NetEase Cloud Music’s lawsuit against SM Entertainment, one of South Korea’s biggest K-pop companies, became a trending topic on Chinese social platform Weibo on July 31. The Chinese streaming firm is alleging that SM has abused its dominant market position in a dispute over music licensing.
Why it matters: The high-stakes conflict underscores rising tensions in China’s digital music landscape, where licensing access to K-pop is a major competitive factor. Adding complexity, Tencent Music Entertainment (TME) – NetEase’s primary domestic music streaming competitor – became SM Entertainment’s second-largest shareholder in May. This relationship has raised concerns about market fairness and potential conflicts of interest, as SM’s licensing decisions could be shaped by Tencent’s position as both a shareholder and a business opponent of NetEase.
Details: Court filings reveal that NetEase Cloud Music has brought a suit against SM Entertainment in the Hangzhou Intermediate People’s Court. The trial, focusing on allegations of market abuse, is slated for August 6.
- Following the news, SM Entertainment’s shares fell 2.7% to KRW 129,500 ($92) on Friday.
Context: NetEase and SM’s licensing relationship has been shaped by industry shifts and regulatory intervention. The companies first worked together in 2018, with NetEase allowed to offer SM’s catalog for streaming via a licensing deal with Alibaba Music.
- In 2019, however, SM aligned with Tencent Music Entertainment, resulting in the removal of SM songs from NetEase’s platform and sparking widespread fan complaints.
This dynamic shifted in 2021, when Chinese regulators ended exclusive music licensing, giving NetEase a pathway to renegotiate with SM. In June 2022, NetEase regained full rights to SM’s music catalog.
- However, Tencent further strengthened its strategic position in K-pop by acquiring all of South Korean company HYBE’s stake in SM Entertainment in May.
- NetEase’s annual report showed strong growth in 2024, with revenue rising 23% to RMB 5.35 billion ($785 million), driven by increased subscriptions and effective cost management. The company continues to broaden its licensing portfolio, recently securing deals with other major Korean music content providers such as JYP, Kakao, and CJ Entertainment.
- Founded in 1995, SM Entertainment is a powerhouse in the K-pop industry, often dubbed “Asia’s top idol factory.” Together with JYP and YG Entertainment, it is one of the top three Korean entertainment agencies. The company launched first-generation idol groups such as H.O.T. and S.E.S., iconic acts that shaped the musical tastes of fans born in the 1980s and ’90s. acts such as TVXQ, Super Junior, Girls’ Generation, and SHINee helped establish the generational structure of K-pop, contributing to its global rise.
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