中国在线音乐：深挖新动力、利润率和竞争

EquitiesInternet Software & Services Diving into new drivers, margins, and competition China ◆Initiatives like concerts, artist merchandise, and bubble thatconnects fans to artists, offer good but not huge upside Charlene Liu*Head of Internet and Gaming Research, Asia PacificThe Hongkong and Shanghai Banking Corporation Limited,Singapore Branchcharlene.r.liu@hsbc.com.sg+65 6658 0615 ◆Tencent Music (Hold) is still the leader and its margins cangrow but likely to be capped at 50%+; key risk is regulations Christina Chen*, CFAAnalyst, Internet ResearchThe Hongkong and Shanghai Banking Corporation Limitedchristina.z.chen@hsbc.com.hk+852 2822 2912 ◆In an accompanying report we initiate on NetEase Music atHold; TME could outperform given its stronger growth prospects Jessie Lu*, CFAAnalyst, Internet and Gaming ResearchThe Hongkong and Shanghai Banking Corporation Limitedjessie.x.lu@hsbc.com.hk+852 2996 6570 As growth in China’s online music sector slows and a strong new player (Soda Music)enters the market, we take a fresh look at the sector and all the various new initiatives toattract and keep listeners. In particular, we assess how far gross profit margins (GPM)can rise and present a blue-sky scenario for theindustry’snew initiatives. * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and isnot registered/ qualified pursuant to FINRA regulations The dominant player remains very much Tencent Music Entertainment (TME) and whosestock is up 110% this year (vs. +43% for KWEB). We admit we missed the rally as wewere too cautious on 1) its remarkable margin expansion helped by music revenuegrowth from an uptick in premium subscriptions (SVIP); and 2) revenue growth frominitiatives like SVIP and offerings for fans like bubble, concerts and merchandise. TME’s new initiatives:OnSVIP, our blue-sky scenarioshows TME’ssubscriptionrevenue has the potential to grow to RMB32bn in 2030e (13% 2024-30e CAGR), vs our2027 estimate of RMB23bn (15% 2024-2027e CAGR). And while itsfandom-relatedbusinessesare good at bringing in incremental growth, we have already factored theminto our numbers except for bubble, which is still at an early stage. While not included inour 2027 estimates, bubble could translate into 3-4% additional topline and bottom line. How far can TME’s margins grow?TME has delivered very impressive marginimprovement in the last few years, leading the competition, and we think it can go higher.Our analysis shows its GPM is likely to be capped at c50%+ though. Competition and risks: Despite user growth in online music plateauing and Soda Musicentering the market, we do not see more intense direct competition as the major musicplatforms each have their own growth strategy and focus areas.TMEis shifting its focusfrom user growth to boosting monetisation and is looking to find new growth enginesbeyond music streaming.NetEase Musicis adopting a more prudent pricing strategy asit prioritises user growth. AndSoda Music(not listed) has become the third-largest musicapp in daily active users (DAU). While its per user time spent and monetisation is far fromoptimal, we think Soda Music has the potential to grow into a bigger threat as it boosts itsservices, builds up its music library, and improves its paying ratio. We think key downsiderisks lie in regulatory risks around fandom-related opportunities, key upside risk isexpanded online music user TAM by tapping into long-form audio contents. NetEase Music:In an accompanying report published today (A fairly priced goodgrowth story, 29 September 2025), we initiate on NetEase Cloud Music with a Holdrating, as while we are constructive on its near and long-term growth outlook, wethink it is fairly priced after its share price has risen 140% so far this year. Bulls on the march The 21stedition of the EM Sentiment Survey Click to view Issuer of report:The Hongkong and ShanghaiBanking Corporation Limited, Singapore Branch Disclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Investment Research at:https://www.research.hsbc.com Lots of changes for the online music industry Over the past few years, there have been four key changes to the online music industry. One,there was the end of exclusive music copyright agreements in 2021, which led to lower musiccontent costs for all players. Two, rectification of the livestreaming business from 2023,prompting online music players to focus on growing their music business. Three, competitionfrom other entertainment formats such as short videos, which means overall monthly activeonline music users (MAU)haven’t grown muchsince 2022 (Ex. 2). Finally, the emergence of anew and stronger player, Soda Music, launched by ByteDance in 2022, which rocked theindustry as it quickly grew its user base. While TME maintained its dominance during thisperiod, Soda Music’sdaily active users