Core Viewpoint - Tencent Music Entertainment Group (TME) has maintained a Buy rating due to its third quarter results exceeding consensus expectations, and the stock's valuation has become more attractive following an unjustified price decline [1]. Group 1: Company Overview - Tencent Music Entertainment Group is a key player in the Asian equity market, particularly focusing on value investments in Hong Kong-listed stocks [2]. Group 2: Investment Strategy - The investment strategy emphasizes identifying deep value balance sheet bargains and wide moat stocks, targeting companies with significant discrepancies between market price and intrinsic value [1][2].

Product Innovation - Spotify introduces a Premium Platinum plan with lossless access in five markets [1]

Core Insights - Spotify is introducing new premium tiers: Premium Lite, Premium Standard, and Premium Platinum in five markets: India, Indonesia, the UAE, Saudi Arabia, and South Africa [1][5] Pricing and Features - The Premium Lite plan is priced at ₹139 per month ($1.57) and includes ad-free listening and 160kbps audio quality [3] - The Premium Standard plan costs ₹199 per month ($2.25) and offers offline support and 320kbps audio quality [3] - The Premium Platinum plan, priced at ₹299 per month ($3.37), includes access to the Lossless tier, allows account sharing for up to three users, and features Spotify's AI DJ and playlist creation tools [3][4][9] Market Context - The new premium tiers are being launched in markets that have not previously had access to these features, which have been available in North America and Europe [5] - Existing subscribers will retain their current subscriptions, while new subscribers must choose from the new plans, as the old Duo and Family plans are no longer available [6] Price Adjustments - For new subscribers in India, Spotify is increasing subscription prices while reducing some benefits from the previous Premium plan [7] - The Standard individual plan now costs ₹139 ($1.57), matching the new Lite plan, while the Family plan is priced at ₹229 ($2.58) for six members [7][9] Global Pricing Trends - Spotify has made pricing changes in other markets, including a price increase in the U.S. from $9.99 to $11.99 per month over the last two years [9]

Core Viewpoint - The report from Citi indicates that due to the strategic positioning and product differentiation of various platforms, the direct competition risk with ByteDance's Soda Music is low, reaffirming the "outperform" rating for NetEase Cloud Music (09899) and Tencent Music-SW (01698) [1] Group 1 - NetEase Cloud Music is currently trading at a 2026 adjusted forecast P/E ratio of 17 times [1] - The company has a subscription model that is resilient to economic cycles, providing robust long-term profit potential through multiple cost leverage [1] - The target price for NetEase Cloud Music is set at HKD 310.5 [1]

Summary of Spotify Technology Conference Call (November 13, 2025) Company Overview - **Company**: Spotify Technology (NYSE: SPOT) - **Event**: Conference Call - **Date**: November 13, 2025 Key Points Industry and Company Position - Spotify is positioned as a leading global tech company focused on music, podcasts, and audiobooks, emphasizing its technological foundation and global reach [5][6][8] - The company aims to achieve over 1 billion monthly active users (MAU) and gross margins in the 35-40% range, with significant progress noted since 2022 [8][10] Financial Performance and Growth - Spotify has increased its user base by nearly 300 million and added 100 million subscribers since 2022, demonstrating strong growth [9][10] - The company reported over 20% growth compared to the previous year, with expectations for continued profitability and growth into 2025 [10] - Gross margins are expected to grow, with typical seasonal declines between Q4 and Q1 due to advertising revenue fluctuations [49][50] Leadership Changes - Daniel Ek transitioned from CEO to Executive Chairman, with Alex and Gustaf stepping into co-CEO roles. This change is seen as a continuation of existing leadership dynamics rather than a significant shift [11][12][15] Engagement and User Behavior - Engagement metrics, including time spent on the platform, are critical indicators of value creation for users. Increased engagement is noted across music, audiobooks, and podcasts [18][20] - The introduction of new verticals (audiobooks and podcasts) has led to increased user engagement without cannibalizing existing music consumption [20][21] Pricing Strategy and Churn Management - Spotify has implemented price increases across various markets without significant changes in churn rates, indicating effective management of the value-to-price ratio [26][27] - The company emphasizes maintaining a strong value-to-price gap to minimize churn and enhance customer retention [27][29] Product Differentiation and Competitive Position - Spotify holds approximately 60% of the global streaming market share, with a focus on innovation and engagement to maintain its competitive edge [61][62] - The company aims to attract creators to its platform, enhancing its content offerings and user experience [62][63] Technological Advancements - Spotify is leveraging AI to enhance personalization and user experience, including partnerships with OpenAI for improved data utilization [64][66][68] - The company has successfully integrated AI to reduce costs and improve product offerings, such as the AI DJ feature [65][68] Advertising Business - The advertising segment is undergoing a transition towards programmatic advertising, with expectations for significant growth by 2026 [77][78] - Despite current low single-digit growth in advertising, the company is optimistic about future performance as it shifts strategies [79] Capital Allocation and Future Outlook - Spotify has €9.1 billion in gross liquidity and plans to prioritize organic growth while considering strategic acquisitions [81][82] - The company is focused on returning value to shareholders through stock buybacks and maintaining a strong balance sheet [83][84] - The management expresses confidence in achieving substantial growth, with only 3% of the global population currently paying for Spotify, indicating significant market potential [88][89] Conclusion - Spotify's management is optimistic about future growth opportunities, profitability, and market expansion, with a strong emphasis on innovation, user engagement, and strategic capital allocation [85][86][89]

Summary of Tencent Music Entertainment Group (TME) 3Q25 Earnings Review Company Overview - **Company**: Tencent Music Entertainment Group (TME) - **Market Cap**: $32.3 billion - **Enterprise Value**: $27.2 billion - **Current Price**: $20.75 - **12-Month Price Target**: $25.20 (Upside: 21.4%) [1][2] Key Financial Highlights - **3Q25 Results**: TME reported a small beat on revenue and profit, but shares declined by approximately 8-9% during trading [2] - **Revenue Forecasts**: - 2025E Revenue: Rmb 32,697.5 million (up from Rmb 32,309.7 million) [4] - 2026E Revenue: Rmb 36,937.3 million (up from Rmb 36,367.8 million) [4] - **Net Profit Forecasts**: - 2025E Net Profit: Rmb 9,645.0 million (up from Rmb 9,645.0 million) [4] - 2026E Net Profit: Rmb 10,747.4 million (down from Rmb 11,000 million) [4] Core Insights and Arguments - **Market Concerns**: - Increased competition among music streaming platforms (e.g., Soda Music) may impact TME's subscriber growth and pricing strategy [2] - Volatility in the live performance business could weigh on group margin expansion in 2026 [2] - **Growth Narrative**: Despite concerns, TME's growth narrative remains intact due to its unique content and value-added services for over 500 million monthly active users (MAUs) [2] - **Revenue Diversification**: TME is expected to achieve solid Average Revenue Per User (ARPU) growth through SVIP penetration and additional service offerings, alongside expansion into live entertainment and fan economy businesses [2] Future Projections - **2026E Expectations**: - Group revenue growth of 16%+ [3] - Online music revenue growth of 17% year-over-year [17] - Gross Profit (GP) of Rmb 16.2 billion with a Gross Profit Margin (GPM) of 43.9% [17] - Non-GAAP Net Profit (NP) of Rmb 10.7 billion with a Net Profit Margin (NPM) of 29.1% [17] Risks and Challenges - **Key Risks**: - Potential derailment from the beat-and-raise cycle [18] - Higher-than-expected content pricing from label companies [18] - Inability to maintain market dominance amid increasing competition [18] - Slower-than-expected growth in non-subscription online music services [18] - Decline in social entertainment business [18] Additional Insights - **ARPU Forecast**: Expected to reach Rmb 19.4 for SVIP and Rmb 10.7 for basic members by 2025E [28] - **Subscriber Growth**: Anticipated growth in quarterly net additions of music subscribers, albeit at a slower pace [30] - **SVIP Membership**: Expected to reach 25.9 million by 2027E, with penetration increasing from 13% to 19% of total paying members [32] Conclusion - TME is positioned to leverage its unique offerings and user base to drive future growth, despite facing competitive pressures and market volatility. The company maintains a "Buy" rating with a revised price target reflecting its growth potential and market leadership in the music streaming industry [3][4]

Market Landscape Evolution - The Chinese online music streaming market has shifted from a "duopoly" dominated by Tencent Music and NetEase Cloud Music to a "tripartite" competition with the entry of ByteDance's Soda Music [2][3] - Tencent Music held a market share of 76.1% in 2016-2017, while NetEase Cloud Music had about 15.6%. This dominance continued until the emergence of Soda Music [2][3] - As of Q1 2024, Tencent Music and NetEase Cloud Music maintained a combined market share of over 90%, with Tencent Music's monthly active users (MAU) at approximately 202 million and NetEase Cloud Music at around 185 million [2][3] Business Model Comparison - The overall payment rate for online music in China has increased from less than 5% five years ago to about 15% by the end of 2023, indicating a growing trend in user willingness to pay [5] - Tencent Music reported a decline in monthly active users to 551 million, down 4.3% year-on-year, but an increase in paid users to 12.57 million, reflecting a 5.6% growth [6][7] - NetEase Cloud Music's subscription revenue grew by 15.2% year-on-year, reaching 2.47 billion yuan in the first half of 2025, with a paid user conversion rate of 27% [7][9] Platform Strategies - Tencent Music leverages its extensive entertainment ecosystem, focusing on IP creation and social engagement, while NetEase Cloud Music emphasizes community and original content [13][14] - Soda Music employs an algorithm-driven model similar to Spotify, focusing on user acquisition through free offerings and a seamless integration with Douyin (TikTok) for content discovery [15][26] Copyright Disputes - The end of the exclusive copyright era in 2021 allowed for a more open competition among platforms, reducing the need for high-cost exclusive agreements [20][21] - The transition to a post-exclusive era has led to a more level playing field, with platforms focusing on user experience and operational efficiency rather than solely on acquiring exclusive rights [25][22] Future Outlook - The market may stabilize into a "three-way competition" with Tencent Music, NetEase Cloud Music, and Soda Music each solidifying their respective niches [33] - The potential for a "fourth player" to emerge in the market appears low, given the historical challenges faced by new entrants and the dominance of existing players [34]

Core Insights - Spotify is set to introduce music videos in the U.S. after a successful beta rollout in 98 markets, positioning itself as a competitor to YouTube in the audiovisual space [1] - A new partnership with the National Music Publishers' Association (NMPA) will allow independent music publishers to enter direct license agreements for expanded audiovisual rights, leading to higher royalty payouts for songwriters [2][3] Group 1: Spotify's New Features - The introduction of music videos will be available for premium subscribers in the U.S. in the coming weeks [1] - This move aims to enhance the connection between artists and fans through new video features [2] Group 2: Partnership with NMPA - The NMPA has launched an "Opt-In Portal" for its members to facilitate direct licensing agreements with Spotify, which will be open for eligible publishers from November 11 to December 19 [3] - The partnership is expected to create new revenue streams for independent publishers and songwriters, reflecting the increasing value of songs in the digital landscape [2][3]

Market Overview - Pre-market futures are up, indicating a positive market sentiment following a mixed session where the Dow reached a record high while the Nasdaq and S&P 500 experienced pullbacks [1] - Current index performance shows the Dow up +103 points, S&P 500 up +22, Nasdaq up +151, and Russell 2000 up +7 points [1] Economic Indicators - The government shutdown is ongoing, now on Day 43, with a House vote scheduled to discuss re-opening [2] - Upcoming economic reports such as CPI, PPI, Weekly Jobless Claims, and Retail Sales are still possible, which could provide insights into the economy ahead of the holiday shopping season [2] Inflation Insights - Year-over-year Consumer Price Inflation is currently at +3%, up from +2.3% in April, with expectations to reach +3.1% for October [3] - This increase in inflation is significant for the Federal Reserve's considerations regarding future interest-rate cuts [4] Company Earnings Reports - Tencent Music Entertainment Group (TME) reported Q3 earnings of 22 cents per share, beating expectations, with revenues of $1.19 billion, a +20.6% year-over-year increase; however, the stock is down -2% [5] - On Holding (ONON) exceeded earnings expectations with 50 cents per share versus the anticipated 34 cents, and revenues of $992.9 million, leading to a +23% increase in shares [6] - McGraw-Hill (MH) reported an earnings surprise of +300%, with earnings of $1.40 per share compared to the expected $0.35, and revenues of $669.2 million, resulting in a +14% increase in shares [7]

Financial Data and Key Metrics Changes - In Q3 2025, total revenues grew 21% year-on-year to RMB 8.5 billion, marking the highest revenue growth since Q1 2021 [21] - Online music revenues increased by 27% year-on-year to RMB 7 billion [21] - Music subscription revenues surged 70% year-on-year to RMB 4.5 billion, driven by growth in monthly ARPPU and subscriber base [22] - Monthly ARPPU reached RMB 11.9, up from RMB 10.8 in the same period last year [22] - Net profit increased by 29% to RMB 2.2 billion, with non-IFRS net profit rising by 28% to RMB 2.5 billion [25] Business Line Data and Key Metrics Changes - The subscription business saw significant growth, with SVIP membership driving higher ARPPU and user engagement [22][24] - Advertising revenue continued to grow, supported by diversified product offerings and innovative ad formats [23] - Offline performances and artist-related merchandise sales experienced triple-digit year-on-year revenue growth [23] Market Data and Key Metrics Changes - The company successfully hosted multiple large-scale international concerts, including a tour for G-Dragon, attracting over 150,000 attendees [7][8] - The TMEA Concerts featured 35 artists and drew more than 10,000 attendees, highlighting the company's strong market presence [8] Company Strategy and Development Direction - The company aims to broaden its music service and unlock new growth opportunities through innovations in content, services, and live experiences [4] - A dual-engine strategy focusing on platform and content integration is emphasized to enhance user experience and drive growth [57] - The company plans to continue leveraging partnerships with artists and IP creators to enrich its content offerings [10][55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering strong results in Q4 2025 and 2026, driven by a holistic growth strategy and robust user engagement [30][32] - The competitive landscape remains challenging, but the company believes its extensive music library and user management will maintain its leadership position [41][42] - Future growth is expected to come from both subscription and non-subscription services, with a focus on enhancing user experience and content quality [32][75] Other Important Information - The company has won the Music Garden Space Public Welfare Program for seven consecutive years, supporting music education in rural areas [11] - As of September 13, 2025, cash equivalents and short-term investments totaled RMB 36.1 billion, reflecting a solid financial position [26] Q&A Session Summary Question: Outlook for Q4 2025 and 2026 - Management is optimistic about continued growth in music subscriptions and non-subscription services, with a focus on user retention and engagement [30] Question: Industry competition and strategy - Management acknowledged competition from peers but emphasized the company's strong content library and user experience as competitive advantages [41][42] Question: 2026 concert pipeline and revenue modeling - The company plans to organize more top artist tours and leverage proprietary IP to enhance concert experiences and revenue [66] Question: Subscription service growth drivers - Future growth will focus on high-quality content, functional privileges, and a multi-pronged membership strategy to drive user acquisition [75]