TME's music pivot works, but competition bites
- Online music is now the main story, with Q4 2025 revenue of RMB 7.1 billion.
- Online music paying users reached 127.4 million in Q4 2025.
- Subscriptions still lead, but concerts, ads, and merchandise are growing faster off a smaller base.
- Social Entertainment is shrinking by design and fell 5% year over year in Q4 2025.
- The main 2026 test is whether TME can protect subscription pricing while rivals push harder.
A better music business, under pressure
TME has shifted from chasing user count to making more money from each serious music fan. The clearest proof is online music paying users reaching 127.4 million in Q4 2025, while music subscription revenue grew 13% year over year to RMB 4.6 billion.
The bull case is simple. TME is using standard subscriptions, a premium SVIP tier, and a newer ad-supported plan to reach different types of listeners. Non-subscription music revenue, including offline concerts and artist merchandise, grew 41% year over year to RMB 2.5 billion in Q4 2025.
The bear case is also real. Management expects short-term pressure on subscription revenue in 2026 because competition is intense. It will also stop giving quarterly paying-user and ARPPU updates, which may make investors worry more about churn between annual reports.
Ximalaya is the big pending deal. If it closes and integrates well, TME should be stronger in long-form audio. If it drags, or if regulators slow it down, that catalyst could turn into a wait-and-see story.
From free listeners to paid fans
TME runs a freemium model. Many people can listen for free, then TME tries to move them into paid plans, ad-supported 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 said the company is more focused on revenue and profit than user volume.
That focus has a tradeoff. Offline shows and artist merchandise can lift revenue fast, but management has said those businesses carry lower gross margins. In plain English, each extra yuan of sales may leave less profit than a subscription yuan.
The reporting change matters. TME will report total paying users across music services annually, not quarterly. That may fit the new profit focus, but it also gives outside investors less frequent proof that subscribers are staying.
Apps, SVIP, and live fandom
QQ Music
QQ Music is one of TME's core streaming apps. It also hosts newer fan features like the bubble community, where users can interact more directly with artists.
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 2.0, VIPER Ultra Sound, DTS Booming External Speaker, and 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 3-tier membership system.
Offline concerts and fan merchandise
This business is growing quickly and helped non-subscription music revenue rise 41% year over year in Q4 2025. The catch is lower gross margin than core subscriptions.
Ximalaya long-form audio
TME announced a proposed acquisition of Ximalaya in June 2025. If completed, it would add scale in audiobooks, podcasts, and other long-form audio.
Online music now dominates
The mix uses Q4 2025 segment revenue: 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, while Social Entertainment remains in managed decline.
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.
Less frequent user reporting
Medium impact · High oddsTME plans to stop giving quarterly paying-user and ARPPU 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.
Lower-margin growth mix
Medium impact · High oddsConcerts and artist merchandise are growing faster than subscriptions. Management has said these areas have lower gross margins. If they become too large in the mix, revenue can rise while profit quality softens.
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. That could reduce the value of TME's content spending.
Ximalaya deal risk
Medium impact · Medium oddsThe proposed Ximalaya acquisition could make TME stronger in long-form audio. But a delayed close, difficult integration, or weak user overlap would reduce the payoff. The market may give little credit until the deal is closed and working.
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 more managed than before, 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 plans to report total paying users across music services once a year instead of every quarter.
What is the Ximalaya deal?
In June 2025, TME announced a proposed acquisition of Ximalaya, a leading online audio platform in China. The deal would add strength in long-form audio such as audiobooks and podcasts if it closes.
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.