Tencent Music Entertainment Group has agreed to buy Chinese podcasting startup Ximalaya Inc. for US$1.3 billion in cash plus an issuance of stock, a deal that propels its ambition to become China’s answer to Spotify.

The acquisition is intended to enhance Tencent Music’s presence in China’s online media market.

The transaction includes issuing shares to Ximalaya’s founders and investors to help fund the purchase.

Ximalaya, backed by Tencent, Baidu, and Sony Music Entertainment, filed for a Hong Kong IPO in 2021 but postponed the plan.

As of 2023, the platform reported 303 million monthly active users.

Tencent Music, a subsidiary of Tencent Holdings, operates QQ Music, Kugou, and WeSing.

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🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ China’s audio market consolidation mirrors global streaming wars

The Tencent-Ximalaya deal represents a significant consolidation in China’s rapidly expanding audio market, which is valued at $8.3 billion in 2024 and projected to grow at an 8.5% CAGR through 2028 1, 2.

This acquisition creates a combined user base exceeding 580 million, dramatically strengthening Tencent Music’s market position against both domestic and international competitors 3.

The pattern resembles consolidation trends in global streaming markets, where scale and content diversity have become essential competitive advantages as platforms compete for user attention and subscription dollars.

Regulatory scrutiny remains a key concern, with potential anti-trust reviews due to Tencent’s already dominant position in China’s digital entertainment landscape 4.

The $2.4 billion price tag, combining $1.26 billion in cash with 5.2% of Tencent Music’s shares, demonstrates the premium valuations being placed on established audio platforms with large user bases 4.

2️⃣ Diversification beyond music streaming drives audio platform strategy

The acquisition represents a strategic expansion from pure music streaming toward a comprehensive audio content ecosystem, reflecting changing consumer preferences.

Ximalaya’s extensive library of 300 million audio tracks, including podcasts and audiobooks, complements Tencent Music’s existing offerings and opens new monetization channels beyond traditional music 4.

China’s podcast listener base alone reached 640 million in 2021 and was projected to grow to 690 million by the end of 2022, highlighting the market opportunity beyond music streaming 5.

The Chinese audio industry has evolved significantly since 2012, with paid knowledge content now accounting for approximately 30% of audio platform revenues 6.

This diversification strategy parallels moves by global platforms like Spotify, which has invested heavily in podcasts and audiobooks to reduce dependency on music licensing costs and improve profitability.

3️⃣ The “Ear Economy” represents a fundamental shift in digital media consumption

China’s “Ear Economy” has expanded dramatically, with online audio users reaching 747 million in 2024 and a total market exceeding 560 billion yuan ($68.86 billion) 7.

Ximalaya alone reported over 220 million podcast listeners, while the podcast platform Xiaoyuzhou added over 46,000 new shows and 400,000 episodes in 2024, demonstrating the format’s explosive growth 7.

This shift is being driven by changing consumption habits, particularly among younger demographics who are seeking diverse audio content that can be consumed while multitasking 2.

The rise of enabling technologies, including smart speakers, in-car audio systems, and AI-driven personalization, is accelerating adoption and engagement across different user segments 1.

Audio platforms are increasingly leveraging artificial intelligence to enhance content creation, personalization, and production quality, further driving user engagement and retention 7.

Recent Tencent Music developments

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