Tencent Music Entertainment (TME) generated RMB 6.93 billion (USD 981 million) in total revenues for the second quarter of 2020, up 17.5% year-on-year (YoY), beating estimates. Paying online music users ramped up by 51.9% YoY to 47.1 million, according to the firm’s earnings reported on August 10th after market close.
Tencent-controlled TME (NYSE: TME) stock jumped 2.36% to USD 16.06 in after-hours trading.
In the reported quarter, revenues from online music services—including QQ Music, Kuwo Music, and Kugou Music—reached RMB 2.22 billion (USD 314 million), indicating an increase of 42.2% from the prior year’s RMB 1.56 billion. The growth is driven by music subscriptions and digital album selling. On its music streaming apps, TME reported 651 million monthly active users (MAUs), down slightly 0.2% YoY, and about 7% of them are paying users. The monthly average revenue per paying user (ARPPU) of online music services grew 8.1% YoY to RMB 9.3 million.
The social entertainment business, such as online karaoke and livestreaming, continues to be lucrative despite a wane in momentum, raking in RMB 4.71 billion (USD 667 million) for the quarter with an 8.6% increase. The MAU of social entertainment services dropped 2.5% YoY and the monthly average revenue per paying user (ARPPU) was down 2.6% YoY to RMB 125.6.
Net profit attributable to equity holders of TME was RMB 939 million (USD 133 million). The combined cash, cash equivalents, and term deposits amounted to RMB 22.32 billion (USD 3.16 billion).
“Supported by our strong financial position and cash flow generation, we will continue to invest in and ramp up our long-form audio services, and expect to achieve significant synergies across all aspects of our businesses and further boost our long-term sustainable growth,” said CEO Cussion Pang in the report. By “long-form audio,” he refers to content including audio-based literature, audio drama, and talk show on platforms the company operates. The company has also put dedicated effort into an online live music brand—TME Live—this year, organizing nine live performances in the past quarter as offline activities have yet to return to the pre-pandemic condition.
TME recently has also extended its contract with Universal Music Group (UMG) and announced to form a new joint venture music label with UMG. On the same day, UMG also announced a multi-year licensing agreement with TME’s biggest rival in the music streaming market—NetEase Music, breaking the precedent of signing exclusively with TME.
Asked whether TME had a plan to deal with a recommendation from the Trump administration over auditing US-listed Chinese firms during analysts meeting following the report, CSO Tony Yip said that it was “premature” to speculate over a potential delisting.