HSBC: Tencent Music (TME.US) — Ecosystem synergies partly offset margin pressure; Hold maintained
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HSBC reiterates its Hold rating on Tencent Music Entertainment (TME.US), arguing that ecosystem synergies partially offset pressure on margins, and the note's charts trace the competitive dynamics behind that view. Paywall penetration of top-100 songs by platform shows Kugou declining in H2 2025—possibly as some AI-generated songs gained chart attention—before broadly stabilizing in H1 2026 and recovering slightly in recent months. Audience numbers for large offline concerts moved similarly. Soda Music has become the third-largest music streaming app by monthly active users, overtaking NetEase Cloud Music, and Soda Music and Tomato Music both post higher DAU/MAU ratios than peers. User-time data underscore the shift: TME's streaming apps saw user time fall 12% and 14% year on year in Q2 2026 and July 2026 respectively, while NetEase Cloud Music was flat, then up 2%; Soda Music grew 135% and 121%, and Tomato Music 58% and 32%. Soda Music's average daily usage per user has now surpassed NetEase Cloud Music, and Tomato Music ranks second only to Kuwo in time spent. A forecast summary is included as Figure 1.
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