DeepSeek Integration into Tencent Music’s Streaming Service
The Rise of DeepSeek and Its Impact on AI and Music Streaming
In January, DeepSeek, a Chinese-based company, made headlines when it launched its AI chatbot, igniting concerns among investors in artificial intelligence (AI). This chatbot showcased that advanced AI can be developed with fewer resources and at a lower cost than previously assumed, leading to significant discussions within the tech sector.
Concerns Among AI Developers
The entry of DeepSeek into the market raised alarms for several AI developers, including OpenAI. Allegations emerged suggesting that DeepSeek may have borrowed elements from established large language models (LLMs). This situation highlighted a unique turn of events, as OpenAI itself is embroiled in lawsuits regarding its alleged use of copyrighted materials for training.
Despite these controversies, DeepSeek has established itself as a key player in the tech landscape. Recently, Tencent Music Entertainment (TME) integrated DeepSeek into its music streaming service, which marks a significant development in both AI and music creation tools.
DeepSeek’s Role in Music Streaming
DeepSeek is now part of TME’s suite of AI-driven music creation tools. According to CEO Ross Liang, users of TME can now rapidly generate songs tailored to specific themes or contexts, thanks to DeepSeek’s capabilities. Additionally, DeepSeek has been embedded into various user interactions such as comment sections, recommendations, and AI-assisted functionalities, enhancing the personalization of music experiences for listeners.
This move mirrors Amazon’s recent partnership with the AI music generation platform, Suno, despite ongoing legal concerns regarding the unauthorized use of copyrighted music for training purposes. Like Amazon Music, TME appears prepared to partner with an AI firm that faces similar scrutiny regarding copyright issues.
TME and Revenue Growth
TME’s announcement of integrating DeepSeek coincided with the company’s impressive financial results for Q4 and the full year of 2024. Notably, TME’s revenue from paid music subscriptions exceeded USD $2 billion, marking an increase of nearly 26% year-on-year. This growth can be attributed to a rise in paying subscribers and improved average revenue per paying user (ARPPU).
The burgeoning popularity of TME’s "Super VIP" subscription, which offers enhanced features and services, contributed to this revenue growth. Although the exact number of subscribers for this premium tier was not disclosed, previous reports indicated that about 10 million subscribers could be included in this category.
Strategic Pricing Adjustments
In the competitive landscape of music streaming, TME’s management addressed the shifting dynamics of subscription pricing. CEO Liang emphasized that ongoing improvements in services would allow the company to consolidate its user base while also increasing ARPPU. TME plans to avoid aggressive pricing strategies that could disrupt long-term sustainability.
Currently, TME’s entry-level subscription costs around RMB 8 (approximately $1.10) per month, while its premium offerings range from RMB 15 to RMB 40. Liang expressed optimism that user demand for the Super VIP tier would remain strong, regardless of price adjustments.
Expanding Content Creation
TME has increasingly focused on scaling up its own content alongside securing licensing agreements with major music rights holders. The company has leveraged AI technology for creating music, revealing that it produced around 1,000 AI-generated tracks, one of which achieved over 100 million streams. TME’s extensive music library now includes 216 million licensed and co-created tracks, significantly outpacing rivals like Spotify.
This strategy of expanding in-house content allows TME to manage its content royalty costs more effectively, resulting in improved gross margins—43.6% in Q4 2024, compared to 38.3% a year earlier.
The Importance of Live Music
During the recent earnings call, the focus on live music emerged as a key component of the overall music experience. TME’s executive chairman noted that streaming users increasingly seek the atmosphere of live performances. Attending live shows not only fosters a deeper connection between fans and artists but also stimulates further use of streaming platforms.
TME has taken significant steps to integrate live events with its streaming services, positioning itself ahead of competitors. The company’s initiative, TME Live, was established to promote virtual concerts and regional tours.
In a vibrant and evolving environment, TME is navigating challenges while harnessing opportunities for growth in both AI technology and the music industry. TME’s proactive strategies in enhancing subscriber experiences and expanding content could play a pivotal role in shaping the future of music streaming.
