English

By Tang Guhan

The Tencent Music Entertainment Group (TME) filed its application for an initial public offering (IPO) with the US Securities and Exchange Commission  (SEC) on Wednesday.

It is likely to become the first online music-streaming company in China to list in the stock market.

Composed of QQ music, Kuwo Music and Kugou Music, the TME has grown into the most significant music playing platform in China in recent years. The QQ music has ranked first concerning its market share across the country, according to data from BigData-Research (BDR).

Leveraged by Tencent's financial support, the TME has bought music copyrights from global music groups such as the Universal Music Group among others.

The IPO was believed to pave the way for enhancing its content copyrights by raising more funds.

The prospectus has not been unveiled yet.

With protection from the Chinese government, music production companies have seen rapid expansions in the past two years. The music streaming platforms, however, have been scrambling for the related copyrights which have pushed the prices higher than before.

Therefore, profitability has become one of the significant challenges facing these music streaming companies in light of the high costs.

Revenues usually come from advertisements and paid subscriptions for music streaming platforms.

The revenue from these two areas can not cover the steep costs as of yet for almost every music platform globally.

Companies could continue to stay with a loss to sustain their market share in the short-term under fierce competition.

Customers have gradually formed paying habits for displaying and downloading music. Moreover, analysts have projected the industry would see growing profitability in the long run.

The TME has been valued at around $30 billion, according to the previous news report, and their valuation was based on the company's market share, room for business expansion and potential future profitability.