth artists at the earliest stages of building a career in the music business including merchandise, digital live events and brand partnerships."

Spotify said last year that lower-cost or free distribution had spurred the independent ranks of music artists online globally to more than three million, with over 40,000 tracks uploaded daily.

Instrumental said the coronavirus pandemic's impact on recording studios and the live events industry had accelerated the trend.

Dennis Hau, TME vice-president, said the collaboration with Instrumental would "bring greater impetus to the innovation of TME in AI technology application, as a win-win combination of better service for our users, good promotion for the growing artists, and the sound development of the entire online music industry".

TME is one of China's largest online music entertainment platforms, operating music apps including QQ Music, Kugou Music, Kuwo Music and WeSing.