Tencent Music Entertainment (TME) reported its financial results for the first quarter of 2019 overnight, and there are plenty of big numbers as you’d expect. Overall revenues grew by 39.4% year-on-year to RMB 5.74bn ($855m) as TME recorded an RMB 987m ($147m) net profit – as usual benefitting from the fact that a significant chunk of its business is focused on social entertainment apps (karaoke and live-video), rather than being ruled by the margins of music-streaming.

But what about music-streaming? TME’s three ‘online music’ services in China ended March with 654 million mobile monthly active users (MMAUs), up from 625 million a year ago – so 4.6% growth. However, the number of people paying for those music services grew by 27.4% to 28.4 million at the end of Q1. The online-music division generated RMB 1.61bn ($239m) of revenues for the quarter, which was up 28% year-on-year, with subscriptions accounting for RMB 710m ($106m) of that total.

That’s a reminder that Tencent Music’s services are huge in terms of free listeners, but still nascent in terms of revenues. The company’s monthly average revenue per paying user (ARPPU) for online music was RMB 8.3 (around $1.21), and that $239m of music revenues compares to $1.69bn for Spotify in the same quarter. The usual caveat: these may be the two most prominent music-streaming companies to have gone public, but they are operating in very different markets with different overall businesses.

It’s worth noting this quote from TME’s CEO Cussion Pang. “As our users increasingly consume music content through streaming services, we are riding on this trend to gradually transition into a pay-for-streaming model over the coming years,” he said. That reflects the desire from labels to drive more paid subscriptions in China, rather than just large-scale (although at least legal) free listening. Putting more music behind the paywalls of TME’s streaming services is a key part of that strategy: another contrast to the west.

It’s worth thinking about the social-entertainment side of TME’s business too. There are now 225 million MMAUs and 10.8 million paying users for the company’s karaoke and live-video apps – up 0.4% and 12.5% year-on-year respectively. Yet the ARPPU for those paying users is RMB 127.5 ($18.54) – more than 15 times that of the online-music payers. That’s how TME managed to generate RMB 4.13bn ($616m) from social entertainment in the first quarter of this year – 72% of the company’s overall revenues.

EarPods and phone

Tools: platforms to help you reach new audiences

Tools: Kaiber

In the year or so since its launch, AI startup Kaiber has been making waves,…

Read all Tools >>

Music Ally's Head of Insight

Leave a comment

Your email address will not be published. Required fields are marked *