Core Insights - The online music industry is entering a new phase characterized by "emotional economy," with companies adapting their business models to enhance user engagement and monetization opportunities [12] Group 1: Company Performance - Tencent Music reported a total revenue of 84.4 billion yuan for Q2 2025, a year-on-year increase of 17.9%, with adjusted net profit rising by 33.0% to 26.4 billion yuan [1] - In contrast, NetEase Cloud Music's revenue for the first half of 2025 was 38.27 billion yuan, a decline of 6%, but its profit surged by 132.4% to 18.82 billion yuan, indicating a shift towards more profitable "emotional consumption" despite lower overall revenue [1][2] Group 2: Strategic Focus - The online music platforms are increasingly focusing on K-POP, live performances, and fan engagement as key growth drivers for 2025 [2] - Tencent Music has strengthened its content advantage by becoming the second-largest shareholder of SM Entertainment and forming strategic partnerships with K-POP labels [2][3] - NetEase Cloud Music is also expanding its K-POP content library through partnerships with major entertainment companies [3] Group 3: User Engagement and Monetization - Tencent Music has launched the Bubble fan interaction community, offering high-value services such as exclusive merchandise and priority concert ticket purchases, enhancing user engagement [3][4] - NetEase Cloud Music has introduced features like free early listening and ticket purchasing for premium members, tapping into fan demand for exclusive experiences [3][4] - Both companies are leveraging their platforms to create immersive experiences that deepen emotional connections with users, thus driving music consumption [4][6] Group 4: Market Trends - The rise of "emotional economy" is transforming the online music industry, with platforms moving beyond simple music streaming to include artist management, live events, and merchandise sales [6][12] - Tencent Music's successful management of G-DRAGON's concert in Macau has expanded its presence in the international entertainment market, showcasing the potential of fan-driven economic models [7][8] - The number of independent musicians on NetEase Cloud Music has surpassed 819,000, indicating a growing diversity in music content that attracts younger audiences [8] Group 5: Future Outlook - The ongoing evolution of online music platforms reflects a deeper understanding of emotional connections and social interactions, which are crucial for future growth [12] - The balance between commercialization and user experience will be a significant challenge for the industry moving forward, as companies navigate the complexities of the emotional economy [12]

Group 1 - The company achieved operating revenue of 3.83 billion yuan in H1 2025, a year-on-year decrease of 6%, while net profit attributable to shareholders reached 1.89 billion yuan, a significant increase of 132.8% [1] - Adjusted operating profit for H1 2025 was 910 million yuan, reflecting a year-on-year growth of 35%, and adjusted net profit was 1.95 billion yuan, up 121% year-on-year [1] - The gross margin improved to 36.4% in H1 2025, compared to 35% in H1 2024, driven by a large deferred tax credit of 850 million yuan and reduced advertising expenses [1] Group 2 - The company continues to enhance its monetization capabilities centered around music, with online music revenue reaching 2.97 billion yuan in H1 2025, a year-on-year increase of 15.9% [1] - Subscription service revenue amounted to 2.47 billion yuan, up 15.2% year-on-year, attributed to improved user experience and enriched music community content [1] - The number of active users and paying users has shown stable growth, with the ratio of daily active users to monthly active users remaining above 30% [1] Group 3 - The company is expanding its music copyright portfolio by establishing agreements with popular K-Pop labels such as RBW and StarShip, and is focusing on genres like rap, Japanese ACG, and Western music [2] - As of June 2025, the platform has 819,000 registered independent musicians, an increase of 11.9% year-on-year, with approximately 4.8 million tracks uploaded, reflecting a 33.3% year-on-year growth [2] - The company has introduced innovative features in its app, such as the "Shen Guang Player," and is leveraging AI to enhance music creation, which has received positive feedback from users [2]

Investment Rating - The investment rating for NetEase Cloud Music (09899.HK) is "Buy" (maintained) [4][11]. Core Insights - The report highlights that NetEase Cloud Music continues to experience high growth, driven by an expansion of its music library and optimization of its ecosystem [4]. - In H1 2025, the company achieved operating revenue of 3.83 billion yuan (down 6% year-on-year), with a net profit attributable to shareholders of 1.89 billion yuan (up 132.8% year-on-year) [4]. - The adjusted operating profit was 910 million yuan (up 35% year-on-year), and the adjusted net profit was 1.95 billion yuan (up 121% year-on-year) [4]. - The gross margin improved to 36.4% compared to 35% in H1 2024, primarily due to the recognition of deferred tax credits and reduced advertising expenses [4]. Revenue and Profitability - Online music revenue for H1 2025 was 2.97 billion yuan (up 15.9% year-on-year), with subscription service revenue at 2.47 billion yuan (up 15.2% year-on-year) [5]. - The company is focusing on enhancing its core music monetization capabilities, leading to stable growth in monthly active users and paying users [5]. - The report projects net profits for 2025-2027 to be 2.95 billion, 2.45 billion, and 2.95 billion yuan respectively, with corresponding P/E ratios of 18.2, 21.9, and 18.3 times [4]. Music Library and User Experience - The company is continuously expanding its music copyright, having established agreements with popular K-Pop labels and focusing on various music genres [6]. - As of June 2025, the platform had 819,000 registered independent musicians (up 11.9% year-on-year) and approximately 4.8 million uploaded tracks (up 33.3% year-on-year) [6]. - The introduction of innovative features and a streamlined app interface has received positive feedback from users, potentially enhancing user engagement and monetization opportunities [6].

Core Viewpoint - The article discusses the valuation and challenges faced by Ximalaya, China's largest online audio platform, particularly in light of its acquisition by Tencent Music at a significantly reduced price, raising questions about its worth and sustainability in the competitive landscape of online audio and music [4][38]. Group 1: Valuation and Market Position - Ximalaya was sold to Tencent Music for 20.9 billion, which is one-third less than its last financing round valuation of 30 billion [4]. - Despite having a monthly active user base nearing 300 million, Ximalaya's financial struggles are evident, with over 3 billion in losses over five years and multiple failed IPO attempts [4][20]. - The valuation of Ximalaya is compared to other platforms, indicating it is worth approximately seven times Zhihu, eight times Keep, and eleven times Douyu [4]. Group 2: Importance of Copyright - Copyright is identified as the most valuable asset for online audio platforms, with Ximalaya's strategic partnerships and acquisitions in this area being crucial for its market position [5][11]. - Ximalaya has established significant copyright agreements, holding 70% of the market for audiobooks and exclusive content partnerships since 2014 [8][9]. - The platform's revenue structure heavily relies on subscription income, which constitutes over half of its total revenue, primarily driven by its extensive copyright library [10]. Group 3: Financial Performance and Challenges - Ximalaya's subscription revenue growth has drastically slowed from 57.1% in 2021 to 8.5% in 2023, indicating a decline in user willingness to pay [24]. - The average monthly active users include a significant number from third-party platforms, which may not contribute to revenue, highlighting the limitations of monetization in the audio sector [22]. - The platform's operational costs are heavily influenced by revenue sharing and content costs, which together account for over 30% of its income [20]. Group 4: Industry Comparisons - In contrast to Ximalaya, Tencent Music has a more robust subscription model with a higher payment rate, indicating a more mature commercial structure in the online music sector [32][36]. - The online audio market lacks the broad audience and established commercial mechanisms that the online music industry possesses, making it difficult for platforms like Ximalaya to achieve similar financial success [37]. - The article suggests that the online audio industry's ceiling for user engagement and monetization is lower than anticipated, leading to Ximalaya's ongoing financial difficulties [21][22].

Core Viewpoint - The article discusses the valuation of Ximalaya, questioning whether it is worth 20.9 billion yuan after its acquisition by Tencent Music, highlighting a significant drop from its previous valuation of 30 billion yuan during the last funding round [1][2]. Group 1: Valuation and Market Comparison - Ximalaya's valuation of 20.9 billion yuan is comparable to seven times that of Zhihu, eight times that of Keep, and eleven times that of Douyu, indicating a substantial reduction in perceived value [2]. - The company has faced four unsuccessful attempts to go public and has incurred losses exceeding 3 billion yuan over five years, making the discounted sale seem reasonable [2]. Group 2: Importance of Copyright - The article emphasizes that copyright is the most valuable asset for online audio platforms, similar to how Tencent Music cannot afford to lose Jay Chou, Ximalaya cannot afford to lose Guo Degang [5][3]. - Ximalaya has strategically invested in copyright since 2014, partnering with Guo Degang's company, and has secured 70% of the market's audio book adaptation rights through agreements with major copyright holders [9][11]. Group 3: Revenue Structure and Challenges - Ximalaya's revenue structure shows that subscription income contributes over half of its total revenue, with a significant reliance on audio books and traditional storytelling formats [12][13]. - Despite having a large user base, the platform struggles with monetization, as evidenced by a decline in subscription revenue growth from 57.1% in 2021 to 8.5% in 2023 [35]. Group 4: User Engagement and Market Limitations - Ximalaya's average monthly active users reached 300 million, but the user engagement metrics indicate a potential ceiling, with average listening time declining from 144 minutes in 2021 to 130 minutes in 2023 [22][30]. - The platform's user base includes a significant number of IoT and third-party platform users, which limits the monetization potential compared to video platforms [31]. Group 5: Competitive Landscape - The article compares Ximalaya's situation to that of its competitors, noting that platforms like Lizhi, which rely on user-generated content, have lower monetization rates, highlighting Ximalaya's relatively better performance [17][19]. - The online audio market faces challenges due to a lack of a broad audience and a mature commercial mechanism, making it difficult to balance high copyright costs with revenue generation [58]. Group 6: Acquisition Context - Tencent Music's acquisition of Ximalaya reflects a strategic move to consolidate its position in the online audio market, especially after struggling with its own platform, Penguin FM [62][64]. - The acquisition gives Tencent Music control over a significant portion of the online audio market, with Ximalaya holding a market share of 45.52% [64].