It’s not just Spotify enduring the slings and arrows (well, share-price drops) of life as a public music-streaming company. Tencent Music published its latest financial results overnight, and saw its share price drop in after-hours trading as analysts picked over the figures.
What are the figures? They’re good, at first glance. In the final quarter of 2018, Tencent Music’s revenues were up 50.5% year-on-year to RMB 5.4bn ($785m), and while the company did report a net loss of $127m, it pointed to a one-off $221m charge relating to equity issued to Warner Music and Sony Music in the run-up to the company’s IPO. For the full-year 2018, Tencent Music’s revenues were up 72.9% to $2.76bn, and it posted a net profit of $267m even with the equity charge.
Let’s dig into the figures though. Tencent Music ended 2018 with 644 million mobile monthly active users (MAU) of its online-music services – up 6.8% year-on-year. Of those, 27 million were paying users, up 39.2%, and paying an average of RMB 8.6 (around $1.28) a month. These figures largely cover Tencent’s three music-streaming services in China: QQ Music, Kugou Music and Kuwo Music.
Remember, though, that Tencent Music is also a business based on mobile karaoke and live-streaming video apps. This ‘social entertainment’ category ended 2018 with 228 million mobile MAUs, up 9.1% year-on-year. 10.2 million of them were paying users (up 22.9%) spending an average of RMB 126.7 (around $18.91) a month. For 2018 as a whole, social entertainment generated $1.96bn for Tencent Music, while online music generated $805m (including $364m of subscriptions income).
The monthly average revenue per paying user (ARPPU) fell by 1.1% year-on-year for online music, but grew by 24.3% for social entertainment, which is something to ponder. Meanwhile, Tencent mentioned as highlights from 2018 the expansion of its catalogue through new label-licensing deals; in-house production of chart-countdown shows and live-streamed video talk shows; more long-form audio content like radio shows; and “empowering independent artists through the Tencent Musician platform to distribute high-quality original music content”.
As we’ve noted before: Spotify’s moves towards direct licensing deals with artists in the west may be controversial, but they’re already part of the fabric of how Tencent Music operates in China.