Tencent Music Entertainment, China's largest online music company, increased its profit by a third in the April-June quarter of its fiscal year, despite a marginal decline in revenue.
The company reported revenue of 7.16 billion yuan (US$985 million) in the first three months of the year, down 2% year-on-year, and net profit of 1.79 billion yuan (US$247 million). In the first half, revenue fell 2% to 13.9 billion yuan, while net profit grew 30% to 3.32 billion yuan.
Data analysis shows that the company's lucrative social music business (karaoke and other derivative music services) is suffering a massive 45% decline in average revenue per paid user (ARPPU), a 31% decline in regular users and only modest (5%) gains in subscribers.
But those slowdowns were more than offset by growth in its music streaming business. The number of paying users for streaming services rose 17% year-over-year to 117 million, while average revenue per user rose 10%.
The increase in paying users is primarily due to high-quality content, attractive membership benefits, improved user operations, and effective promotions. During the period, Tencent Music renewed its contracts with Sodagreen and Korea's CJ ENM.
Zhou Shen's digital album Shenself topped the platform's sales volume this year. Digital albums from Lay Zhang and Korea's aespa were also strong.
The streaming service also saw an increase in advertising revenue. The company explained that this was primarily due to the diversification of the product portfolio, innovative advertising formats, and the introduction of sponsored ads and sponsorships. In addition, increased revenue from offline shows also contributed to the growth in revenue from online music services.
In contrast, the continued decline in the social music side was “primarily a result of changes to interactive live streaming functions, stricter compliance procedures, and increased competition from other platforms.”
“With over 10 million net subscribers added in the first half of 2024 and revenue per user expanding, we continue to break new ground in the live streaming space in China. We remain optimistic about the long-term potential of the music industry and are committed to achieving our medium- to long-term goals sustainably, at a healthy pace and with the right balance,” said CEO Kuchen Pang. “This approach has served us well in the past as we successfully navigated through different development stages and changing external environments, and it will continue to fuel innovation and growth in the years to come.”
Parent company Tencent is scheduled to report its second-quarter financial results on Wednesday.
