High-Stakes Acquisition
Reports suggest that Tencent Music Entertainment (TME) is in the final stages of negotiations to acquire the Chinese podcasting company Ximalaya Inc. for an estimated 2.4 billion US dollars, according to Bloomberg.
This acquisition would significantly enhance TME’s content offerings beyond music, with plans for a combination of cash and stock options, as Bloomberg reports, citing sources who wish to remain anonymous.
Ximalaya Current shareholders reportedly include the parent company of TME, Tencent Holdings, along with Baidu and Sony Music Entertainment.
According to a filing with the SEC, reviewed by MBW, Sony Music acquired 4.6 million E-2 series preferred shares in Ximalaya for a valuation of 50 million US dollars in 2020.
The sale of Tencent Music could be finalized as soon as the upcoming weeks, according to Bloomberg sources, although discussions are ongoing and no final decisions have been made.
Both Tencent Music and Ximalaya have declined to comment on the potential transaction.
This acquisition aligns with TME’s strategy to diversify its offerings beyond traditional music streaming.
Earlier this week, TME revealed its expanded capabilities on its platforms, including music creation tools that enable users to generate tracks and publish them directly on the QQ Music streaming service.
As per its listing statement submitted last year, Ximalaya reported 303 million monthly active users as of 2023. The podcast platform had initially planned for an IPO in 2021 but postponed those plans.
The acquisition is likely positioning TME to compete more directly with global streaming giants like Spotify, which has aggressively expanded into podcasts and audiobooks in recent years.
Strategic Growth for TME
TME’s interest in acquiring Ximalaya aligns with its broader strategy for diversification and growth.
TME reported strong financial results in 2024, with subscription revenue increasing by 25.9% year-over-year to reach 15.23 billion yuan (2.12 billion US dollars).
This growth was partially attributed to the launch of the “Super VIP” (SVIP) subscription level.
TME’s paid music subscribers reached 121 million in the fourth quarter of 2024, a 13.4% increase compared to the previous year.
TME is also making significant investments in artificial intelligence technology.
As detailed in its recent ESG report, the company has integrated Deepseek’s large language models into its platforms, including an AI Songwriter tool that allows musicians to easily create original AI-generated songs that can be published directly on QQ Music “with one click.”
Expanding Into New Markets
The potential acquisition of Ximalaya by TME follows a trend among music streaming services to expand into podcasts and audiobooks, with Spotify leading the charge.
Spotify has been particularly aggressive in this area, making significant investments and acquiring a variety of podcast networks, studios, and exclusive content over the past few years.
Recently, Spotify also invested heavily in audiobooks.
Last year, the company added 15 hours of audiobook listening to its premium subscription tiers, causing a stir in the music industry.
This change enabled Spotify to advertise its premium subscription levels as “bundles” in the United States, allowing the company to pay a reduced rate of mechanical royalties to publishers and songwriters as per the Phonorecords IV settlement.
Spotify has since signed direct licensing agreements for publishing and recordings in the US and elsewhere with Universal Music Group and Warner Music Group.
