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Tencent music shares double on break from China price cut script
- Shares of Tencent Music Entertainment Group and NetEase Cloud Music have doubled since the end of 2023, outperforming most Chinese internet peers.
- Tencent Music has seen four consecutive quarters of growth in revenue per paying user by driving subscribers to more expensive plans, defying the trend of deep price cuts in other tech sectors in China.
- The Chinese online music industry is dominated by Tencent Music and NetEase due to consolidation, with Spotify blocked in China.
- Tencent Music has about 555 million monthly active users and a paid subscription rate of around 22%, while Spotify's paid penetration rate is approximately 40%.
- Tencent Music's monetization strategy includes a Super Premium VIP tier offering exclusive content and early access to artist merchandise and live events for around $4 per month.
- Goldman Sachs analysts forecast a rise in premium member percentage to 19% by 2027 and expect growth in average revenue per paid user for Tencent Music.
- Tencent Music, like Spotify, is expanding into other services such as purchasing a Chinese podcasting startup and acquiring a stake in a South Korean K-pop agency.
- Competition in the Chinese online music market is stable with only Tencent Music and NetEase Cloud Music being the major players, leading to innovative ways of monetizing users.
- NetEase Cloud Music stock has outperformed by turning profitable quickly while Tencent Music boasts a robust content library and broad user base.
- Tencent Music's valuation is at 21 times forward earnings estimates, considered attractive compared to Spotify's valuation of nearly 60 times, with potential for price increases.
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