Like a number of other Chinese technology companies, Tencent Music (TME) has been dealing with the close interest of the Chinese authorities in its business practices recently – including a crackdown on its exclusive deals with music rightsholders.
The impact on this public company has been marked: its market cap has plunged from a peak of $53.8bn in March to $15.1m now. Unsurprisingly, however, TME was keen to stress its cooperation with the Chinese regulators when announcing its latest financial results this morning.
“We would like to reiterate that TME sincerely accepts the decision issued in July by the regulator pertaining to exclusive music licensing arrangements. We are committed to fully complying with all requirements in a timely manner,” promised executive chairman Cussion Pang.
What about those financials? TME saw its revenues grow by 15.5% year-on-year to RMB 8.01bn (around $1.24bn), including a 32.8% increase in its online music business to $457m. Within that, music subscriptions grew by 36.3% to $277m, with 66.2 million users of TME’s services paying in some way during Q2.
That figure is up by 40.6% year-on-year, even though TME’s monthly active users for online music has fallen by 4.3% to 623 million. So, 10.6% of its users are now paying, up from 7.2% a year ago. For comparison, Spotify’s conversion rate is 45.2%, but in the context of China TME’s growth on this metric is very encouraging for the music industry.
TME reported an operating profit of $160m for Q2 this year. The company also shared some details on the evolution of its TME Live livestreaming business, which is moving to “a hybrid model featuring both online concerts and offline events, including indoor music festivals and parties”. TME has also recently added features including ticketing, VIP perks and merchandise sales.
What next though? Cussion Pang admitted that the regulatory environment may have more bumps ahead for TME’s overall business. “While we expect some impact to our business operations as a result of this decision, we remain steadfast in our ongoing goals of fostering innovation, fulfilling our social responsibilities, providing users with better services and promoting the long-term, healthy development of the digital music industry.”
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