Whatever the facts, DeepSeek<\/strong> is now firmly part of the tech landscape \u2014 as evidenced by Tencent Music Entertainment<\/strong> (TME)\u2019s announcement on Tuesday (March 18) that it has integrated DeepSeek<\/strong> into its music streaming service.<\/p>\n China\u2019s largest operator of music streaming services has made DeepSeek<\/strong> a part of its music creation tools<\/strong>, CEO Ross Liang<\/strong> explained on the company\u2019s latest earnings call.<\/p>\n DeepSeek is now part of TME\u2019s AI-powered songwriting tool, with which \u201cusers can quickly create songs tailored to specific contexts or modes,\u201d<\/strong> Liang said.<\/p>\n But DeepSeek\u2019s<\/strong> participation doesn\u2019t end there.<\/p>\n TME<\/strong> has also integrated it into its AI assistant, comment sections, recommendations pages and other \u201cuser touch points,\u201d Liang explained. All of this enables users to enjoy \u201ca more personalized music experience.\u201d<\/p>\n TME\u2019s move has echoes of Amazon\u2019s recent announcement<\/a> that the next generation of its voice assistant Alexa will be integrated with AI music generation platform Suno<\/strong>.<\/p>\n In an ongoing lawsuit brought by the music majors (Sony Music Entertainment<\/strong>, Universal Music Group<\/strong>, and Warner Music Group<\/strong>), Suno has all but admitted<\/a> to using copyrighted songs without permission to train its AI.<\/p>\n Just as Amazon \u2014 owner of the Amazon Music<\/strong> streaming service \u2014 doesn\u2019t appear to have an issue partnering with a potential copyright violator, so too does TME<\/strong> appear comfortable allying itself with an AI developer\u00a0<\/span>suspected of using copyrighted content<\/strong> without authorization.<\/p>\n And just as Amazon Music<\/strong> licenses music from copyright holders, so too does TME,<\/strong> which has previously signed licensing agreements with the likes of Sony Music<\/a>, Universal Music Group<\/a>, Warner Music Group<\/a>, and K-pop giant HYBE<\/strong><\/a>, among others.<\/p>\n TME\u2019s<\/strong> revelation about DeepSeek came as the company reported<\/a> Q4 and full-year 2024 earnings, showing major improvements for both the year and the quarter.<\/p>\n One standout number in the report: TME\u2019s revenue from paid music subscriptions surpassed USD $2 billion<\/strong><\/a> in 2024, rising nearly 26%<\/strong><\/span> year-on-year.<\/p>\n The growth in revenue came from both an increase in paying subscribers (up 13.4% YoY<\/strong><\/span> to 121 million<\/strong> in Q4 2024) as well as improvements in average revenue per paying user (ARPPU).<\/p>\n Some of that ARPPU growth came from the increasing popularity of TME\u2019s \u201cSuper VIP\u201d<\/strong> tier, which costs five times as much<\/a> as a standard subscription and offers listeners long-form audio and online karaoke on top of music streaming, and comes with perks such as priority access to digital albums and ticket booking for live events.<\/p>\n TME didn\u2019t update its Super VIP<\/strong> subscriber numbers in the latest report, but in the prior quarter report it said<\/a> that 8%<\/strong> of paying subscribers had the Super VIP tier, which would have amounted to around 10 million<\/strong> subscribers at that time.<\/p>\n TME Executive Chairman Cussion Pang<\/strong> hinted at more and better perks for Super VIP subscribers going forward.<\/p>\n \u201cWe will roll out more VIP access, meet-and-greet opportunities, limited editions, merchandise, personalized experiences and more while empowering artists and record labels to explore new ways to interact with [the] targeted audience,\u201d Pang said on the earnings call.<\/p>\n Overall, TME\u2019s revenue rose 2.3%<\/strong> in 2024 RMB 28.40 billion<\/strong> ($3.95 billion<\/strong>) as the rapid growth of music streaming revenues was partly offset by continued declines in the company\u2019s social entertainment segment.<\/p>\n The company announced its third share buyback \u2013 $1 billion<\/strong> in shares to be purchased over the next 24 months \u2013 and a dividend of $273 million<\/strong> for 2024.<\/p>\n Here are three other things we learned on TME\u2019s latest earnings call.<\/p>\n It\u2019s no secret in the music industry that, after years of keeping subscription prices low to compete for listeners, music streaming platforms have started raising prices to improve their bottom line \u2013 a tactic that has certainly worked for Spotify<\/strong>, which last year reported its first full year of operating profitability.<\/p>\n In the Chinese market, revenue per user is considerably lower than in the developed-world markets where Spotify has gained its strongest foothold. While Spotify ARPU (average revenue per user) for Premium subscribers came in at $5.18 in Q4<\/a>, TME\u2019s ARPPU in the same quarter was RMB 11.1<\/strong>, or $1.53<\/strong>.<\/p>\n That\u2019s understandable given China\u2019s<\/strong> relatively low incomes, but it doesn\u2019t mean there isn\u2019t room for price hikes, as certain analysts have suggested<\/a>.<\/p>\n \u201cWe will not sacrifice our interest by rolling out aggressive low prices\u2026 for short-term growth.\u201d<\/p>\n Ross Liang, Tencent Music Entertainment<\/span><\/p><\/blockquote>\n CEO Liang<\/strong> seems to agree. On the earnings call Tuesday, Liang noted that paying subscribers are \u201cquite price sensitive,\u201d but TME\u2019s strategy is that \u201cwe will not sacrifice our interest by rolling out aggressive low prices\u2026 for short-term growth.\u201d<\/p>\n Currently, TME\u2019s basic subscription costs RMB 8<\/strong> ($1.10<\/strong>) per month, while premium memberships run between RMB 15<\/strong> and RMB 18<\/strong> ($2.08<\/strong>–$2.49<\/strong>) and Super VIP costs RMB 40<\/strong> ($5.53<\/strong>).<\/p>\n \u201cWe hope that we can continue to improve our service by improving the price,\u201d Liang<\/strong> said. \u201cAnd by so doing, we will be able to consolidate this user base by improving the ARPPU for sustainable growth.\u201d<\/p>\n Liang added that he expects the Super VIP tier to continue growing its subscriber base \u201cno matter the price.\u201d<\/p>\n For years now, TME<\/strong> has focused not only on signing licensing agreements with major music rightsholders, but on creating its own music and other content.<\/p>\n To that end, TME<\/strong> has made prolific use of AI tech. In late 2022, the company revealed<\/a> it had created some 1,000 tracks<\/strong> with AI-generated, human-mimicking vocals, and one of them had clocked more than 100 million<\/strong> streams.<\/p>\n It also launched a Tencent Musician Program<\/em> back in 2017, through which some 390,000 independent artists<\/strong> had uploaded 2.3 million tracks<\/strong> as of 2022.<\/p>\n These types of initiatives help\u00a0explain why TME\u2019s music platforms \u2014 QQ Music<\/strong>,\u00a0Kugou<\/strong>,\u00a0Kuwo<\/strong>, and\u00a0WeSing <\/strong>\u2014 now boast<\/span> a huge library of 216 million<\/strong> \u201clicensed and co-created\u201d tracks, while global music streaming leader Spotify boasts \u201conly\u201d 100 million+<\/strong> tracks.<\/p>\n (We will see how TME’s<\/strong> new DeepSeek<\/strong> affiliation may grow that 216 million number yet further…)<\/p>\n \u201cThe scaling of our own content further improved our gross margin. This continues to be a key metric in managing our content royalty costs.\u201d<\/p>\n Shirley Hu, Tencent Music Entertainment<\/span><\/p><\/blockquote>\n But to what end is TME<\/strong> building this giant catalog? TME\u2019s Chief Financial Officer Shirley Hu<\/strong> offered some insight into that on the earnings call.<\/p>\n \u201cThe scaling of our own content further improved our gross margin,\u201d Hu<\/strong> told analysts on the call. \u201cThis continues to be a key metric in managing our content royalty costs.\u201d<\/p>\n Given that music streaming services hand over something in the range of two-thirds of their revenue to rightsholders, TME\u2019s<\/strong> ability to avoid licensing fees on some of its streamed music can certainly make a difference.<\/p>\n In Q4 2024, TME\u2019s gross margin improved to 43.6%<\/strong>, compared to 38.3%<\/strong> in the same period a year earlier, \u201cprimarily due to strong growth in revenues from music subscriptions, including subscriptions to SVIP membership<\/strong>, and\u2026 revenues from advertising services, and the ramp-up of our own content,\u201d TME said in its earnings report.<\/p>\n Among the more notable aspects of TME\u2019s<\/strong> latest earnings call was Executive Chairman Pang\u2019s<\/strong> focus on live music, and the growing role it has in the streaming music environment.<\/p>\n Pang asserted that streaming consumers are increasingly less likely to be satisfied with only the streaming experience.<\/p>\n Listeners \u201cincreasingly seek the live atmosphere and enjoyment that comes from experiencing live concerts and music festivals<\/strong>,\u201d Pang said.<\/p>\n \u201cIn addition, we are also seeing that fans… want to show support to [their idols] through purchasing official merchandise<\/strong>. By attending\u2026 live shows, fans gain a more diverse and in-depth understanding of the artists, which in turn strengthens their [relationship with artists].<\/p>\n “For the artists, [it] encourages more song listening on our platform as well. So it’s going to create a positive cycle for music content consumption, which benefits all parties.\u201d<\/p>\n \u201cAs more and more [live] shows are being held, users\u2019 expectations for the quality of these shows have also increased.”<\/p>\n Cussion Pang, Tencent Music Entertainment<\/span><\/p><\/blockquote>\n Live music has seen robust growth in China<\/strong> over the past few years, Pang said, \u201cand the willingness of users to spend on such events has surged dramatically, with tickets for many top-tier artists\u2019 concerts and music festivals selling out in seconds.\u201d<\/p>\n TME<\/strong> has arguably done more to integrate live music with streaming than other major streaming services. It established TME Live<\/a> in 2020, invested in<\/a> virtual concerts, and partnered with<\/a> music companies on regional concert tours.<\/p>\n Pang<\/strong> sees intensifying competition in the live music space.<\/p>\n \u201cAs more and more shows are being held, users\u2019 expectations for the quality of these shows have also increased,\u201d he said on the earnings call. \u201cSo the industry has now entered a phase where only the strongest survive, and the weaker are left behind.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" China’s largest operator of music streaming services says live music is becoming increasingly important to listeners<\/p>\n","protected":false},"author":46,"featured_media":226683,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7],"tags":[115212,133581,131996,133158,4565],"class_list":["post-226665","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-cussion-pang","tag-deepseek","tag-ross-liang","tag-shirley-hu","tag-tencent-music-entertainment"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/posts\/226665","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/users\/46"}],"replies":[{"embeddable":true,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/comments?post=226665"}],"version-history":[{"count":0,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/posts\/226665\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/media\/226683"}],"wp:attachment":[{"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/media?parent=226665"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/categories?post=226665"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/tags?post=226665"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n![](\"https:\/\/www.musicbusinessworldwide.com\/files\/2024\/11\/tme-music-revenues-quarterly-80x44.png\")
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\n1) The era of streaming services competing on price is over, even in China<\/h6>\n
\n2) Scaling up its own content has helped TME improve its gross margins<\/h6>\n
\n3) Live events are a growing part of the music experience<\/h6>\n