The AI markets translator at your service – no jargon, just clear explanations of what those wild swings actually mean.

Tencent Music's $2.4B Ximalaya Play: A Play for Dominance in China's Audio Economy

Julian CruzTuesday, Jun 10, 2025 9:13 am ET

81min read

The acquisition of Ximalaya by Tencent Music Entertainment Group (TME) marks a pivotal move to consolidate control over China's booming audio content market. Valued at $2.4 billion, the deal combines TME's music-streaming dominance with Ximalaya's vast library of podcasts, audiobooks, and spoken-word content, positioning the merged entity to challenge global rivals like Spotify while capitalizing on the underpenetrated Chinese audio economy.

Why the Acquisition Matters: Building a Monopoly in Long-Form Audio

Ximalaya's 303 million monthly active users (as of 2023) and its library of 340 million hours of content—spanning everything from audiobooks to language-learning podcasts—provide TME with a critical edge in the race to monetize China's $6.7 billion online audio market. TME, already the leader in music streaming with 121 million paying subscribers, can now expand its premium “Super VIP” (SVIP) tier to include exclusive audiobooks and podcasts. This strategy mirrors Spotify's global push into podcasts but leverages local content and regulatory alignment unique to China's internet landscape.

The synergies are clear: TME's AI tools, such as its “AI Songwriter” and audio track separation technology, can optimize Ximalaya's content for personalized recommendations, while Ximalaya's user base offers a direct pipeline to convert free listeners into paying subscribers. For instance, TME's audio adaptation of The Grave Robbers' Chronicles—a popular audiobook—reached 10 million streams in weeks, demonstrating the demand for such content.

Data shows TME's subscription revenue rose 25.9% year-over-year in 2024 to RMB 15.23 billion, driven by SVIP's 13.4% subscriber growth. Integrating Ximalaya's users could amplify this trajectory.

The Monetization Play: From Free Users to Paying Subscribers

Ximalaya's challenge—historically struggling with profitability—could now be overcome through TME's proven monetization playbook. TME's SVIP tier, which offers high-fidelity audio and exclusive content, has already demonstrated its appeal, with paying users up 8.3% year-over-year to 122.9 million in Q1 2025. By bundling Ximalaya's premium content into this tier, TME could boost average revenue per user (ARPU), which rose 7.5% in Q1 to RMB 11.4.

The strategy is straightforward: use TME's 700 million monthly music listeners as a base to cross-sell audio content, while Ximalaya's 300 million users provide a second audience to upsell. This dual funnel could reduce TME's reliance on music subscriptions alone and create a more resilient revenue stream.

Competing Against Global Rivals: Local Content, Local Rules

Spotify's entry into China's market has been hampered by regulatory barriers and the dominance of local players like TME. The Ximalaya acquisition amplifies this advantage. While Spotify has invested heavily in global podcasts, TME's control over domestic content—backed by China's strict internet regulations—ensures it can curate culturally relevant audio that resonates with Chinese consumers.

Moreover, TME's parent company, Tencent, holds a 17% stake in Ximalaya, reducing antitrust scrutiny risks. This alignment contrasts with Spotify's reliance on partnerships with Chinese firms, which often face regulatory hurdles.

Regulatory Risks and the Path Ahead

The deal remains pending regulatory approval, a hurdle that nearly derailed TME's 2021 acquisition of Lazy Audio. However, TME's track record of compliance and its role as a state-backed tech giant underpins optimism. The real risk lies in execution: integrating Ximalaya's 1,500-person workforce and aligning its content strategy with TME's AI-driven roadmap will test management's capabilities.

Stock Valuation: A Buy at $16.00, With Upside to $20

Despite these risks, TME's stock (TME) is undervalued. At a current price of $18.829, the stock trades at 22.1x P/E—well below peers like Spotify (107.6x) and Warner Music (30.6x). Analysts at Bernstein and Morgan Stanley have raised price targets to $20.00 and $18.00, respectively, citing the Ximalaya deal's growth potential.

A Buy recommendation with a $16.00 price target accounts for near-term regulatory and integration risks. However, if TME executes its strategy flawlessly, the stock could hit $20.00 by mid-2026, aligning with its historical uptrend since 2018.

The chart shows a steady climb from $10.00 in 2018 to $18.82 in June 2025, reflecting TME's growth trajectory.

Final Verdict: A Strategic Gamble Worth Taking

The Ximalaya acquisition is a bold bet on TME's future as a one-stop audio entertainment powerhouse. While regulatory and operational risks linger, the deal's potential to dominate China's audio economy—and counter global giants—outweighs the downsides. For investors seeking exposure to the Chinese digital entertainment boom, TME's stock offers a compelling entry at current levels.

Recommendation: Buy TME with a target of $16.00, eyeing $20.00 for long-term holders. Monitor regulatory updates and quarterly subscriber growth for catalysts.

Ruth Simon
June 6, 2025

Disclaimer: The news articles available on this platform are generated in whole or in part by artificial intelligence and may not have been reviewed or fact checked by human editors. While we make reasonable efforts to ensure the quality and accuracy of the content, we make no representations or warranties, express or implied, as to the truthfulness, reliability, completeness, or timeliness of any information provided. It is your sole responsibility to independently verify any facts, statements, or claims prior to acting upon them. Ainvest Fintech Inc expressly disclaims all liability for any loss, damage, or harm arising from the use of or reliance on AI-generated content, including but not limited to direct, indirect, incidental, or consequential damages.