Tencent Music Entertainment Group (TME) is reportedly in advanced negotiations to acquire Chinese podcasting company Ximalaya Inc. in a deal valued at USD $2.4 billion, according to Bloomberg.
The acquisition, which would significantly expand TME’s audio content offerings beyond music, is expected to involve a combination of cash and shares, Bloomberg reports, citing people familiar with the matter who asked not to be named.
Ximalaya’s current shareholders reportedly include TME’s majority-parent company, Tencent Holdings, plus Baidu and Sony Music Entertainment.
According to an SEC filing reviewed by MBW, Sony Music acquired 4.6 million Series E-2 preferred shares in Ximalaya for a consideration of USD $50 million in 2020.
A sale to Tencent Music could potentially be finalized “as soon as the coming weeks,” according to Bloomberg’s sources, though discussions are ongoing and no final decisions have been made.
Both Tencent Music and Ximalaya have declined to comment on the potential deal.
The mooted acquisition comes as TME, China’s largest music streaming company, continues to diversify its business beyond traditional music streaming.
Earlier this week, TME revealed in its ESG report that it has significantly expanded its AI capabilities across its platforms, including music creation tools that allow users to generate tracks and publish them directly to its QQ Music streaming service.
According to a listing application filed last year, Ximalaya boasted 303 million monthly active users as of 2023. The podcast platform had previously filed for an IPO in 2021 but delayed those plans.
The acquisition would potentially position TME to more directly compete with global streaming giants like Spotify, which has been aggressively expanding beyond music into podcasts and audiobooks in recent years.
TME’s expanding business
TME’s reported interest in Ximalaya aligns with its broader strategy of diversification and growth.
TME reported strong financial results in 2024, with subscription revenue increasing 25.9% year-over-year to RMB 15.23 billion (USD $2.12 billion).
This growth was partially attributed to TME’s premium “Super VIP” (SVIP) subscription tier.
TME’s paying music subscribers reached 121 million in Q4 2024, representing a 13.4% increase from the previous year.
TME has also been making significant investments in AI technology.
As detailed in its recent ESG report, the company has integrated DeepSeek’s large language models across its platforms, including its AI Songwriter tool, which allows musicians to generate original AI songs that can be published directly to QQ Music “with just one click.”
Podcasts and audiobooks: The new streaming battleground
The potential acquisition of Ximalaya by TME would follow a trend among music streaming services to expand into podcasts and audiobooks, with Spotify leading the charge.
Spotify has been particularly aggressive in its push into podcasting, having made substantial investments acquiring podcast networks, studios, and exclusive content deals over the past few years
More recently, Spotify has made significant investments in audiobooks.
Last year the company added 15 hours of monthly audiobook listening to its Premium subscription tiers, a move that sparked controversy in the music industry.
The change resulted in Spotify reclassifying its Premium subscription tiers as “bundles” in the United States which allowed the company to pay a lower mechanical royalty rate to publishers and songwriters in the US under the Phonorecords IV settlement.
Spotify has since inked direct licensing agreements for publishing and records – in the US and elsewhere – with Universal Music Group and Warner Music Group.Music Business Worldwide
