Positive Reviews: Deep Cultivation of User Value and Innovation in Business Model, Tencent Music Paves a Differentiated Growth Path
Against the backdrop of the plateauing user growth in the domestic online music market, Tencent Music has delivered an impressive quarterly report through its strategic transformation of “refining users” and “deeply excavating value.” Its core logic has shifted from “scale expansion” to “enhancing the value per user,” not only achieving dual growth in revenue and profit but also exploring a commercialization path that suits the characteristics of the Chinese market, providing important references for the industry.
First of all, the continuous growth of subscription revenue validates the in – depth exploration of users’ willingness to pay. The financial report shows that Tencent Music’s revenue from online music services reached 6.854 billion yuan in the second quarter, accounting for 81.19% of the total revenue. Among them, subscription revenue increased by 17.1% year – on – year to 4.38 billion yuan, and the monthly ARPPU rose from 10.7 yuan to 11.7 yuan. Behind these figures is Tencent Music’s meticulous design of the membership system – by launching a tiered service of Super Members (monthly fee of 40 yuan) and ordinary Green Diamond Members (monthly fee of 20 yuan), it precisely covers user groups with different consumption capabilities. The number of Super Members breaking through 15 million reached a record high, indicating that high – net – worth users have a strong willingness to pay for “exclusive rights” (such as priority ticket – buying for concerts and discounts on digital albums). This model of “tiered payment + differentiated rights” is similar to the SVIP strategy of long – video platforms. In essence, it transforms users from “basic need satisfiers” to “right experience pursuers,” effectively enhancing the long – term value per user.
Secondly, the in – depth operation of the fan economy has become a new growth engine. Through actions such as introducing the private – domain interaction platform Bubble for Korean stars (monthly fee of 28 yuan), investing in SM Entertainment, and hosting offline concerts, Tencent Music tightly binds online music services with fans’ emotional needs. For example, the Bubble platform provides users with opportunities to interact with their idols, which not only satisfies fans’ “sense of participation” but also directly translates into revenue through paid subscriptions. Investing in SM Entertainment strengthens its exclusive advantage in K – pop music content and further consolidates fan stickiness. This closed – loop of “content + social + consumption” not only feeds back the online subscription business (such as the bundled sales of Super Members and Bubble) but also expands the diversity of revenue sources. The mention in the financial report that “artist – related rights have a significant effect on the conversion of Super Members” is a direct manifestation of the synergistic effect between the fan economy and the membership system.
In addition, the optimization of financial performance reflects the health of the business model. In the second quarter, Tencent Music’s gross profit margin increased to 44.4%, and the adjusted net profit increased by 33% year – on – year, far exceeding Spotify’s 31.5% gross profit margin and its net loss state. This is due to its focus on high – margin businesses (such as subscriptions and advertising) and the contraction of low – efficiency businesses (such as social entertainment live – streaming). The proportion of social entertainment revenue, which used to rely on live – streaming rewards, has dropped from a dominant position (once exceeding 50%) to less than 20%, while the high – margin nature of subscription revenue (usually higher than live – streaming commissions) directly drives up the overall profitability. This revenue structure of “light assets + high repurchase” is more sustainable than models relying on traffic advertising or live – streaming.
Negative Reviews: Shrinking User Rights, Cyclical Nature of the Fan Economy, and Risks in Business Expansion, Hidden Growth Concerns Need Attention
Although Tencent Music’s short – term growth data is impressive, the potential risks behind its strategy also deserve attention. From user experience to business sustainability, from the competitive environment to industry regulation, multiple challenges may affect the stability of its long – term development.
Firstly, the shrinking of ordinary members’ rights may damage user trust. To promote the sales of Super Members, Tencent Music has reduced the rights of ordinary Green Diamond Members. For example, some digital albums require additional payment, and there are adjustments to audio quality and download limits. Complaints on social platforms such as “having to open a Super Member after opening a regular membership” reflect users’ resistance to the “rights tiering” strategy. This approach of “first reducing the basic service experience and then using premium memberships to make up” essentially turns users’ “basic needs” into “paid privileges,” which may lead to a decline in users’ trust in the platform. If the incremental rights of Super Members cannot match their price (40 yuan per month, twice that of ordinary members) in the future, users may “vote with their feet” and even turn to other platforms (such as NetEase Cloud Music) for more reasonable services.
Secondly, the cyclical nature of the fan economy may lead to revenue fluctuations. Tencent Music’s growth highly depends on fans’ short – term enthusiasm for idols. For example, the release of new songs and the sale of concert tickets often accompany peaks in the opening of Super Members and the purchase of digital albums. Although the management emphasizes that “the growth of Super Members is not event – driven,” analysts’ doubts are not unfounded. The fan groups of traffic stars, although highly loyal, have obvious phases of enthusiasm (such as an idol’s withdrawal from the circle or negative news). If the platform fails to establish a more stable “non – fan user” payment scenario (such as providing differentiated services for ordinary music lovers), its revenue growth may be pressured by the fluctuations of a single group. In addition, the “additional payment” model of digital albums forms a sharp contrast with overseas platforms (such as Spotify’s free listing), which may limit its imagination space for international expansion.
Thirdly, the heavy – asset risks of offline performances and the acquisition of Himalaya need to be vigilant. Tencent Music’s recent involvement in hosting offline concerts, investing in SM Entertainment, and planning to acquire Himalaya, although strengthening the content ecosystem, also bring higher operating costs and management complexity. Offline performances are heavy – asset businesses, involving venue rental, artist coordination, ticket distribution, etc. The profit margin is limited by fixed costs (such as venue fees) and variable costs (such as artist commissions), which is significantly different from the online subscription model with “marginal cost approaching zero.” If the “feedback effect” of offline businesses (such as enhancing the stickiness of online members) fails to meet expectations, it may drag down the overall profitability. While the acquisition of Himalaya can integrate audio content, the synergy between their user groups and consumption scenarios still needs to be verified. Music users and audiobook users have different payment habits, and there is uncertainty about the operating efficiency after the merger.
Advice for Entrepreneurs: Extract Reusable Experiences from Tencent Music’s “Deep Cultivation of User Value”
Tencent Music’s transformation provides important inspiration for entrepreneurs: In the stock market where user growth has plateaued, “enhancing the value per user” is more strategically significant than “pursuing user scale.” Combining its experiences and potential risks, entrepreneurs can optimize their own strategies in the following directions:
- Tiered Operation, Design a “Upgradable” User Value System: The success of Tencent Music’s Super Members stems from the precise tiering of user needs. Entrepreneurs need to clarify users’ core needs (such as basic functions, emotional experiences, and identity recognition) and design tiered payment rights, avoiding a “one – size – fits – all” membership model. For example, basic members meet “functional needs” (such as ad – free, basic audio quality), and premium members meet “experience needs” (such as exclusive content, exclusive services), allowing users to “voluntarily upgrade” rather than “be forced to pay.”
- Balance Short – Term Profits and Long – Term Trust, Avoid the “Shrinking Rights” Trap: The adjustment of Tencent Music’s ordinary members’ rights has caused user dissatisfaction, reminding entrepreneurs to hold the “basic service bottom line” when designing the payment system. The core rights of basic members (such as the use of core functions) should remain stable, and the incremental rights of premium members need to match the price (such as providing exclusive content, priority services). User trust is the key to long – term retention, and user experience should not be sacrificed for short – term revenue growth.
- Expand “Non – Event – Driven” Revenue Scenarios, Reduce Cyclical Risks: Entrepreneurs relying on the fan economy need to be vigilant about revenue fluctuations and can disperse risks by expanding “daily consumption scenarios.” For example, Tencent Music can explore providing regular paid services such as “music learning” and “scenario playlists” for ordinary users, reducing its dependence on “idol events.” Entrepreneurs should build a diversified revenue structure of “core users (high stickiness) + general users (high frequency).”
- Carefully Evaluate the “Feedback Effect” of Heavy – Asset Businesses: Tencent Music’s offline performances and acquisition actions essentially strengthen the ecological barrier through “heavy investment.” When expanding new businesses, entrepreneurs need to quantitatively evaluate the “input – output” ratio and clarify how heavy – asset businesses can feed back the core business (such as enhancing user stickiness and increasing data assets). If the feedback path is not clear, the light – asset model (such as cooperation and sharing) may be more suitable for the early stage.
- Pay Attention to Changes in User Needs, Dynamically Adjust Strategies: The needs of online music users have extended from “listening to music” to “social + experience” (such as the interactive function of Bubble). Entrepreneurs need to continuously monitor user behavior data (such as usage time, payment preferences) and adjust product strategies in a timely manner. For example, through user surveys to understand “which rights can most drive payment,” avoiding “self – indulgent” rights design.
In conclusion, Tencent Music’s transformation is a typical case of “deep cultivation of user value” in the stock market. Its successful experiences and potential risks provide valuable references for entrepreneurs. In the era of fading traffic dividends, “making each user contribute more value” tests the operation ability of enterprises more than “acquiring more users.” Balancing short – term profits and long – term trust and building diversified revenue scenarios will be the key to entrepreneurs’ continuous growth.
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