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The IPO could be #4 largest US-listed tech IPO by valuation
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Tencent Music used to command 90% of China’s copyrighted music
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Chinese music-streaming market amounts to US$645 million in 2018
Tencent Music, the music-streaming unit of China’s most valuable company, has invited investment banks to pitch next week for its $4 billion U.S. IPO and is fetching a valuation of $25 billion, Thomson Reuters publication IFR reports earlier this week citing people familiar with the matter.
The IPO could be #4 largest US-listed tech IPO by valuation, according to a WSJ report citing market intelligence firm Dealogic. In December last year, the company was valued at around $12.5 billion in a share swap deal with its Swedish counterpart Spotify.
In January 2018, Tencent Music raised tens of millions of dollars from a strategic investor Hundreds Capital.
The operator of China’s three most popular music apps
Tencent Music was incarnated in July 2016, when Tencent merged its music division QQ Music with rival China Music Corp (CMC). Kugo and Kuwo, formally owned by CMC, together with QQ Music, are the three most popular music-streaming apps in China by MAU, according to Chinese market research firm QuestMobile.
The company claimed in September 2017 that it has 700 million monthly active users across its PC and mobile platforms, while its Swedish counterpart Spotify reports 170 million monthly active users in Q1 2018.
The popularity of Tencent Music among users can be largely attributed to its edge in music licensing. The company used to command 90% of China’s copyrighted music according to a report by iResearch in 2016. Even after a recent call from the government on copyright sharing between platforms, it still holds exclusive royalties of some of the most popular songs, including pop star Jay Chou’s.
While its global counterparts are struggling to prove that music-streaming has a tangible business model, as Spotify incurred a net loss of 169 million euros (around US$ 202.6 million) in the first quarter of 2018, Tencent Music has turned a profit in the second half of 2016, according to a Chinese self-media. The company generated a net profit of RMB 1.6 billion (around US$ 252.2 million) in 2017 and is expected to double that number this year, added the same self-media.
Market & Competition
Tencent Music’s IPO may come against the backdrop of the booming Chinese music-streaming market, which amounts to US$645 million in 2018 and is expected to grow to $1190 million by 2022 in part thanks to the governmental clampdown on pirated music. But still, the Chinese market is dwarfed by the American market which is worth $6.4 billion, according to the statistics portal Statista.
In China, Tencent Music is competing with local rivals both backed by tech giants, namely NetEase Cloud Music and Alibaba‘s subsidiary Xiami, which are respectively #4 and #5 most popular music apps by MAU in December 2017, as stated in a report by China’s market research firm QuestMobile.
NetEase Cloud Music, launched in 2o14, 8 years later than QQ Music, has been gaining ground since its inception and its MAU reached 66.78 million in December last year. Tencent has been trying to hamper the growth of NetEase Cloud Music, suing the latter for copyright infringement in 2014, and in April this year, NetEase Cloud Music took offline songs of Jay Chou, as it failed to extend a royalty-sharing contract with Tencent.