Tencent Music Quarterly Profits Jump 28% on Growing Subscriber Base

Executives of Tencent Music Entertainment Group said on Monday that higher than expected subscriber growth pushed its first quarter profits up 28% to RMB1.53 billion ($212 million).

Through marketing promotions timed around the Chinese New Year holiday, TME was able to add nearly 7-million-net new subscribers in the quarter—the most it has ever added in a single quarter—helping drive a nearly 40% increase in music subscription revenues of RMB3.62 billion ($501 million).

“Our effective marketing campaigns led to higher-than-expected first-quarter music subscriber growth,” TME chief executive Ross Liang said in a statement. “We are pleased to see a steady user base recovery thanks to our optimized operations efforts.”

Tencent Music had 113.5 million paying subscribers as of March 31 — roughly half the number of subscribers its more global competitor Spotify has. Still total revenues fell 3.4% compared to last year to RMB6.77 billion ($937 million) due to another quarter of declining social entertainment services revenues.

Social Entertainment services has seen declining revenue since TME scrapped a popular livestreaming service amid concerns it could be exploited for gambling. Revenues in the quarter from social entertainment services fell nearly 50% to RMB1.76 billion ($244 million) from RMB3.5 billion in the same period last year. Increased competition has also contributed to a consistent downward trend in monthly active users to its social entertainment products, with 97 million, or 28% fewer monthly active users, in the first quarter this year compared to last year.

The impact of declining social entertainment division revenues was blunted by a 43% increase in online music division revenue, which totaled RMB5.01 billion ($693 million) and was driven by music subscription and advertising services revenues.

Monthly average users to TME’s online music platform ticked down 2.4% to 578 million, but the money TME earns from paying users to its site rose. In the first quarter, TME earned 10.6 RMB ($1.47), up 15.2% from 9.2 RMB ($1.27) in the year-ago quarter, in monthly average revenue for each paying user of its online music service.

Tencent Music operates QQ Music, Kugou and Kuwo as well as the social karaoke game WeSing.

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