Facing competition from ByteDance’s "Soda Music," Tencent Music’s growth relies on "premium memberships and offline concerts."

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In the face of competitive pressure from ByteDance's "Qishui Music," Tencent Music is establishing new growth engines by expanding premium memberships and ramping up its offline concert business.

Citibank pointed out this strategic path in a report released on November 12. Although TME's third-quarter results exceeded expectations, market concerns about competition have put pressure on its share price. Citibank believes that behind this is investors choosing to avoid risk amid controversy that "Qishui Music, under ByteDance, may intensify competition."

Citibank points out, this sell-off is "baseless," and sees it as an excellent buying opportunity.

Dual Drivers: Premium Memberships and the Fandom Economy

The report believes the market reaction in selling TME stock is excessive. Facing low-price competition, TME’s strategy is not a simple price war, but to enhance user value and stickiness through a carefully designed multi-tiered membership system. This system, ranging from free and ad-supported models to standard and then premium memberships, aims to meet the needs of different user groups.

Citibank points out: "Multi-tiered membership services and SVIP memberships will drive growth in paying users and ARPPU (Average Revenue Per Paying User). The drivers include high-quality music content, privileges related to artists’ live concerts, merchandise such as Starlight Cards, and continuously optimized sound quality."

This shows that TME's core strategy is to upsell — retaining and converting high-value users through value-added services rather than through lower prices.

Expanding Offline: Concerts Build an Ecosystem Loop

Offline performances are another strategic focus of TME. The report emphasizes that the company is heavily investing in large-scale tours and proprietary IP events (such as TMEA), which not only bring new revenue streams but, more importantly, deepen cooperation with artists and provide exclusive benefits for paying members, forming an ecosystem loop linking online and offline.

"The concert business not only builds experience, but also establishes deeper partnerships with artists and the ecosystem… Through organizing these concerts and events, TME aims to provide users with more privileges and fandom-based products, which helps drive SVIP subscription growth."

This move expands the pure music streaming service into a more immersive, comprehensive music entertainment platform.

Core Barriers: Content, Experience, and the Tencent Ecosystem

At the level of competition, TME’s management is fully confident. The report cites management’s view that its core advantages lie in a deep music content library, years of user asset management experience, and high penetration on multiple terminals such as PC and in-car services. In addition, synergy with Tencent’s gaming and video IPs is a unique advantage difficult for competitors to replicate. TME is not limited to mobile App coverage; its multi-device reach and ecosystem synergy form a robust moat.

Citibank ultimately reiterates its "Buy" rating for TME, viewing it as transforming into a higher-barrier, socialized music ecosystem platform. While the offline concert business may initially put some pressure on gross margins, in the long term, such strategic investment in fandom economy and the ecosystem will drive the company toward more sustainable growth.

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