China's Tencent Music Entertainment Group saw its profit jump 36 percent to 5.22 billion yuan ($735 million) in 2023 as growth in paid subscriptions helped offset mixed results in its social media business, according to earnings deposit on Tuesday (March 19).
China's leading music streaming company – Tencent Music operates QQ Music, Kugou and Kuwo as well as social karaoke game WeSing – reported that revenue from music subscriptions rose 39.1% to 12.10 billion yuan (1.70 billion dollars) thanks to 18.2 million more net paying subscribers in 2023. (This compares to a net increase of 12 million paying subscribers in 2022.) Tencent Music's paying subscribers now stand at 106.7 million, or nearly as many as based in the US as much as Spotify and Apple Music combined.
However, the company said its full-year revenue of 27.75 billion yuan ($3.91 billion) was down 2.1 percent from 2022 and that fourth-quarter 2023 revenue of 6.89 billion yuan ($957.06 million) decreased by 7.2% compared to the previous quarter due to a decrease in its revenue in the social entertainment services sector.
Tencent Music executives said the company's “dual engine” strategy, which led to a 38.8% year-on-year increase in revenue for its core online music business, allowed it to absorb the success in its social business.
“The fourth quarter saw accelerated year-over-year growth in music subscription revenue, underpinned by continued increases in subscribers and (average revenue per paying user),” he said. Cushion Pang, executive chairman of Tencent Music. “The strong performance of online music services mitigated headwinds from social entertainment services and contributed to expanded quarterly net earnings.”
Revenue for the company's social entertainment services for the full year 2023 fell 34.2% to 10.43 billion yuan (US$1.47 billion) from 2022, due to “adjustments to certain live streaming interactive features and tighter compliance procedures,” the company said. Tencent Music, along with other content platforms such as NetEase's Cloud Music, removed a popular live streaming feature that analysts said was often exploited for gambling after the Chinese government launched a gambling crackdown in mid-2023.
The crackdown prompted Tencent Music and others to shut down their popular and highly profitable live streaming services, leaving Tencent Music's social entertainment services division struggling to recover. Reuters mentionted.
Shares of US-listed Tencent Music were up 6.8% by 2:30 p.m. ET after the earnings announcement.
