Linktone (LTON) has entered into an agreement to make a strategic investment in 9Sky, a digital music download provider in China.
The undisclosed terms of the transaction will enable Linktone to initially invest and obtain a majority stake in 9Sky and, over the course of the next two years, to acquire the remaining stake in 9Sky, through an earn-out based on agreed performance targets.
The transaction is expected to be completed by early November.
Linktone says 9Sky differentiates itself from competitors by offering licensed music downloads to Chinese consumers. 9Sky currently has agreements with many local and international record labels such as Sony BMG and EMI, and offers digital music streaming services to a community of approximately one million registered users, and is in the process of introducing licensed full-track download services.
9Sky's services also enable users to download music content from the internet to their home or office computers. The users in the 9Sky music community map closely to Linktone's target user demographic of 16 – to-30 year-olds with disposable income to spend on digital music entertainment.
Linktone and 9Sky's joint cooperation will focus on leveraging 9Sky's brand strength in the music download services market and Linktone's wireless presence. Linktone plans to closely integrate 9Sky's services and community with its wireless music offerings.
Linktone's position in music-related wireless value-added services will be enhanced by cooperation with 9Sky's consumers and recording label partners. 9Sky will benefit from co-promotions and cross-selling opportunities through Linktone's successful partnerships.