This report does not constitute a rating action. We expect Tencent Music?s growth in paid users for music subscription to decelerate to about four million annually over the next one to two years due to increased competition, particularly from Douyin?s music apps. That said, Tencent Music's robust content library and diverse music experiences for premium users is likely to drive increasing adoption of higher-tier membership programs, resulting in a stronger average revenue per paying user. Tencent Music's lower-margin non-subscription music services, such as offline performances and merchandise sales, are likely to outgrow music subscription revenue. Furthermore, margin benefits from the growing revenues and partially fixed music content costs will diminish as music subscription growth moderates. We now project the company's
