Tencent Music Entertainment, China’s largest digital music conglomerate, managed nearly 7% revenue growth in the July-September quarter as streaming services more than compensated for the continuing retreat of the group’s high-value ‘social entertainment activities.
Net profits in the third quarter of its financial and calendar year, climbed by 35% to RMB1.71 billion ($244 million) on revenue of RMB7.02 billion ($1 billion). For nine months, revenues were an unchanged RMB20.9 billion ($2.98 billion) and net profits RMB5.03 billion ($717 million), a 32% gain in local currency terms.
Streaming music services managed the double whammy of increasing the number of paying subscribers (by two million quarter-on-quarter to 119 million) and increasing average revenues per subscriber, to RMB10.8. Together, they produced 20% year on year growth in music subscription revenues to RMB3.84 million ($547 million).
In contrast, social entertainment managed a fractional increase in subscriber numbers, to 7.8 million, but only with a 25% cut in per user revenue. Social entertainment services include karaoke app WeSing and live concert platform Kuwo Music. But the group was forced to remove some of its live music services in compliance with China’s changing regulations.
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“Our commitment to high-quality growth is reflected in another solid quarterly performance. The steady expansion of our music subscribers and diversified music services continue to drive overall growth and profitability. We are encouraged by the growing synergies between our platform and well-established content ecosystem, which have become a vital force in empowering us to seize new opportunities for long-term, sustainable growth,” said Cussion Pang, executive chairman.
“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. By offering enriched and differentiated user privileges, our value proposition for more premium memberships has been well accepted, cultivating greater loyalty on our platform,” said Ross Liang, CEO.
Operational highlights included: updated partnerships with leading record labels, including with YH Entertainment Group and Image Music Group to include early access for new song releases; a strategic alliance with Galaxy Corporation to increase the firm’s advantage in K-pop content offerings, including digital albums, merchandise, and multi-year hosting rights for G-Dragon’s concerts.
It also introduced new product features such as dynamic player skins, audio players, and ringtones; and collaborated with popular IPs such as “Black Myth: Wu Kong,” “Crayon Shin-chan” and Disney to drive user engagement.