Tencent Music Entertainment (NYSE: TME) said on Monday that the company gained RMB 8.34 billion (USD 1.28 billion) in revenue in the fourth quarter of last year, up 14.3% year-on-year (YoY), and generated RMB 1.2 billion in net profits, up 15.4% YoY.
Revenues from online music services increased by 29% to RMB 2.76 billion (USD 423 million), driven by strong growth in music subscriptions and advertising, while other revenues such as social entertainment services were up 8.2% YoY to RMB 5.58 billion, thanks to increased demand for online karaoke services.
TME’s music subscriptions alone brought in RMB 1.58 billion, up 41.9% YoY, and the number of paying users reached 56 million, up 40.4% compared to one year ago. Subscribers pay RMB 9.4 per month on average. CEO Cussion Pang told analysts on Tuesday on the company’s earnings call that it has now paywalled 20% of its music and plans to increase that to 30% by the end of this year.
Overall monthly active users of mobile apps such as QQ Music, Kugou Music, and Kuwo Music decreased by 3.4% YoY to 622 million, as non-core users left, according to Pang. He added that in the fourth quarter, the firm witnessed double-digit year-on-year user growth for its IoT (Internet of Things) products, including smart speakers and in-vehicle applications.
“That represents additional opportunities for us, which we will share more in the future,” Pang said.
Advertising revenues increased by 100% YoY in the fourth quarter, amid balancing efforts to retain some of the free segment of users who were hard to be transformed into paying customers, according to him. Users of the social entertainment services, mainly of the karaoke app WeSing, decreased by 4.3% to 223 million, while the virtual gifts segment also narrowed to 10.8 million users, down 14.3% from 12.6 million in the fourth quarter of 2019. This unfavorable change was however mitigated by an increase of the monthly revenue per paying user from RMB 136.3 to RMB 172.1.
Along with the earnings release, TME also said that it expanded its multi-year licensing agreement with Warner Music, to continue to make the US company’s repertoire available across all its online music platforms and social entertainment app WeSing.