Tencent Music Entertainment
Tencent Music Entertainment reported a 35% uptick in profit on Tuesday after the Chinese music streamer added 2 million subscribers over the third quarter.
TME reported net profit for the third quarter of RMB1.71 billion ($244 million), and total revenues of RMB7.02 billion ($1 billion)–increases of 35.3% and 6.8% respectively from the third quarter last year. Music subscription revenue grew by more than 20%, which offset the continued decline in social entertainment services revenue TME has seen for more than a year.
“This quarter’s robust music subscription performance, with better-than-expected net subscriber additions and an expanding ARPPU, highlights the effectiveness of our balanced approach to achieve growth, which is important to drive paying user base expansion in the coming years,” TME’s chief executive officer Ross Liang said in a statement.
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TME added 2 million new paying users during the third quarter to bring its total number of subscribers to 119 million, which drove a 4.9% expansion of the company’s monthly average revenue per paying user (ARPPU). That metric now stands at RMB 10.8 ($1.50). Music subscriptions revenue grew to RMB3.84 billion ($547 million) representing 20.3% year-over-year growth.
The company’s gross margin — the percentage of company revenue that remains after expenses are taken out — rose to 42.6% from 35.7% in the year-ago quarter, thanks to increased revenues from subscriptions and advertising.
Notably, TME said its number of SVIP subscribers — a premium tier that costs five times more than the regular version — topped 10 million in the quarter ending Sept. 30.
Tencent Music executives said partnering with Galaxy Corporation this quarter for K-pop icon G-Dragon upcoming tour boosted its content offerings with audiences.
G-Dragon released his first single in seven years, “POWER,” in October ahead of his tour of Southeast Asia, the Middle East, Hong Kong, Macao, Taiwan, Australia and New Zealand.
TME’s stock was trading at $10.46, down 9.48% at 10:25 a.m. in New York. TME’s stock has declined by nearly 18% in the past month, but is still up 19.7% year to date.
Tencent Music Entertainment’s stock fell by 15% on Tuesday after declines in the leading Chinese music streamer’s quarterly revenue and monthly active users overshadowed higher profit and paid subscriber gains. TME’s revenues of RMB7.16 billion ($985 million) edged 1.7% lower this quarter from the year-ago quarter, and monthly active users for online music services fell […]
Top Chinese singers including Zhou Shen, Xue Zhiqian, Tia Ray and Wang Yuan are set to perform at the 2024 Tencent Music Entertainment Awards (TMEA), which will be held at the Galaxy Arena in Macau, China, from July 19 to 21. Themed “High Five. Music Drive,” the fifth edition of TMEA will showcase more than […]
Executives of Tencent Music Entertainment Group said on Monday that higher than expected subscriber growth pushed its first quarter profits up 28% to RMB1.53 billion ($212 million). Explore Explore See latest videos, charts and news See latest videos, charts and news Through marketing promotions timed around the Chinese New Year holiday, TME was able to […]
China‘s Tencent Music Entertainment Group saw its profit jump 36% to 5.22 billion yuan ($735 million) in 2023 as growth in paid subscriptions helped offset mixed results in its social media business, according to an earnings filing on Tuesday (Mar. 19). The leading music streaming company in China — Tencent Music operates QQ Music, Kugou […]
Universal Music Group and Tencent Music Entertainment have renewed their multi-year licensing agreement, the companies announced on Wednesday (Jan. 3). Under the renewed agreement between TME and UMG — first signed in May 2017 — Tencent will continue to distribute UMG content on its associated streaming platforms QQ Music, Kogou Music and Kuwo Music, as […]
Chinese music streaming company Tencent Music Entertainment saw its paying users grow to 103 million in the third quarter, up 20.8% year over year and 3.6% better than the previous quarter, the company announced Tuesday (Nov. 14).
A 42% gain in subscription revenue to 3.2 billion RMB ($438 million) helped online music revenue grow 32.7% to 4.55 billion RMB ($624 million). Not only has Tencent Music Entertainment gained paying customers, but they’re also paying more: Average revenue per paying user (ARPPU) rose 17% to 10.3 RMB ($1.41) in the third quarter.
“We will continue to drive solid growth of our online music business, with subscription revenue driven by the subscription base growth and also ARPPU expansion as well,” said executive chairman Cussion Pang during Tuesday’s earnings call. “Outside of the subscription revenue, we expected the revenues from advertising and new initiatives, such as artist merchandise, to continue to grow healthily.”
Tencent Music Entertainment’s 103 million subscribers is well behind Spotify’s 226 million subscribers, but its subscriber base has grown steadily from 85.3 million and 71.2 million in the third quarters of 2022 and 2021, respectively. Its ARPPU of 10.3 RMB ($1.41) is also far lower than Spotify’s ARPU of 4.34 euros ($4.72), reflecting the relatively higher prices in the North American and European markets where Spotify is strongest. Still, Tencent Music Entertainment’s ARPPU showed strong growth last quarter after dropping from 8.9 RMB ($1.23) in the third quarter of 2021 to 8.8 RMB ($1.21) in the third quarter of 2022.
Tencent Music Entertainment operates the music streaming apps QQ Music, Kugou and Kuwo. It also owns WeSing, a social karaoke game. The music-focused company additionally offers podcasts and ventured into audiobooks with its 2021 acquisition of audiobook platform Lazy Audio.
The company touts what it calls a “dual-engine” strategy that improves both the content and the platform’s features and technology. In the third quarter, Tencent Music Entertainment expanded its partnership with K-pop company YG Entertainment to include ticketing, which gave subscribers the ability to purchase BLACKPINK concert tickets. A partnership with another South Korean company, Cube Entertainment, gives Tencent Music Entertainment a 30-day window of exclusivity on new song releases. On the technology side, a new music production tool in the Kugou app allows users to create music in multiple languages. “Through a brief training session, it can effectively and efficiently produce songs in Mandarin, Cantonese, English, Korean and Japanese,” said Pang.
Gains from the music side of the company couldn’t make up for steep declines in Tencent Music Entertainment’s social entertainment segment, however. Company-wide revenue declined 10.8% to 6.57 billion RMB ($900 million) due to a 48.8% year-over-year decline in social entertainment revenue and a 16.8% drop in social entertainment mobile monthly average users.
“For the social entertainment services, we will continue to execute our current operational strategy with the backdrop of the macro factors and competition for 2024,” said Pang. “Our primary target is to stabilize the business and better serve our core users.”
Gross margin improved by 3.1 percentage points to 35.7% due to growth of music subscriptions and the company’s use of its own content. “Looking forward [to] Q4, we expect subscription revenue and advertisement revenue will continue to be strong,” said CFO Shirley Hu. “On the cost side, we expect our in-house made content will have a positive impact on gross margin continually and we will continue to increase our operational efficiency and monitor cost items.”
Shares of Tencent Music Entertainment rose 3.1% to $7.66 on Tuesday. That was slightly better than the gains most stocks posted following a report that inflation was flat in October and up 3.2% from the previous year. The news sparked hope amongst investors that the Federal Reserve would stop hiking interest rates to help tame inflation. The Nasdaq composite gained 2.4% and the S&P 500 gained 1.9%.
Tencent Music Entertainment third-quarter financial and user metrics:
Total revenue of 6.57 billion RMB ($900 million), down 10.8% year over year.
Music subscription revenue of 3.19 billion RMB ($438 million), up 42% year over year.
Social entertainment revenue of 2.02 billion ($276 million), down 48% year over year.
Net profit of 1.26 billion RMB ($173 million), up 15.6% year over year.
Monthly active users (online music) of 594 million, down 4.2% year over year.
Mobile monthly active users (social entertainment) of 129 million, down 16.8% year over year.
Paying users, online music of 103 million, up 20.8% year over year.
Paying users, social entertainment of 7.8 million, up 5.4% year over year.
Spotify led a group of high-flying streaming stocks this week by gaining 14.8% to $157.54 per share, increasing its market capitalization by nearly $4 billion to $30.7 billion. The world’s largest streaming company, which boasted 220 million subscribers as of June 30, has clawed back nearly all its losses since its share price dropped 14% […]
Tencent Music Entertainment topped all music stocks this week after second-quarter earnings on Tuesday helped the company’s share price gain 7.2% to $6.53. The Chinese music streaming company, traded on both the New York Stock Exchange and the Hong Kong Stock Exchange, reported second quarter revenue of $1.01 billion (up 5.5% year over year) and net profit of $179 million (up 51.6%).
Investors tend to react positively when companies report strong subscriber numbers and TME had good news about the surging Chinese market. TME finished the quarter with 99.4 million subscribers, up 20% from the prior-year period, and for the first time its music services (QQ Music, Kuguo Music and Kuwo Music) generated more revenue than its social entertainment services (WeSing). Users’ willingness to pay for copyrighted music, whether to listen to songs or enjoy premium features, “marks a significant step along TME’s growth trajectory,” said CEO Cussion Pang during Tuesday’s earnings call.
Tencent Music Entertainment was the only music stock with a double-digit gain and one of only two stocks to finish the week in positive territory. With Round Hill Music Royalty Fund unchanged, the remaining 18 stocks in the 21-stock Billboard Global Music Index lost ground this week. The index fell 3% to 1,299.04, the fourth straight week the index declined, and has lost 10.2% of its value since peaking at 1,447.32 for the week ended July 21.
Streaming companies (Spotify, TME, Cloud Music, Anghami, Deezer) dropped by an average of 1%. Live music companies (Live Nation, MSG Entertainment, Sphere Entertainment Co., CTS Eventim) had an average decline of 3.1%. Record labels, publishers and distributors (Universal Music Group, Warner Music Group, HYBE, SM, Believe, Round Hill, Hipgnosis Songs Fund) fell an average 4.6%. Radio and satellite broadcasters (SiriusXM, iHeartMedia, Cumulus Media) dropped by an average of 5.1%.
Music stocks’ decline reflected the losses seen by stocks around the world this week. Higher bond yields have helped dampen interest in equities and investors are increasingly looking for safer places to put cash. In the United States, the S&P 500 declined 2.1% and the Nasdaq composite fell 2.6%. In the United Kingdom, the FTSE 100 dropped 3.5%. South Korean’s KOSPI composite index fell 3.3%, the biggest one-week point and percentage decline since Sept. 2022, due to falling operating profits, concerns about the Chinese economy and high interest rates.
K-pop stocks were among this week’s biggest losers. Shares of YG Entertainment and JYP Entertainment, neither of which are in the index, fell 12.1% and 13.3%, respectively. HYBE shares dropped 7.3% and SM Entertainment fell 6.7%. All four K-pop companies’ share prices have made large gains this year, however. Even after this week’s declines, SM, YG and JYP have gained between 63% and 66% while HYBE shares are up 36.3%.
Tencent Music Entertainment Group’s (TME) quarterly net profit surged by more than 50% for the quarter ending in June on the strength of its online music business, sending its stock up 5% in mid-day trading on Wednesday.
Net profit for TME’s second quarter was RMB1.30 billion ($179 million), up 51.6% from second quarter last year, the Chinese company reported on Tuesday. Total revenues rose 5.5% to RMB7.29 billion ($1.01 billion) in the quarter ending June 30, as a more paying subscribers helped the online music business contribute more than half of TME’s earnings for the first time since the company’s launch in 2016.
TME is growing increasingly focused on its music business, and its company promotions which resulted in a record high of 99.4 million paying users this quarter, are paying off, executives say.
“As we continue driving the healthy development of China’s online music industry, we have seen users become increasingly accustomed and willing to pay for copyrighted music, whether for songs they want to listen to or for premium listening features they enjoy,” TME executive chairman Cussion Pang said on Tuesday. “This marks a significant step along TME’s growth trajectory.”
Quarterly revenue from online music services jumped nearly 50% to RMB4.25 billion (US$586 million) on strong music subscription revenue growth and advertising services and contributed more than 58% of the company’s total revenues.
The number of monthly active users for online music fell nearly 5% to 594 million in the second quarter this year from 623 million in the year-ago quarter, but the number of paying online music users rose more than 20% to 99.4 million from 82.7 million a year ago.
Revenues from music subscriptions grew 37% to RMB2.89 billion ($399 million).
TME’s social entertainment business, which it has de-emphasized for the last several quarters in a row, saw mobile monthly active users fall 18% to 136 million from 166 million, while paying social entertainment users also declined 5% to 7.5 from 7.9.
Monthly average revenue per paying user (ARPPU) rose 14% to RMB9.7 ($1.33) for online music, while monthly ARPPU for social entertainment declined 20% to RMB135 ($18.50).
Tencent Music executives said they are in the process of deploying several service enhancement and risk control measures that will promote music-centric live streaming, which they expect to put pressure on TME’s social entertainment services revenues throughout the rest of 2023.
“TME remains confident about delivering year-over-year net profit growth for 2023, driven by the continued strong performance of online music services, laying a much more solid foundation for the company’s healthy and resilient development in the long run,” a spokesperson said.