CLOUD Village Inc., the music streaming arm of Chinese gaming giant NetEase Inc., is postponing the launch of a Hong Kong initial public offering (IPO) that was set to raise about US$1 billion, according to people familiar with the matter.

The NetEase unit tested demand for its offering last week, but is not going ahead with taking investor orders, the people said. It intends to wait for better market conditions, one of the people said.

At an expected size of about US$1 billion, Cloud Village’s IPO would be one of the biggest potential first-time share sales in Hong Kong by a technology company this year.

IFR first reported the delay yesterday. A representative for the company didn’t immediately respond to requests for comment.

Cloud Village runs NetEase’s music streaming platform in China and generates most of its revenue through subscriptions, virtual gifting and advertising.

NetEase has long been a distant runner-up to Tencent Holdings Ltd. in gaming and music streaming. Started in 2013, Cloud Village has since expanded its products to offer everything from online karaoke to livestreaming and lyrics sharing.

The unit — 62 percent owned by NetEase — grew its monthly music users to 181 million last year, of which 9 percent are paying subscribers, according to its preliminary prospectus.

Unlike its much larger rival, Tencent Music Entertainment Group, Cloud Village is still in the red largely because of high content costs.

But the company recently struck deals to license songs directly from Universal Music Group Inc. and Sony Music Entertainment, ending the label giants’ exclusive arrangements with Tencent Music.

Tencent was last month ordered by the Chinese antitrust watchdog to give up its exclusive music streaming rights and pay half a million yuan in fines, marking the most direct hit to the Internet giant. (SD-Agencies)