Tencent Music Entertainment managed to post strong earnings on Monday, but its dominant position is increasingly under threat. The company recorded revenues of RMB 7.82 billion (USD 1.19 billion) in the first quarter of this year, up 24% year-on-year (YoY) but decreasing from RMB 8.34 billion in Q4 2020. The firm generated RMB 926 million (USD 141 million) in net profits, compared to RMB 887 million in the same quarter last year and RMB 1.2 billion in Q4.
Online music services, including paid subscriptions, contributed RMB 2.7 billion (USD 420 million), while social entertainment and other services increased to RMB 5.1 billion (USD 775 million). The number of paying users for online music reached 60.9 million in the quarter, representing a 42.6% YoY increase and a historical high. Paying users of its social entertainment services, however, slightly decreased to 11.3 million.
Mobile monthly active users of the music apps QQ, Kugou, and Kuwo decreased to 615 million from 657 million a year ago, primarily due to “some churn of our casual users served by pan-entertainment platforms,” the company said on Monday. TME added that its core music users have become more engaged and spend more time on the platform. It attributed the drop in the social entertainment segment, which includes the app WeSing, to a “changing competitive landscape.”
In addition to its competition, TME also faces uncertainty from regulators, which are conducting an antitrust probe into its parent company Tencent, Reuters reported in late April. The State Administration of Market Regulation told the company that it “should expect a fine, give up exclusive music rights, and may even be forced to sell the acquired Kuwo and Kugou music apps,” the report said, referring to people with direct knowledge of the matter.
On Tuesday, Bloomberg reported that NetEase reached an agreement with Sony Music Entertainment putting an end to an exclusive partnership between Sony and TME. Tencent Music’s NYSE-listed shares closed marginally up at USD 15.30 on Monday and were slightly gaining in after-hours trading.