Tencent Music Entertainment is placing bets on both sides of the audio equation, simultaneously pushing the frontiers of AI-driven music creation while reportedly lining up a multi-billion dollar deal to acquire a traditional podcasting giant. The move highlights a complex strategy: integrating vast, human-generated content libraries with increasingly sophisticated automated tools.
Deal on the table: China's largest music streaming company is reportedly in advanced talks to acquire podcast platform Ximalaya Inc. in a deal valued at roughly $2.4 billion. The potential acquisition, expected to involve a mix of cash and stock, could reportedly be finalized in the coming weeks, though neither Tencent Music (TME) nor Ximalaya has officially commented.
Building the AI engine: The acquisition talks surfaced just days after TME detailed significant advancements in its artificial intelligence capabilities in its 2024 ESG report. TME has integrated the DeepSeek large language model into its platforms, powering tools like an AI Songwriter that allows users to generate original songs—complete with lyrics and vocals—and publish them directly to TME's QQ Music service "with just one click." The company also offers AI tools for vocal tone generation (AI Tone Magician) and audio track separation, providing its base of over 580,000 independent artists on the Tencent Musician Platform with sophisticated creation and production aids.
Acquiring reach, and risk: A successful Ximalaya deal would bring a massive audience under TME's umbrella; Ximalaya boasted 303 million monthly active users as of 2023. However, Ximalaya represents a significant gamble. TechInAsia notes that the platform has struggled with profitability, achieving its first reported profit in 2024 primarily through aggressive cost-cutting, including significant layoffs since 2021.
TME's previous attempts at a Hong Kong IPO failed, and converting its vast free user base into paying subscribers remains a core challenge, with a reported pay rate of just 5.3% in 2021. The company has faced hurdles integrating past audio acquisitions, notably the $415 million purchase of Lazy Audio in 2021.
Content meets code: The potential acquisition raises questions about how TME plans to fuse Ximalaya's traditional, human-centric podcast and audiobook content with its cutting-edge AI initiatives. The deal could provide TME with a huge trove of audio data to potentially train its AI models, while also offering a massive user base to which it can market its existing music services and potentially newer AI-powered features.
TME has shown success in boosting its own music subscription revenue, reporting a nearly 26% year-over-year increase in 2024, driven by subscriber growth (reaching 121 million) and premium tiers, according to Music Business Worldwide. Applying that monetization engine to Ximalaya's audience could be the core strategy, blending established content reach with TME's platform expertise.
Consolidation play: The move also fits a broader pattern of tech consolidation in China, occurring amid a landscape shaped by previous regulatory scrutiny that impacted valuations across the sector. Acquiring an established player like Ximalaya—whose backers already include TME parent Tencent Holdings, Baidu, and Sony Music Entertainment—represents a potentially lower-risk path to user growth compared to pure organic expansion. Sony Music, which invested $50 million in Ximalaya in 2020 according to SEC filings, stands to gain significantly if the $2.4 billion deal proceeds.