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Tencent Music Entertainment sees profits grow as paying users rise

The firm also announced an expected slowdown in revenue for the first half of 2020 due to coronavirus.

Music - Photo by Malte Wingen on Unsplash Music - Photo by Malte Wingen on Unsplash

Tencent Music Entertainment (NYSE: TME) reported on Monday total revenues of USD 1.05 billion for the fourth quarter of 2019 with a swing in net profit, beating analysts’ expectations and sending the company’s stock up by 4.1% to USD 11.5 per share in the after-hours session. 

The entertainment arm of Tencent, which went public in December 2018, registered year-on-year (YoY) increase in revenues of 35.1% in the reported quarter, fuelled by continuous growth in paid subscriptions. The company gained 4.5 million new users during the quarter, up 47.8% YoY, to reach 40 million paying users in total.

TME’s net profit attributable to equity holders was RMB 1.04 billion (USD 150 million), compared with a net loss of RMB 876 million in the same period of 2018. Revenue generated from online music services was USD 307 million, up 40.7% versus the prior year’s level. This included music subscriptions, advertising services, digital album sales, and sub-licensing. Also, social entertainment services and other segments brought in USD 740 million in revenue.

The company highlighted the rise in average revenue per paying user (ARPPU) in its report, indicating that monthly ARPPU for online music grew to RMB 9.3 (USD 1.3), an 8.1% YoY rise. In its social entertainment business, which includes the organization of events such as the Tencent Music Entertainment Award, it reported a 9.3% YoY increase to RMB 138.5 (USD 19.8).

In the fiscal year of 2019, TME booked total revenues of USD 3.65 billion, up by 34% YoY.

Tencent’s music arm operates three music streaming services in China—QQ Music, Kugou Music, and Kuwo Music—and is the market leader, with NetEase’s Cloud Music playing a catch-up. The company’s karaoke and music-centric livestreaming app, WeSing, also leads in its vertical, while NetEase released a similar offering, dubbed Yinjie, just last week.

“2019 marked a year of healthy growth across our businesses. We made significant contributions to upholding music copyright protection, supporting original content creation and designing innovative monetization models to unlock the intrinsic value of music,” said TME’s CEO Cussion Pang.

The firm, which announced in December 2019 that it will join a Tencent-led consortium to acquire a 10% equity stake in Universal Music Group, has big plans for the present year, although it recognized the impact of the coronavirus outbreak over its business.

“Total revenue growth is expected to be slower than original expectation due to the short-term impact in the first half, and we expect revenue growth to improve in the second half,” Pang said during the firm’s earnings call.

“For 2020, we look forward to launching a livestreaming service on our QQ Music application, and tapping into China’s massive but under-penetrated long-form audio market,” added Tony Yip, Chief Strategy Officer of TME.

TME previously established a partnership with Tencent-backed China Literature to bring audiobooks onto its platforms.