Tencent Music Quarterly Revenue Hits $1B on Big Spike in Streaming
China's leading music streaming company reports a 34% increase in revenue from music subscriptions.
China’s Tencent Music Entertainment Group (TME) reported quarterly revenue rose for the start of the year, as the number of paying music streaming subscribers jumped nearly 18% and the company benefited from the rebounding economic activity as the threat of COVID-19 wanes.
Despite the surge in music subscription revenue helping Tencent Music beat analysts’ expectations for the quarter, the steady decline in revenue from social entertainment services disappointed investors. Shares of the Tencent Holdings Ltd.-controlled company were down roughly 3.5% to $7.68 in mid-day trading on the New York Stock Exchange.
Overall revenue for Tencent Music rose 5.4% to RMB 7 billion ($1.02 billion) for the quarter ending March 31, compared to a year ago, driven by a 34% increase to RMB 2.6 billion ($378 million) in revenue from music subscriptions. The number of online music subscribers rose 17.7% to 94.4 million for the quarter, driving average revenue per paying user up to RMB 9.2 ($1.32).
Tencent Music benefited from a rebound in economic activity in China since the country rolled back strict COVID-19 policies. Advertising revenue for e-commerce, games, travel, and food and beverage segments all increased year-over-year, while new big-name advertisers like PepsiCo and JD.com signed sponsored live events with the company in the first quarter.
Revenue from online music services for the quarter reached RMB 3.5 billion ($510 million), equaling for the first time ever revenue generated by Tencent Music’s social entertainment services. That signified the company’s “long-term commitment to developing a sustainable online music business model is bearing fruit,” company chairman Cussion Pang said on an earnings call. Nonetheless, revenue from social entertainment services fell 13% from a year ago to RMB3.50 billion ($510 million).
Tencent Music’s gross margin increased 5.1 percentage points to 33.1% for the quarter, compared to 28% a year ago, mainly due to the increase in music subscriptions and advertising revenue.
Key Points From TME’s Q1:
- Revenue rose 5.4% to RMB 7 billion ($1.02 billion) for the first quarter 2023 compared to the first quarter 2022.
- Revenue from music subscriptions increased by 30.4% to RMB 2.6 billion ($378 million).
- The number of subscribers rose 17.7% to 94.4 million from 88.5 million a year ago. The figure was also up 5.9 million from the fourth quarter last year.
- Monthly average users fell 6.9% to 592 million from 636 million a year ago, while mobile monthly active users of the social entertainment services fell 16% to 136 million.
- The company’s net profit attributable to shareholders rose 88.5% to RMB 1.15 billion ($167 million) from last year.