Downloadedbydaisy@ilookcap.comNot forredistibutionwithoutwritenconsernt ofMorganStanleyMorganStanley |ReseARcH,GLOBALINSIGHTOctober28,202510:10PMGMTMedia &Entertainment+1212761-7079Lessons trom China: TheBenjaminSwinburne,CFAPremium Music Streaming+1212761-7527MORGAVSTANLEYASIALITEDHYangLiuOpportunity+8522239-1911MORGAISTALEY&COINTERNATIONLPLCAWHAT'SCHANGEDEdYoungWamerMusicGroupCop.(MMG.O)PriceTarget$35.00$37.00EdYoung@morgaratarley.com+44207677-1761We take a detailed look at China's music market. TME's SVP tierMDRGANISTALEYMFGSECURTIESCO,LTD-+KazuoYoshikawa,CFAThis carries opportunity across OWs SPOT/UMG and EW WMG,+8136836-8408in our view, but likely represents a single contributor to multiMORGAISTANLEY&CO.LLCGraceSongfactor pricing growth for music streamingnorganstankey.com+1212761-4931KevTakeawavsNORGAISTAMLEYMUFGSECURTIESCO,ITD-+HidetakaSuzukinenetrationand oricingbothincrease+8136836-8402There remain expectations that Spotif wllaundh a premium tier to drive prdingnear-term. We view that prospect as more supplemental vsa coreARPU driverConstantinPKollmannpotify(OW)suggests10-15%+44207425-3268additionalupsidetoour$800PT,ifit werefullv incrementalMEDIA&ENTERTAINMENTNorthAmericaIndustryViewIn-Linestreaming platforms would require action from allplatfoms for stmilar unlf# Our collaborative work suggests that mapping Tencent Music's SVIP success to-date onto streaming platforms outside of China maybe overly optimisticWith this report, Cameron Mansson-Perrone assumeslead coverage of WarnerMusicor VP offering fromSpotfy and ts US-based peerscould prove a meaningfu. musilindustry growth driver. We evaluate this opportunity, and take an indeoth look atthe arguments for(and against) using Tencert Music'sSuperVIP(orSVIP)tir asapraxy for successWhv isTencentMusic'sSVIP tierheld un asareolicablemodel?Weseethreeprimary areas that likely drive the comparison;1. Many of thefeaturesthatSVPoffrstoitssubscrbers-exclusivemercdhandise, frst lok content, h-h audi,concert tickets-could feasibly beincluded as part ofa premilum Spotify offering2. Tencent Musit Entertainment (TME')has a similar histoy fshifting users
MoraanStanley|weseaerGLOBALINSIGHTup the value(and price)curve, fferinga range of ters today with variedTable of Contentsfunctionality and targeting different consumer preferencesand priceExecutiveSummary4appetite(Exhibi#17)fSpotify(8%ofTME)andTencentMusic(2-3%ofSpotifybut9% acrossSpollysPremium Offering Opportunlty,2Tencent entties) continue to have cross-equity holdings- increasing theThe PotertialUpiftfor MusicLabels,possbltythey may share strategic operational leamings.ACloserLookatChina'sMusic2The Non-Subscription Businessin Chinalabels: For purely illustrative purposes, we analyze the upliftConsumptionPatters:Howisd value chain bv. (D) applving TME's successwithSVIP(oriceChinaSImilarorUnique?Global Music Industy ForecastWMGFinancialsThe result is aroughly $3.5bn uplf in global consumer spending on subscriptonstreaming in 2027, Assummarized in Exhibit 1(see Exkhibit8 foranalysis, acrosSpotfy, Universal Music, and Warner M...
