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Tencent Music Entertainment

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Tony Yip, the chief strategy officer for Chinese audio streaming company Tencent Music Entertainment (TME), will step down on August 31, the company announced Monday (July 17). He plans to spend more time with his family overseas and pursue other personal interests, according to the press release. The company did not indicate who will replace […]

China’s leading music streaming company Tencent Music Entertainment Group (TME) reported on Tuesday a 9.3% decline in the company’s annual revenues last year, as falling earnings from its social entertainment services business compounded a decline in monthly active users on its music platform.

TME’s total revenues fell to RMB 28.34 billion (USD $4.11 billion) in 2022 from RMB 31.24 billion 2021, with revenues for the fourth quarter ending Dec. 31 having fallen by 2.4% to RMB 7.43 billion ($1.08 billion) compared to the fourth quarter in 2021.

TME, which owns streaming platforms QQ Music, Kugou and Kuwo, plus karaoke app WeSing, said revenues from its social entertainment services and others fell 19.8% in 2022 to RMB 15.86 billion ($2.30 billion). The number of paying users fell 24.3% due to the macroeconomic environment, competition from other platforms and COVID-19, the company said. 

Revenues from music subscriptions rose 18.6% to RMB 8.70 billion ($1.26 billion) helping TME’s online music services revenues to increase overall by 8.9% to RMB 12.48 billion ($1.81 billion) for 2022. The number of paying subscribers grew by 22.7%. However, average revenue per user was slightly lower — RMB 8.6 in 2022 compared to RMB 8.9 in 2021 — due to higher marketing costs, and the number of mobile monthly active users (MAU) of its online music division fell 7.8% to 567 million in the fourth quarter.

“During the fourth quarter, as a result of macro headwinds, increased competition from other platforms and the surge in COVID cases social entertainment services MAUs and paying users declined year over year,” said Tony Yip, TME chief strategy officer, on a call discussing the company’s earnings on Tuesday.

China’s late-year increase in COVID cases as it loosened pandemic restrictions and increased competition also led to the year-over-year decline in online music mobile MAUs, Yip said.

Declining social entertainment services revenues held one benefit for TME: lower revenue sharing fees in 2022. That contributed to a savings of more than RMB 2.27 billion, as its cost of revenues for the year fell 10.4% year-over-year to RMB 19.57 billion ($2.84 billion).

This helped TME achieve an operating profit up nearly 17% to RMB 4.44 billion ($644 million) in 2022. Operating income is the income that remains after accounting for nearly all costs of doing business.

TME expects 2023 total revenues and profitability to be up from last year, and for the share of quarterly revenues coming from online music services will exceed those coming social entertainment services at some point this year as they continue to achieve “high quality growth in both subscription and non-subscription revenue,” Yip said.

Tencent Music Entertainment Group’s 2022 Highlights:

Mobile monthly active users (MAU) for its online music division fell 7.8% to 567 million in the fourth quarter 2022 from 615 million in the fourth quarter 2021

Mobile MAU for social entertainment fell 16.6% to 146 million in the fourth quarter of 2022 from 175 million in the fourth quarter 2021

Paying users of TME’s online music platform rose 16.1% to 88.5 million in the fourth quarter 2022 from 76.2 million in the fourth quarte 2021

Paying users of TME’s social entertainment platform fells 15.6% to 7.6 million in the fourth quarter 2022 from 9 million in the fourth quarter

HONG KONG — Concerned about the impact that fake streams are having on the accuracy of China’s music charts, Tencent Music Entertainment (TME) has designed an annual chart that incorporates both streaming and sales data with votes from industry professionals, the company tells Billboard.
The new year-end chart, which TME recently released to the public in China, combines inputs from two existing charts, the TME UniChart and TME Wave Chart, which track weekly and monthly streaming data. They feed into the Tencent Music Chart, the year-end charts compiled by the China-based music giant, which operates streaming apps QQ Music, Kugou Music, Kuwo Music, and karaoke service WeSing. 

The TME UniChart, which first launched in 2018 and has been featured on Billboard’s global website (billboard.com) since November, calculates listening data from China’s public radio stations and streaming data on TME-run platforms, including clicks, favorites, downloads, shares, purchases and recommendations. The TME Wave Chart, on the other hand, is compiled by scores and recommendations from over 250 industry professionals every month. (TME, which licenses the Billboard brand in China and publishes Billboard China, would not disclose its math formula for weighting its results.)

The new combined chart was developed to ensure the accuracy and fairness of the rankings, and to address growing concerns from music professionals that China’s music charts are subject to tampering, and include inflated streams and social media statistics, a company representative tells Billboard. 

The issue mirrors concern expressed in the U.S. music industry about aggressive organizing by fan groups of certain pop artists to push them up the rankings. That has notably included K-pop group BTS’ fan ARMY and its agency, HYBE, which have come under scrutiny for BTS’ chart successes. (Both HYBE and BTS have rejected accusations that chart manipulation accounts for the group’s success.)

Chinese fan groups often engage in “data work,” which includes conducting online activities to ensure the high placement of celebrities on social media ranking boards,” says Dr. Celia Lam, associate professor in Media and Cultural Studies at the University of Nottingham Ningbo China, who studies audience and fan engagement. “Organized team-building activities within fandoms can include daily data targets – liking, sharing or reposting social media posts or using specific hashtags — to ensure the continued data performance of a celebrity figure,” she says.

China, the world’s sixth-largest music market, has dozens of domestic music charts, including some run by China’s state-owned broadcaster that have been operating for about two decades. But the country lacks an industry-recognized reference chart like the Billboard Hot 100 or Spotify’s Weekly Top Song Global.

Several established music charts already exist in China, including Global Chinese Golden Chart (jointly launched by seven largest Chinese-speaking radio stations), China Music Billboard (run by China National Radio MusicRadio), and Global Chinese Music under CCTV. There are also emerging music charts run by streaming platforms such as Fresh Asia Music Weekly Chart, NetEase Music Hot Songs Weekly Chart and QQ Music MV Chart, along with some hosted by social media platforms such as Sina Weibo and Douyin.

With fewer music listeners tuning into radios, charts run by China’s public broadcaster have become limited in their ability to reflect a song’s popularity. Music professionals have questioned the credibility of emerging music charts, as fans in China are known to mobilize in mass-streaming activities to push their singers to the top of the charts, preventing those charts from reflecting the organic popularity of songs.

Tencent Music says it wants to help weed out fraudulent activity and create more credibility for its own charts. Still, the move comes amid recent government regulatory scrutiny on TME for its potential monopoly stranglehold on the streaming market. Music listeners in China spent 70% of their time streaming music in 2022 on TME’s three major platforms — QQ Music, Kugou Music and Kuwo Music, the company says. TME had 85.3 million paying music users as of the third quarter of 2022, according to company filings.

Leveraging the huge amount of data generated by TME’s services, the annual rankings also offered insights into China’s fast-growing music industry. In 2022, pop stars Jay Chou, Yisa Yu, Lala Hsu, G.E.M., Mao Buyi and Jackson Wang took the top spots on the Tencent Music Chart. Rising stars Zhou Shen, Joker Xue, Liu Yu Ning, Xin Liu rounded out the top 10. 

“Looking at the annual charts in recent years, we can see that the Chinese music market has begun to diversify,” Vincent Lee, director of TME’s charts team, tells Billboard. “Influential singers like Jay Chou, Eason Chan, and Karen Mok still occupy important positions in the music market. But the power of the new generation should also not be underestimated such as the very young boy band Teens In Times and Zhou Shen, who gained popularity through variety shows and original soundtracks of film and television dramas.”

Music lovers in China have also started branching into different music genres. Besides Jay Chou’s “Greatest Works of Art” and “Free of Worries When Flowers Blossom” by Zhou Shen, Chinese listeners embraced “You Are My Magic” by Taiwanese psychedelic rock band Accusefive and Cai Xu Kun’s romantic love song “Hug Me.” 

Younger rising artists have also begun to win the hearts of fans. “Getting Warmer” by Teens In Times topped the UniChart as song of the year, while the song “Beautiful” by the boy band INTO-1 member Mika has remained on the chart for 52 weeks. 

“Judging from the hit songs in recent years, there is less and less a ‘standard formula’ to musical success,” says Lee. “Different types of music have shown strong potential in China’s music scene, and popular songs have emerged from all kinds of genres.”

In its third-quarter earnings report Tuesday (Nov. 15), China’s leading music streaming company Tencent Music Entertainment Group (TME) said quarterly net profits soared 39% to RMB 1.09 billion ($154 million USD) from last year as the number of online music subscribers reached a record 85.3 million.

TME, which owns streaming platforms QQ Music, Kugou and Kuwo, plus karaoke app WeSing, reported that music subscriptions rose 18.3% to RMB 2.25 billion (USD $316 million) for the third quarter ending Sept. 30 compared to the same period in 2021. The number of subscribers rose by nearly 20%, up from 71.2 million in the third quarter 2021.

“As we are employing a balanced approach to grow paying users…revenues from online music services increased at a healthy pace in the third quarter, driven by year-over-year gains in subscriptions,” Cussion Pang, TME’s executive chairman, said in a statement. “Meanwhile, effective cost optimization measures and improved operating efficiency led to increased profitability amid challenging macro conditions this quarter.”

Overall, online music services revenues rose by 18.8% to RMB 3.43 billion (USD $482 million), but that wasn’t enough to offset a 20% decline in revenues from social entertainment and services, the company’s other main business unit. TME’s total revenues fell by 5.6% to RMB 7.37 billion (USD $1.04 billion).

Media companies have reported widespread declines in mobile revenues for the third quarter, as increased prices for many and the worsening economic outlook globally has caused consumers to rethink everyday expenses. TME was not spared from the trend. The number of monthly active mobile music users fell by 7.7% to 587 million in the quarter, compared to 636 million in the third quarter last year — a decline the company attributed to casual listeners dropping off the platform.

Monthly average revenue per paying user of TME’s online music edged 1% lower, to RMB 8.8 million (USD $1.24 million) compared to RMB 8.9 million (USD $1.25 million) during the year-ago period.

The company bought back $800 million of its own stock in the third quarter, part of a $1-billion stock buyback program it announced last spring.

In September, TME launched a secondary listing on the Hong Kong Stock Exchange; it was already publicly traded on the New York Stock Exchange in the United States. Its move to issue secondary shares in Hong Kong followed similar moves by other big Chinese companies seeking to safeguard themselves against potential ramifications of the geopolitical tensions between China and the U.S.