Tencent Music Entertainment Group, controlled by China’s biggest social network operator, is seeking new funding at a US$10bn valuation ahead of an initial public offering, people familiar with the matter said.

The operator of karaoke and Spotify-like streaming apps plans to sell about 3% of its shares to strategic partners, including record labels, one of the people said, asking not be identified as the details are private. Tencent Holdings, owner of the WeChat messaging service, held about 62.5% of the music group at the end of last year. South Africa’s Naspers owns 33.2% of Tencent.

By forging an equity link with record labels, Tencent Music would be securing its right to hold on to vital streaming rights in China’s increasingly heated music market. Tencent spun out its music division after merging it with China Music to win over a larger slice of a domestic streaming market forecast to reach 4.4bn yuan ($664m) of subscription revenue by 2018.

The company, which competes with products from Alibaba Group and NetEase, is scooping up content to cater to users who turn to the Web for entertainment and want services tailored to personalised preferences. Tencent Music has deals in place to distribute songs from artists including Beyonce and Taylor Swift after signing up with some of the world’s largest record labels, including Universal Music Group, Warner Music Group and Sony Music.

Some of the other most influential record labels for the China market include Huayi Brothers Media and Korea’s YG Entertainment, both of which have distribution deals with Tencent.

Tencent Music declined to comment in an e-mailed statement.

Apps

Tencent mainly distributes music via its QQ Music, Kugou and Kuwo apps, which have a combined 600m monthly active users. The apps provide a free-to-stream service and a subscription mode. The company also operates a live streaming service and a karaoke app.

Tencent Music makes money via subscription, advertisements and sub-licensing its content to other companies including Netease.