On April 29, 2026, an online music app industry report released by QuestMobile quickly gained traction within China's internet and investment circles. KuGou Music maintained its top position with 205 million monthly active users (MAU), followed closely by QQ Music with 201 million. However, the long-held third-place position, traditionally occupied by NETEASE MUSIC, was taken over for the first time: ByteDance's Soda Music, with 156.05 million MAU, surpassed NETEASE MUSIC's 146.82 million, ending the latter's reign as the industry's third-largest platform.
This shift in MAU rankings is not merely a short-term slowdown for NETEASE MUSIC but reflects a fundamental change in the competitive logic of the online music industry—a transition from "community content" to "ecosystem synergy," and from "active user choice" to "passive consumption driven by scrolling."
Two Types of "Growth" Behind the Numbers From a data perspective, this represents a clear defeat. According to QuestMobile, in March 2026, Soda Music's MAU surged by 78% year-over-year, reaching 156 million. In the same period, KuGou Music's MAU declined by 6.3% year-over-year, QQ Music grew by 6.1%, and Kuwo Music plummeted by 15.4%. User growth for traditional online music platforms has largely stagnated, while ByteDance's disruptor is reshaping the competitive landscape.
Soda Music's rise is no accident. Looking back at QuestMobile's data from December 2025, Soda Music's MAU was approximately 139.8 million, already visibly closing the gap with NETEASE MUSIC. By March 2026, this gap was reversed within a single quarter. During this period, Soda Music's growth accelerated further, driven by continuous expansion of its licensed content library and early strategic investments in AI music.
NETEASE MUSIC: Profitable, But Losing Users NETEASE MUSIC had just three months prior demonstrated the profitability of its core online music business to the capital markets with its 2025 financial report, which showed significant profit growth. The report indicated total revenue of RMB 7.759 billion for 2025, a slight year-over-year decrease of 2.4%. However, adjusted net profit attributable to shareholders reached RMB 2.860 billion, representing a substantial year-over-year increase of 68.2%. Revenue from online music services grew steadily by 12.0% year-over-year to RMB 5.994 billion, with subscription revenue increasing 13.3% to RMB 5.05 billion. The platform had over 1 million original musicians, and its DAU/MAU ratio remained consistently above 30%.
This was a financial report that showed "community stickiness" remained intact and financial structure continued to optimize.
However, in the race for "scale," NETEASE MUSIC's user appeal is being marginalized by the ByteDance ecosystem. A significant 82.1% of Soda Music's traffic originates from the Douyin ecosystem. When users encounter appealing background music (BGM) while scrolling through Douyin, they can seamlessly jump to Soda Music to listen to the full track. This closed-loop experience cleverly bypasses the community atmosphere that NETEASE MUSIC has painstakingly built over many years. Soda Music's differentiated product logic—no splash screen ads, a short-video-style vertical swipe interface for switching songs, and a "watch ads for free listening" model that lowers the payment barrier—precisely targets the broad entertainment user segment that does not chase specific artists, prioritize audio quality, or wish to curate playlists. The user overlap with NETEASE MUSIC is only 2% to 3%. This data further confirms that Soda Music's growth is not coming from cannibalizing existing platforms but from capturing a vast casual entertainment demographic not fully covered by traditional subscription models.
NETEASE MUSIC is acutely aware of this pressure, which explains the frequent product reforms initiated from the first quarter: from abandoning the long-used brand color "Netease Red" in favor of a darker crimson tone, to completely revamping the homepage into a "Heartbeat Homepage" that borrows Soda Music's swipe-and-switch interaction model. These changes represent reactive adjustments.
The Competitive Logic Has Changed: From "Songs Finding People" to "People Scrolling for Songs" Soda Music's success is not a result of traditional product iteration but a contest between two strategic approaches.
Tencent Music relies on its extensive copyright library as a moat, while NETEASE MUSIC's early community was the foundation of its user stickiness. Listening to music on these platforms required active user choices—selecting playlists, searching for artists, or saving albums. This is a behavior pattern dependent on deep, engaged users. However, in a context where online leisure time and attention are increasingly fragmented by short videos, the broader user base desires instant, passive consumption: open the app and start listening, swipe away if they don't like it—essentially, being algorithmically "fed" content similar to the Douyin experience.
Soda Music replicates Douyin's core experience: the app opens directly into full-screen playback, with no splash ads, no sidebars, and no initial choices. Listening to music becomes a passive activity requiring no prior decision-making, allowing users to instantly fill their commute, home, or chore time with background music. Coupled with the low-barrier "watch ads for free listening" strategy, the "cost of consuming content is nearly zero"—this captures the peripheral user growth that NETEASE MUSIC's community model and deep-user retention strategies cannot effectively address.
A deeper competitive barrier lies in the AI music arena. Soda Music launched its AI Creation Lab before 2025, enabling users to generate personalized music within minutes through simple prompts, compressing song creation costs to near zero. This has spawned a massive volume of "viral hits" perfectly suited for dissemination on Douyin and Soda Music within just one year. In contrast, NETEASE MUSIC, despite launching its "Netease Tianyin" mini-program as early as 2022, failed to gain significant traction. It only hurriedly introduced its "Yunchuang" AI tool in March 2026 to try to close the gap. This strategic delay, combined with insufficient experience in AIGC governance, has further amplified its passivity in capturing user growth.
Stock Price Down 30% from Highs, Brokers Downgrade Targets The capital market's reaction has been far more intense than the figures on paper suggest.
As of May 11, 2026, NETEASE MUSIC's stock closed at HKD 130. Its peak price in July 2025 was approximately HKD 302.4. A rough calculation shows a decline of about 57% from that high. Year-to-date, the cumulative decline is about 30.1%, with a maximum drawdown reaching 43.3%. Following the release of its full-year 2025 results, the stock price fell over 9.6% in a single session the next day, as growth in online music service revenue slowed from 16% in the first half to 8% in the second half, falling short of some institutional expectations.
Multiple brokerages issued target price downgrades during this period: - BOC International lowered its target price from HKD 295 to HKD 200, noting that NETEASE MUSIC's total revenue in the second half of last year increased only 1% year-over-year, slightly below market expectations of 1%. Online music revenue grew 8% year-over-year, driven by a 12% increase in core music subscription revenue, but this was offset by a 17% year-over-year decline in social entertainment revenue. - CMB International slashed its target price from HKD 360.42 to HKD 239.4, a reduction of approximately 33.6%. - CICC cut its target price from HKD 324 to HKD 224, a decrease of 30.9%. - Huaxing Securities downgraded its target price from HKD 336 to HKD 196, a significant reduction of 41.7%.
From February 12 to May 8, NETEASE MUSIC conducted share buybacks for 54 consecutive days, repurchasing a total of 6.0246 million shares for approximately HKD 810 million. During this buyback period, the stock price fell 31.7%. The fact that the company needs to use substantial capital to support its share price itself speaks volumes about the prevailing market sentiment.
Challenges and Opportunities: NETEASE MUSIC Still Has a Window The warning signs for NETEASE MUSIC are clear. The decline in MAU may not be immediate, but when the positive feedback loop built over years between monthly active users and paying users begins to face sustained diversion by external, high-engagement products, the channels for acquiring new users become effectively narrowed.
Simultaneously, there is no impenetrable barrier between Soda Music's low-barrier, traffic-driven approach and NETEASE MUSIC's core asset—its music community—in terms of functional experience and user habits. As Soda Music continues to invest in AI music creation tools to expand its original content pool and extends into diverse partnerships to bolster its licensed catalog, it is only a matter of time before new user preferences are algorithmically reshaped.
NETEASE MUSIC is accelerating its response. Beyond following suit in product design, measures such as integrating AI music into its core strategy and lowering the withdrawal threshold for creators indicate the company is playing catch-up. However, the entire industry is rapidly entering a new competitive paradigm dominated by AI, algorithms, and the short-video ecosystem. NETEASE MUSIC currently lacks equivalent non-content entry points to provide horizontal support for its core service. The competition in the online music sector in the second half of 2026 is more complex than a simple ranking battle: it is a multi-faceted race involving deep user loyalty, creator ecosystems, AI-driven industrial content production, and closed consumption loops. Soda Music's rise serves as a reminder to all competitors—the next industry reshuffle may not require waiting another seven years.