If You Thought the US Music Industry Was Concerned About AI, You Should Hear What They’re Saying in China.

Why It Matters

AI‑driven copyright violations threaten subscription growth and creator royalties in China’s massive streaming ecosystem, prompting tighter enforcement and investor scrutiny. The issue highlights a regulatory gap that could reshape competitive dynamics across global music platforms.

Key Takeaways

• TME's membership revenue fell Q/Q to RMB 4.57 bn ($662 m)
• AI‑generated tracks flood Chinese catalogs, prompting “song‑washing” crackdown
• Competitors Soda Music and NetEase use AI to attract “light” users
• TME removed 250k policy‑violating songs and reviewed 600k cases in 2025
• Analysts downgrade TME, citing AI‑driven catalog inflation and ARPPU pressure

Pulse Analysis

China’s music streaming sector is confronting a surge of AI‑generated tracks that bypass copyright safeguards, a problem TME’s leadership labeled as "industry chaos." The influx of low‑cost, algorithm‑produced songs enables rivals to quickly expand their libraries, enticing price‑sensitive, ad‑supported listeners. TME’s Q1 2026 results show membership services revenue slipping to RMB 4.57 bn, even as overall revenue grew 7.3% YoY, underscoring how AI‑driven catalog bloat can erode premium subscriber value.

In response, TME has launched a rights‑protection mechanism, removing more than 250,000 infringing songs and reviewing 600,000 high‑risk cases in 2025. The company’s crackdown targets practices it calls "song‑washing," "song laundering," and "trend hijacking," which it says dilute creator royalties and undermine the long‑term health of the music ecosystem. These enforcement actions come as analysts from Morgan Stanley, Benchmark and UBS downgrade TME, citing pressure on average revenue per paying user (ARPPU) and heightened competition from ByteDance’s Soda Music and NetEase Cloud Music, both leveraging AI to attract low‑engagement "light" users.

The Chinese scenario diverges sharply from Western narratives where AI‑generated content is deemed a marginal market share. Without clear regulatory guidance on AI‑created music, Chinese platforms face a unique risk‑reward calculus: aggressive AI adoption can boost catalog size but also invite legal challenges and subscriber churn. For investors and industry watchers, the unfolding tension signals that AI’s role in music will be shaped not just by technology but by evolving copyright enforcement and market‑specific competitive pressures.