Tencent Music has announced its acquisition of the audio platform Ximalaya for USD 1.26 billion in cash and related equity, marking the largest merger and acquisition deal in China's online audio industry to date. After the deal is completed, Ximalaya will become a wholly-owned subsidiary of Tencent Music, continuing to operate under its own brand independently. This is not only the largest merger and acquisition case in China's online audio industry to date, but also marks Tencent Music's official completion of its strategic positioning in long audio.
For Tencent Music, this acquisition is aimed at rapidly expanding its content portfolio to include podcasts, audiobooks, and other audio segments, addressing structural weaknesses in long-form audio content, and enhancing its content matrix to improve user retention and paid conversion rates. For Ximalaya, this acquisition represents a much-needed capital injection at a time when the company has faced challenges like failed IPOs, tighter financing channels, and halved valuations. In this context, selling equity has become a necessary reality for Ximalaya.
In fact, Ximalaya has long been a leader in China's audio-podcast industry, with a massive content library and a large user base. In 2023, its monthly active users across all scenarios reached 303 million, ranking it first in the industry, with a primary user base in young people from first- and second-tier cities. According to data released by the platform, in 2023, the number of commercially valuable podcasts on the platform exceeded 240,000, with over 5.19 million new podcast episodes released that year. Additionally, the company reported its first-ever annual profit, with an adjusted net profit of RMB 224 million.
However, the reasons behind this profitability have sparked market doubts. Data shows that Ximalaya’s profit is more a result of cost-cutting and expense reduction rather than revenue growth. In recent years, the company has continued to slash costs and reduce expenditures, with the number of employees decreasing by nearly 40% compared to 2021, while marketing and R&D expenses have also decreased. At the same time, its revenue growth has significantly slowed, from 43.7% in 2021 to just 1.7% in 2023, essentially stagnating. The company’s revenue structure shows that membership subscriptions and advertising account for about 75% of its total revenue, but user growth has plateaued, and the conversion rate has declined. By the end of 2023, the platform had approximately 15.8 million monthly active paid users, with a payment rate of 11.9%, which is on a downward trend. Therefore, while Ximalaya is profitable, its growth potential has been exhausted.
It is clear that Ximalaya's decision to be acquired by Tencent Music was made out of necessity. Behind this decision lies a broader commercialization dilemma in the entire audio-podcast industry.
The audio industry, centered around audio content, encompasses creation, production, distribution, and consumption. Among these, podcasts are an important part. Podcasts originated in the 2000s in the United States; the word itself is a portmanteau of "iPod" and "broadcast", emphasizing portability and on-demand listening. Podcasts are typically produced by individuals or teams, covering diverse topics like news, interviews, education, true crime, and entertainment. Users can listen to podcasts on platforms like Spotify, Apple Podcasts, and Ximalaya. Unlike traditional radio, podcasts are highly flexible and interactive, allowing users to choose content anytime and anywhere. Creators can also directly engage with their audience. The core of the podcast industry is the “audio economy”, capitalizing on human auditory habits to meet content needs during activities like commuting, exercising, or doing housework.
While China’s podcast industry is struggling with a growth bottleneck, the U.S. podcast industry, which began in the 2000s, has continued to thrive and has become the largest podcast market in the world. What has caused podcasting, a crucial content distribution model, to remain relatively lukewarm in China?
First, due to different user habits, China has not yet formed a solid and widespread podcast user base like the United States. The U.S. is recognized as the most mature podcast market globally. According to an Edison Research survey in 2024, 70% of people over 12 years old in the U.S. have listened to a podcast, with 43% tuning in weekly. In comparison, the figures for the UK, Germany, and Japan are 26%, 19%, and 13%, respectively. Americans listen to an average of 8.3 hours of podcasts per week, which is twice as much as most European countries. During the 2024 U.S. presidential election, Trump turned down many traditional TV interviews, like CBS’s flagship show 60 Minutes, and instead participated in 14 different podcast shows.
Americans' love for podcasts is closely related to their preference for direct and clear communication. American culture places great emphasis on public speaking skills, and society naturally respects oral expression. This has created a fertile ground for talk-based content, with listeners eager to hear others’ opinions and stories. In contrast, East Asian cultures tend to favor a high-context communication style, and the means of communication is more subtle; hence, purely audio content is less prominent in mass communication in the region.
Americans' preference for podcasts is also influenced by their travel habits. The U.S. is a car-centric country, and during long commutes, Americans are unable to watch their phone screen; therefore, audio content has become a major way to pass their time. With the rise of smartphones, driving while listening to podcasts has become even more popular, making audio content an integral part of daily life. In comparison, commuting in large Chinese cities mostly relies on public transportation, where users tend to watch short videos or read.
The different stages of media and technology development also explain why the U.S. has a more solid podcast user base than China. The U.S. has a long-standing broadcast culture, and the audience base and habits have already been established. Podcasts are like an extension of radio in the internet era, making them easier for Americans to accept. Additionally, the influence of celebrities, such as presidential candidates using podcasts to campaign and business leaders frequently appearing on podcasts, has solidified podcasts’ status as a mainstream medium. In contrast, China did not experience a golden era of mass broadcasting, and when the mobile internet emerged, users quickly shifted to more stimulating media like short videos and live streaming, making podcasts seem like a niche medium.
From a commercial monetization perspective, the U.S. has already formed a relatively mature podcast revenue model, while China’s model remains quite simple.
The U.S. podcast industry primarily relies on advertising monetization. In recent years, the U.S. podcast advertising market has grown explosively. In 2015, the market size was less than USD 200 million, but by 2019, it reached nearly USD 700 million, and it is expected to surpass USD 2.8 billion by 2024. U.S. podcasts offer diverse advertising formats, often highly integrated with content, such as sponsor mentions and product placements, providing high returns on investment. Studies show that for every dollar invested in podcast ads, the average return is USD 2.40. Such high commercial returns make it attractive for mature businesses to invest heavily in podcast advertising, and the additional revenue from paid subscriptions and small donations further supports a sustainable revenue model for U.S. podcasts.
In contrast, China’s online audio platforms primarily rely on membership subscriptions for revenue, and users have yet to form the habit of directly paying for content. Membership subscription revenue accounted for over half of Ximalaya's 2023 revenue, while advertising made up nearly a quarter. Although the trend of paid knowledge content has boosted the market, the proportion of users paying for individual podcast episodes or albums remains low. Free access habits and piracy also undermine users’ willingness to pay, posing challenges to sustainable podcast monetization. Data shows that Ximalaya's user payment rate in 2023 was under 12% and declining.
In terms of content ecology, U.S. podcasts have formed global content influence after nearly two decades of development, while Chinese podcasts are heavily homogenized and have limited influence.
The growth of American podcasts is largely fueled by the constant emergence of high-quality, diverse content, which nurtures listener loyalty and strengthens engagement habits. Major institutions like NPR and Gimlet Media consistently produce high-quality shows, while an increasing number of journalists, writers, celebrities, and scholars are launching their own podcasts. According to Statista’s 2024 data, the U.S. has over 4.4 million podcast programs covering topics such as news, current affairs, true crime, comedy, technology, education, health, sports, arts, and personal narratives. Leading programs like The Joe Rogan Experience cover topics like politics, science, and culture, while niche shows like Hardcore History dive deep into historical topics. Brands like General Electric also have their own podcasts, such as The Message. American podcasts are also experimenting with combining video and audio to enrich content. Last year, 9% of podcast advertising revenue came from video-enhanced programs. For example, PowerfulJRE on YouTube, a podcast that uploads video of the host and guests recording the podcast, has garnered 11.1 million followers. One of the most popular videos, featuring a conversation between the host and Tesla CEO Elon Musk, garnered 47.63 million views.
In contrast, while the number of Chinese podcasts has surged in recent years, there is a noticeable trend of repetitive topics and similar styles. Many Chinese podcast programs focus on popular areas like business interviews and general cultural entertainment, lacking differentiated high-quality content. Whether independent podcasts or platform-produced shows, the homogenized competition has led to a decline in user novelty, making it difficult to cultivate long-tail paid habits. At the same time, due to the influence of censorship mechanisms and market preferences, there is a shortage of truly innovative and niche content. This has made it difficult for podcasts to consistently produce viral content like short videos, which is essential for attracting new users and, consequently, limits their commercialization potential.
All in all, the acquisition of Ximalaya by Tencent Music may appear to be a strategic alliance, but it actually reflects the development challenges faced by the podcast industry in China. Compared to the podcast industry in the U.S., a combination of factors, including user habits, monetization models, and content ecosystem, has led to the relatively lukewarm reception of podcasts in China. Despite this, as a key component of the audio economy, the Chinese podcast industry still holds significant growth potential and room for innovation. The merger between Tencent Music and Ximalaya could mark a turning point. With Tencent Music's capital infusion and user traffic, Ximalaya may be able to alleviate short-term pressures and explore new growth avenues within the ecosystem of a major player.
Final analysis conclusion:
The acquisition of Ximalaya by Tencent Music may appear to be a resource consolidation, but it actually reveals the structural challenges in the commercialization path of the Chinese podcast industry. Compared to the podcast ecosystem in the U.S., it is evident that China has yet to establish a positive cycle in terms of user habits, monetization models, and content supply, which has limited the overall development of the industry. Despite this, with the support of Tencent Music's capital and traffic, Ximalaya may have the opportunity to refine its business model within the ecosystem of a major player, potentially opening new growth avenues for the Chinese podcast industry.
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Chen Li is an Economic Research Fellow at ANBOUND, an independent think tank.
