While much of China’s tech landscape has been mired in relentless price competition—from electric vehicles to e-commerce—one corner of the digital economy is striking a different chord. The country’s online music platforms, led by Tencent Music Entertainment Group and NetEase Cloud Music Inc., have emerged as unlikely success stories, delivering strong returns for investors and sidestepping the volatility plaguing other tech segments.
Since the end of 2023, shares of Tencent Music and NetEase Cloud Music, both listed in Hong Kong, have more than doubled. That outperformance stems largely from their shift away from volume-driven strategies to a focus on monetizing loyal user bases, expanding live events, and adding podcast content.
Monetization Over Mass: A New Growth Tune
Tencent Music, the industry leader with 555 million monthly active users, has seen consistent growth in average revenue per paying user across four straight quarters. This marks a significant departure from the aggressive discounting tactics seen elsewhere in China’s tech world.
Unlike sectors where consumers quickly abandon platforms for marginal savings, music platforms have a stickier user base. “Music is becoming more important to the lives of young people in China,” said Morningstar analyst Ivan Su. “You’re not going to just save one or two yuan to abandon all your playlists.” With basic monthly subscriptions priced around the cost of a coffee, the value proposition for users remains compelling.
Tencent Music's introduction of a Super Premium VIP tier — at about $4/month — offers exclusive content, merchandise, and early access to live events. The company’s base subscription costs roughly $2, making the upgrade accessible for many users. Analysts at Goldman Sachs forecast that premium subscribers could make up 19% of paying users by 2027, up from 12% in 2025, with average revenue per user expected to grow by 10% this year.
A Duopoly with Room to Expand
China’s online music market has consolidated significantly, effectively leaving Tencent Music and NetEase Cloud Music in a duopoly. Global giants like Spotify remain blocked by the country's internet firewall, giving domestic players space to thrive.
Spotify may have a higher paying-user penetration rate (about 40%), but Tencent Music’s 22% paid ratio leaves plenty of room for growth in what remains an underpenetrated market. In this environment, competition is described as “benign” by T. Rowe Price's Agnes Ng, who noted the stability and innovation in monetization methods, from virtual concerts to podcasting.
NetEase Cloud Music, while smaller, has turned heads with its faster-than-expected path to profitability. Its strong stock performance is credited to lean operations and increasing efficiency, even as Tencent Music holds the edge in content depth and reach.
Investor Sentiment and Valuations
Investors are taking notice. Of the 23 analysts tracked by Bloomberg covering Tencent Music, 20 have issued a “Buy” rating, with none recommending a sell. The stock trades at 21 times forward earnings—above its three-year average, yet considerably lower than Spotify’s multiple of nearly 60. NetEase Cloud Music is priced at 24 times earnings.
“Tencent Music’s valuation still looks attractive, particularly when compared to Spotify,” said Kevin Net, head of Asian equities at Financière de l’Echiquier. He points to the firm’s over 70% market share and a business model with ample room for price increases in a relatively untapped market.
Conclusion: Music Hits the Right Notes in China Tech
As China’s broader tech industry continues to navigate regulatory shifts and margin pressure, its online music segment has carved out a different path—one of steady growth, loyal users, and diversified revenue streams. For investors weary of the ongoing price wars in other sectors, the beat coming from Tencent Music and NetEase Cloud offers a welcome rhythm of stability and upside potential.