Tencent Music Entertainment is reportedly in discussions to acquire the long-form audio platform Himalaya. These negotiations come after a previous attempt in 2022 and occur at a significantly lower valuation, according to various media reports.

China’s long-form audio sector faces challenges such as changing user habits, weak monetization, and decreasing interest from major tech companies.

Himalaya, the leading platform in this sector, has struggled with multiple failed IPO attempts, significant layoffs, and regulatory scrutiny.

Although it reported its first profitable year in 2024, sources indicate that the gains resulted from cost-cutting rather than sustainable growth.

Tencent previously invested in the audio streaming sector, acquiring Lazy Audio for US$417 million in 2021. However, its efforts to integrate Lazy Audio into its platform have not succeeded, allowing Himalaya to maintain its leading position. In 2023, Tencent closed its “third-tier” audio platform Penguin FM, indicating a retreat from aggressive expansion in this space.

If the acquisition proceeds, analysts suggest Tencent’s focus will be on user acquisition rather than revitalizing the long-form audio segment. Together, Tencent Music’s platforms and Lazy Audio have a user base comparable to Himalaya’s 150 million mobile users. However, long-form audio seems to have decreased in importance for Tencent, which is now prioritizing its gaming and AI initiatives.

Himalaya’s founders reportedly wish to keep the platform independent, but the company faces numerous challenges. Monetization rates remain low, with only 5.3% of its 268 million monthly active users paying for content in 2021. Additionally, failed ventures like unlicensed lending services and declining creator retention have complicated its position.

The broader long-form audio industry in China is also struggling. Competition from new entrants such as ByteDance’s Tomato Audio and Kuaishou’s Pitin has intensified, but user engagement and loyalty remain limited. The sector’s future may hinge on advancements in AI-driven content and personalized experiences, though most platforms have yet to make substantial progress.

🔗 Source: Cailianshe

🧠 Food for thought

1️⃣ China’s audio platforms face monetization challenges despite massive user bases

China’s audio streaming sector highlights the gap between adoption and sustainable revenue models in digital media.

Despite Himalaya claiming 268 million monthly active users across platforms, its pay rate was only 5.3% in 2021, showing how difficult converting users to paying subscribers remains in the audio space 1.

This monetization challenge is particularly stark compared to China’s overall music streaming sector, which generated $1.45 billion in 2023 with 25.9% year-over-year growth, where streaming accounts for nearly 90% of total revenue 1.

The pressure to achieve profitability has forced drastic measures, with Himalaya cutting its workforce by 65% since 2021 and claiming its first profitable year in 2024 primarily through cost-cutting rather than revenue growth.

The experience mirrors Tencent Music’s own challenges, where despite having approximately 600 million monthly active users, subscription music services remain less profitable than its social entertainment features like live streaming, which contributes over 50% of revenue 2.