The Strategist

The world's largest music service goes to IPO

10/03/2018 - 15:49

Tencent Music, the largest music streaming service with about 800 million subscribers, is planning an IPO. The Chinese company has already applied for an IPO in the US, it plans to raise $ 1 billion. Thus, its value can be estimated at about $ 25 billion.

On Tuesday, October 2, Chinese music streaming service Tencent Music Entertainment submitted an application to the US Securities and Exchange Commission for an IPO. No exchange is specified, and the date of the IPO has not been announced yet. During the IPO, the company plans to raise $ 1 billion. Tencent Music Entertainment is owned by the Chinese Internet giant Tencent. The service was created in 2016 after purchase of China Music Corp. and combining it with existing Tencent streaming service. In fact, Tencent Music is not a single platform, but combines four separate music applications - Q Music, Kugou Music, Kuwo Music and WeSing online karaoke streaming services.

The number of active monthly listeners of Tencent Music is about 800 million people, and this is the largest streaming music service not only in China, but in the whole world. Tencent Music’s principle is different from Western streaming services - the bulk of its income comes not from paid subscriptions, but from social entertainment services, such as online karaoke, as well as from advertising and selling songs. So, in June, the number of monthly Tencent Music users reached 644 million people, of which 23.3 million were paid subscribers. For example, the ratio of the Swedish streaming service Spotify was 83 million paid subscribers to 180 million monthly users in general.

The fact that the Chinese service is planning an IPO was first revealed in the last year. In December 2017, the service exchanged shares with Spotify - Spotify owns 9.1% of the shares of Tencent Music, and that in turn - 7.5% of Spotify. Spotify itself held an IPO earlier this year.

Tencent Music was valued at about $ 12 billion at the end of 2017.

During an IPO, value of the company can be estimated from $ 25 billion to $ 30 billion, which, according to the research company Dealogic, will make this placement one of the largest technological IPOs of the last time. In its application, Tencent Music reports that its revenue in 2017 more than doubled to $ 1.7 billion, and its profit was $ 199 million compared to $ 2 million in 2016. The company's revenues continue to grow - in the first half of 2018 alone, its revenues amounted to $ 1.3 billion with a profit of $ 263 million (that is, more than in the entire previous year). 


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