We’re still waiting for the official publication of Tencent Music’s filing for an IPO in the US, which will provide bags of metrics on the company’s music-streaming services. In advance of that, we’ve got a new Reuters report based on an investor document that’s been circulating privately in the run-up to the imminent IPO.
It claims that Tencent Music expects to generate $3.1bn of revenues in 2018, and earnings before interest and taxes of $764m – up from nearly $400m in 2017. Comparisons with Spotify are the obvious response to this – in 2017 it recorded a loss before tax of €1.23bn (around $1.43bn) although the two companies are operating under markedly different licensing structures, given the advance-focused culture in Tencent’s homeland of China.
“The current practice in China is for companies to sign three-year contracts regardless of play count, so the economy of scale helps the platform’s profit,” is how BOCOM International analyst Connie Gu put it when interviewed for the article. Just as interesting are separate comments about Tencent Music’s business model being bolstered by other kinds of revenues – for example its share of tips paid to performers on karaoke-livestreaming apps like WeSing, which has 50 million daily active users, and from which Tencent takes a 70% cut of tips from listeners.
Also notable: Reuters says that the investor document rows back on some of the stats around Tencent’s streaming services that have been floating about in recent months. “All told, Tencent Music has more than 600 million active monthly users and about 80 percent of the online music market,” explains the report. We’ve seen claims of 700 million and even 800 million users in recent times, but it seems the IPO filing may (sensibly) reduce that: perhaps by not double-counting users on the company’s three main streaming services.
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