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Alibaba acquired the music streaming app Xiami back in 2013, whereby the app had been up and running since 2008.
Shares of Alibaba Group Holding Ltd (NYSE: BABA) closed Monday trading at $227.85, down 2.10%. Meanwhile, they were down approximately 0.15% more during the after-hours trading session but is 0.55% up now in the pre-market. The drop coincided with an announcement from the online music arm of the company that it will close its Xiami music app next month due to lack of market demand. “Due to operational adjustments, we will stop the service of Xiami Music. It’s hard to say goodbye after being with you for 12 years,” Alibaba noted in the announcement.
BABA shares have been on the receiving end for the better part of the past twelve months despite being a technology company during the pandemic. According to market data provided by marketwatch, BABA shares are down approximately 22.07% in the past three months. However, with a market valuation of approximately $649.31 billion, the company is in a position of turning around and investing in profitable areas.
The Jack Ma-led company has been under government scrutiny for antitrust issues due to its huge market dominance. Incidentally, its subsidiary Ant Group was halted from its mega IPO by the government.
The Chinese government has in the past been whipping up companies with large market dominance. Notably, Chinese regulators passed laws on antitrust that will cap tech related companies from huge market dominance.
Alibaba Music App Xiami Closure
Alibaba acquired the music streaming app Xiami back in 2013, whereby the app had been up and running since 2008. The company had anticipated to take over the Chinese music streaming market by storm but it did not materialize as expected. Apparently, Xiami controls approximately 2% of Chinese streaming market behind KuGou Music, QQ Music, KuWo, and NetEase Cloud Music.
The company noted that it will close Xiami’s operations in China by February 5. Xiami’s departure will add more customers to streaming giant Tencent music apps that control up to 75% of the market share.
Meanwhile, Alibaba will continue to venture into more promising ventures including NetEase Cloud Music. Whereby the company invested upto $700 million in NetEsse Cloud music back in September 2019.
Xiami’s closure might be both tactical and critical to the future growth prospects of Alibaba holding. Whereby, in future the company may argue that it closed part of its ventures due to market competition thus free from government antitrust accusations. On the other hand, the closure may be critical to allow the company’s investment in other music streaming businesses to thrive and in turn profitable.