MBW Reacts is a collection of analytical commentaries from Music Enterprise Worldwide written in response to main current leisure occasions or information tales. Solely MBW+ subscribers have limitless entry to those articles. The under article initially appeared in Tim Ingham’s newest MBW+ Evaluation electronic mail, issued solely to MBW+ subscribers this week.
What’s the world’s greatest subscription streaming market?
For those who guessed the USA – the plain reply – then you definitely’re half-right. And half (very) mistaken.
Uncle Sam nonetheless leads the world in phrases of subscription revenues (at over USD $6 billion yearly).
However in phrases of the quantity of paying subscribers, nowhere can contact China.
China’s prime two music streaming suppliers, Tencent Music Leisure (TME) and NetEase Cloud Music (NCM), counted round 171 million paying customers between them on the shut of 2024.
That’s almost double the amount of subscription streaming accounts in the US on the identical juncture: 100 million (supply: RIAA).
What’s extra, China is rising approach sooner than the USA.
China added over 25 million paying music subs in 2024, in accordance with senior business sources.
The USA? Simply 3.2 million.
China can be quickly gaining international market share of subscription streaming revenues.
In response to IFPI knowledge, China’s annual subscription commerce revenues surpassed USD $1 billion in 2024, up 18.9% YoY.
In doing so, China surpassed Germany to turn out to be the world’s third-largest subscription market.
It now appears to be like inevitable that China will leapfrog the world’s second-largest subscription market, the UK, by 2026.
So what’s ‘The China Paradox’?
The meteoric rise of China as a subscription market is clearly a boon for the world’s greatest music rightsholders.
But, on the identical time, it’s a vital risk.
That’s as a result of Tencent Music and NetEase Cloud Music are more and more competing with music rightsholders to signal and produce China’s greatest hits.
Get your head round these numbers.
In response to monetary filings reviewed by MBW, some 1.4 million artists at the moment are signed on to the ‘impartial’ distribution/label companies arm of both Tencent Music or NetEase Cloud Music.
These indie artists don’t simply launch music by way of TME/NetEase.
The most popular acts additionally obtain a bunch of career-accelerating advantages – together with music-making help and severe advertising and marketing help.
In Tencent Music’s newest quarterly submitting (Q2 2025), the platform highlights its “cross-platform promotions” for a number of key tracks signed to DIY artist companies arm, Tencent Musician.
One of these tracks – Xiang Sisi’s Why Not Wait for the Wind – amassed over 20 million streams and “topped a number of music charts” in Q2.
In addition, TME facilitated over 300 reside efficiency alternatives in the quarter for almost 100 of its directly-signed artists.
In the meantime, NetEase Cloud Music has signed a whopping 819,000 indie artists so far, who’ve launched 4.8 million tracks between them.
A quantity of these NetEase-signed acts have acquired label-like companies together with financing (by way of ‘Cloud Ladder’), plus invites to sync music in advert campaigns for main manufacturers.
NetEase-signed artists additionally obtain A&R sources, whether or not digitally (‘AI Musician’ and ‘Trainee Musician’) or by way of offline songwriting camps.
Since 2021 says NetEase, its 9 songwriting camps have produced 120 tracks which have “collectively garnered greater than 6 billion performs”.
Concurrently, NetEase is making its personal music by way of “in-house studios”. These studios have apparently “produced and popularized a number of hit songs throughout our group and exterior platforms”.
NetEase doesn’t clarify in earnings experiences whether or not these “hit songs” are carried out by human artists (or not). Nevertheless, it just lately confirmed its greatest “in-house” hit of calendar Q2: Liang Nan (两难).
Via the marvel of Google Translate, I’ve tracked it down… and it’s Bieber-esque:
The rising scale of Tencent and NetEase’s self-signed hits is clearly not ultimate for ‘western’ firms seeking to safe international market share. Particularly as China continues its ascent in direction of changing into the world’s second-biggest subscription music market.
In calendar Q1, Warner Music Group introduced underwhelming development in international streaming revenues (+3.2% YoY).
Oddly, this occurred regardless of main US-driven frontline successes at Atlantic Music Group and Warner Data. WMG CEO Robert Kyncl even confirmed the quarter was outlined by “our strongest [US] chart presence in two years”.
What dragged down Warner’s international numbers? The China Paradox was an essential issue.
As WMG informed traders: “Streaming income was [affected] by a lighter launch slate and market share loss in China.”
Sources recommend this market share loss was partly because of WMG’s common underperformance in China – considerably exacerbated by the recognition of TME and NetEase’s personal artists.
Warner is now banking on an govt with sturdy native information and connections to treatment its decline in China.
The appointment of WMG’s new Hong Kong-based APAC chief, Lo Ting-Fai, was confirmed alongside the agency’s much-stronger calendar Q2 outcomes in August.
Robert Kyncl stated that Ting-Fai can be “dedicated to discovering and growing artists with large inventive and industrial impression” whereas “rising our market share throughout the [APAC] area”.
Warner’s wobble in the face of ‘The China Paradox’ will not be distinctive.
Greater-ups at different vital music companies have quietly famous comparable issues in non-public conversations – whereas additionally voicing worries over AI-assisted music being inspired by TME and NetEase on their platforms.
It hasn’t gone unnoticed, for instance, that Tencent Music –partly by way of an integration with copyright-ignoring AI platform DeepSeek – now allows its customers to make AI tracks and add them straight to flagship music service, QQ Music.
The strategic response
So how do massive music rightsholders navigate this new actuality in China?
One response, as seen by WMG’s Lo Ting-Fai appointment, is to acknowledge that success in China requires native experience, relationships, and cultural understanding – not simply catalog licensing.
I think, at some stage, deeper partnerships with Tencent and NetEase may additionally should be struck.
Moderately than treating Chinese language platforms as easy licensees, Western labels could more and more discover joint ventures and co-production offers.
The torchbearer for this mannequin is Common Music Group and Tencent, who’ve been tied collectively since a Tencent-led consortium finalized the acquisition of a 20% stake in UMG 4 years in the past.
Even earlier than that deal was signed, UMG and Tencent Music established JV label operations in China, with the intention of “cultivating, growing, producing, and showcasing extremely gifted home artists”.
Boosted by the market experience that developed from this setup, UMG has seen optimistic industrial outcomes in China of late – even in opposition to the backdrop of TME/NetEase’s rising in-house music roster.
In April, UMG confirmed “double-digit development” in China, whereas praising the conversion of free customers into paid customers by the likes of Tencent.
Again in 2021, as UMG was welcoming Tencent to its cap desk, we noticed a run of different music firms inking extra easy licensing offers with Chinese language platforms.
They included indie rights rep Merlin, saying a contemporary multi-year settlement with NetEase.
Merlin’s then-CEO, Jeremy Sirota, commented that the deal confirmed “impartial music is a actual focus internationally, together with in China”.
He couldn’t have been extra proper.
In the present day, NetEase and Tencent appear extraordinarily centered on impartial music – as long as it’s signed on to them.Music Enterprise Worldwide
