TME adds Ximalaya as offline concerts squeeze its margins
- Online music is now the main story, with Q4 2025 revenue of RMB 7.1 billion.
- Online music paying users reached 127.4 million at the end of 2025.
- Subscriptions lead the mix, while concerts and merchandise are growing rapidly.
- The rapid growth in offline events caused a slight decline in overall gross margins.
- TME consolidated Ximalaya to become a comprehensive audio platform.
A broader audio platform with margin questions
TME has shifted from chasing user count to making more money from each serious fan. The clearest proof is online music paying users reaching 127.4 million in Q4 2025. The recent consolidation of Ximalaya turns the company into a comprehensive audio platform.
The bull case relies on execution. TME is using standard subscriptions, a premium SVIP tier, and an ad-supported plan to reach different listeners. Non-subscription music revenue, including offline concerts and merchandise, continues to grow very rapidly.
The bear case centers on profitability and competition. Management expects short-term pressure on subscription revenue in 2026 due to intense competition. Furthermore, the very fast growth in the offline business is structurally lowering gross margins.
AI is another open question. TME is rolling out AI agents as personal DJs to boost engagement. However, management has also warned that AI-generated hit songs could dilute the premium value of original music catalogs.
From free listeners to paid fans
TME runs a freemium model. Many people can listen for free, then TME tries to move them into ad-supported plans, paid plans, premium SVIP plans, digital albums, concert tickets, and fan merchandise.
SVIP is the key profit lever. It adds higher-end sound, special content, digital perks, and some event-related benefits. Management has stated the company is more focused on revenue and profit than raw user volume.
That focus has a tradeoff. Offline shows and artist merchandise can lift revenue fast, but those businesses carry lower gross margins. In Q2 2026, the rapid growth in offline performance actually caused a slight decline in overall gross margins.
The reporting change matters. TME reports total paying users across music services annually, not quarterly. That fits the new profit focus, but it gives outside investors less frequent proof that subscribers are sticking around.
Apps, SVIP, and live fandom
QQ Music
QQ Music is one of TME's core streaming apps. It now features AI agents acting as personal DJs to create customized playlists on demand.
Kugou Music
Kugou is another major music platform in the TME network. It helps the company reach a large base of Chinese listeners across free and paid plans.
Kuwo Music
Kuwo rounds out TME's main streaming app group. Its role is to keep users inside the TME music ecosystem and feed the subscription funnel.
SVIP membership
SVIP is the premium paid tier. Features include higher-end audio such as 3D Audio, VIPER Ultra Sound, and special in-car audio experiences.
Ad-supported membership
The ad-supported plan is meant to bring more free users into a paid or semi-paid habit. It is part of TME's three-tier membership system.
Offline concerts and fan merchandise
This business is growing quickly and driving revenue. The catch is that it carries a lower gross margin than core subscriptions.
Ximalaya
TME recently consolidated Ximalaya. This transforms the company into a comprehensive audio platform with premium audiobooks and podcasts.
Online music now dominates
The mix uses Q4 2025 segment revenue with Online Music Services at RMB 7.1 billion and Social Entertainment Services and others at RMB 1.5 billion. The business is now concentrated in Online Music.
What could break the song
Subscription price pressure
High impact · Medium oddsManagement warned of short-term pressure on subscription revenue in 2026 from intense competition. If rivals discount or lock up content, TME may have to spend more or accept lower pricing power.
Lower-margin growth mix
Medium impact · High oddsConcerts and artist merchandise are growing much faster than subscriptions. Management confirmed these areas have lower gross margins, which caused a slight margin decline in Q2 2026. If they become too large in the mix, profit quality softens.
Less frequent user reporting
Medium impact · High oddsTME plans to stop giving quarterly paying-user metrics. That may match its profit focus, but it reduces outside visibility. A weak annual update could hurt trust fast because investors will have fewer early warning signs.
AI weakens music IP value
Medium impact · Medium oddsManagement said AI-generated hit songs create a huge challenge for promoting original music and protecting IP value. If cheap AI songs flood the market, users may care less about premium catalogs.
Social Entertainment drag
Low impact · High oddsSocial Entertainment is no longer the growth center. It fell 5% year over year to RMB 1.5 billion in Q4 2025. The decline is managed, but it still weighs on total company growth.
In one breath
How does Tencent Music make money?
TME makes money from music subscriptions, ads, digital music sales, concerts, artist merchandise, and Social Entertainment services. The highest-quality part of the model is the music subscription base, especially premium SVIP users.
Why is TME changing how it reports users?
Management says it is focusing more on revenue and profit than on user volume. Starting after Q4 2025, it chose to report total paying users across music services once a year instead of every quarter.
What is the Ximalaya deal?
TME consolidated Ximalaya to become a comprehensive audio platform. The deal adds strength in long-form audio such as audiobooks and podcasts.
Is the Social Entertainment business still important?
It still adds revenue, but it is no longer the main growth driver. In Q4 2025, Social Entertainment Services and others produced RMB 1.5 billion and fell 5% year over year.
Sources and research notes
This page combines Finn's company research with public filings and other cited materials. The thesis is reviewed when material company information changes; Finn Scores use the latest available scoring data.
- Thesis reviewed
- September 6, 2026
- Score data
- September 27, 2026
- Reviewed by
- Shivam Bharuka
Comparable Internet Content & Information companies
Companies near Tencent Music Entertainment Group in Finn's Internet Content & Information industry ranking.
