Source: Tencent Music earned almost $400M in 2017, expects $764M profit in 2018 and revenues to grow 72% to $3.1B
Sijia Jiang / Reuters : Tweets: @trengriffin , @adamjh , @hughstephens , @jason , and @accuratetrading Tweets: Tren Griffin / @trengriffin : How much less Tencent Music pays in royalties as a percentage of income to music owners than Spotify will be revealed when the S-1 is filed for the IPO. Wholesale transfer pricing and not the way revenue is generated will be the primary difference. http://www.reuters.com/... Adam Herscher / @adamjh : Customers can buy songs or albums on Tencent's apps, or sign up for monthly subscriptions that cost between 8 yuan to 18 yuan, compared with $9.99 at Spotify http://twitter.com/... Hugh Stephens / @hughstephens : “consumers will never pay for music because they can pirate it so easily” http://twitter.com/... @jason : At this point, has the global market for music subscriptions exceeded the revenue of CD sales at its peak? http://twitter.com/... @accuratetrading : Tencent Music, bound for U.S. IPO, often compared to Spotify but is more socially interactive. In 2017 the company made $400 million in earnings, expected to earn $764 million and increase revenue to $3.1 billion in 2018 http://www.reuters.com/... $TCEHY $SPOT
Context & Ripple Effects
The leaked numbers land mid-IPO arc: Tencent Music has been headed to a U.S. listing since it first planned a 2018 IPO at a $10B valuation, saw private deals push that to $25B+ by spring, then confidentially filed for a $2B offering — half the rumored target. Until now, outside investors had only one hard datapoint: Spotify's disclosure of its 9% stake, which valued TME at $12B+.
What changes today is proof of profitability. Nearly $400M earned in 2017 and a projected $764M profit on $3.1B of revenue make TME a rare profitable streaming issuer, and set up the question analysts like Tren Griffin say the S-1 must answer: how much less TME pays rights holders as a percentage of income than Spotify does.
First-order effects
- IPO investors get their first concrete financials before the S-1 drops — a profitable, fast-growing issuer rather than another growth-at-a-loss listing, which strengthens the case for the confidential filing even at the reduced $2B size.
- Spotify's own positioning gets a new benchmark: TME's subscriptions run 8–18 yuan versus Spotify's $9.99, so the same business model is being priced an order of magnitude apart across the two markets.
Second-order effects
- If the S-1 confirms TME pays a materially lower royalty share than Spotify, labels face a transparency problem: one global licensee's cost structure exposed against another's, with Griffin arguing wholesale transfer pricing — not revenue model — is the real difference.
- Spotify, already TME's strategic partner via the equity swap, now competes with a partner that earns more per dollar of revenue; its investor narrative around licensing costs gets a direct comparable it cannot control.
Third-order effects
- Streaming economics are splitting by geography: China monetizes at low subscription prices but apparently much lower payout ratios, pressuring the assumption that label wholesale terms must converge globally.
- Every major streaming IPO now doubles as a forced disclosure event for royalty economics — the S-1 becomes the document that reprices rights holders' negotiating leverage.
The trend: Music streaming is entering its public-markets phase, where IPO disclosures expose regional gaps in royalty costs and pricing that were previously private negotiating territory.