Tencent Music Entertainment (TME), the owner of QQ Music, Kugou, and Kuwo Music, posted total revenue of RMB 7.58 billion (USD 1.12 billion) for the third quarter, up 16.4% year-on-year (YoY), as it inked deals with labels and expanded content offerings, the company announced on Tuesday after market close.
In the quarter, TME saw revenues from online music subscriptions grow by 55% YoY to RMB 1.46 billion (USD 215 million), as paying users reached 51.7 million, a 46% YoY annual growth. Paying users accounted for 8% of all users on TME’s services. The company added 4.4 million in Q3, representing the largest net increase since 2016.
Mobile monthly active users (MAUs) of online music and social entertainment services dropped 2.3% year-on-year to 646 million and 6.4% to 235 million, respectively. Meanwhile, monthly average revenue per paying user (ARPPU) of online music and social entertainment increased by 5.6% and 32% YoY to RMB 9.4 million (USD 1.42 million) and RMB 166.7 million (USD 23.3 million).
TME booked a net profit of RMB 1.13 billion (USD 167 million), compared to RMB 1.03 billion in the same period of last year. The gross profit for the third quarter increased by 11.2% YoY to RMB 2.39 billion (USD 362 million), although gross margins declined by 1.6% to 32.4% due to larger investments in new products and content, the financial report said.
The stock of TME (NYSE: TME) rose slightly by 1.67% to USD 15.2 in after-hours trading.
“In the third quarter, we continue our healthy trajectory of seizing opportunities in China’s online music entertainment services through various monetization models,” CEO Cussion Pang said during the earnings call. Pang further noted that the company is on track to exceed the 20% paywall target for the monetization of its content. TME consolidated its content library during the quarter by forming partnerships with labels including Merlin, Peermusic, and Kobalt.
The company acclaimed TME Live, the concert livestreaming project it launched to tackle the impact of the coronavirus pandemic and which saw more than 30 online live concerts since March. However, with the pandemic under control in China, TME will focus more on the synergy of online and offline music events, CFO Shirley Hu explained.
“The absolute level of net adds may not have been strong in the third quarter, but overall, but the growth trend could continue into next year and beyond,” Hu said regarding its paying users.