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2021 has been a bumpy year for Tencent Music Entertainment (TME), with the Chinese government cracking down on exclusive licensing deals with labels, and a wider climate in China of sterner regulation of big technology companies and their subsidiaries.

That’s a key reason why Tencent Music’s market cap (value) has plunged from its peak of $53.8bn in March to $13.5bn at the time of writing, although investors are also paying close attention to the company’s business performance. Talking of which, its Q3 financial results came out this morning.

Last quarter, Tencent Music generated RMB 7.81bn ($1.21bn) of revenues, up 3% year-on-year. Within that, its ‘online music services’ revenues grew by 24.3% to RMB 2.89bn ($448m), including a 30.2% growth in music subscriptions revenue to RMB 1.9bn ($295m).

Tencent Music now has 71.2 million ‘online paying music users’ – a metric that includes subscribers, but also people buying digital albums from the company’s services. That number of paying customers is up from 51.7 million a year ago. Meanwhile, its monthly active users for these services (including free listeners) now stands at 636 million.

In his comments on the results, executive chairman Cussion Pang cited regulatory changes and “facing competition for time spent from short video services” as the two trends challenging Tencent Music’s business in 2021. The company is responding to the second of those in several ways, including “upgraded video and social features” on two of its services, QQ Music and Kugou Music.

What else? TME is continuing to invest in its schemes for independent musicians, with a new ‘Riding on the Wind Plan’ teaming them up with established songwriters and lyricists, and a ‘One Hundred Million Yuan Incentive Plan’ for funding original work. The company now has 260,000 artists uploading music through its Tencent Musician arm.

TME is also growing its livestreaming business, putting on 26 online performances in Q3, while also forming a joint venture with Roblox China to work on virtual concerts. Meanwhile, QQ Music’s expansion into short video helped it to generate 100m daily video views, and 18 million daily unique visitors for that content.

As before, the lion’s share of TME’s revenues comes from its ‘social entertainment’ arm: user livestreaming and karaoke, but here there are challenges too. It had 205 million monthly active users for those services in Q3, down from 235 million a year ago. 10 million of them are paying (down from 10.5 million).

Those people spend an average of RMB 163.9 ($25.64) a month on TME’s social entertainment services, compared to the RMB 8.9 ($1.39) a month averaged by the company’s online music paying users. Finally, TME’s push into ‘long-form audio content’ – not just podcasts, but audiobooks and radio-style dramas – has seen its audience for that content grow to 140 million people, with more than five million of them paying for it.

One last bit of news from today: Tencent Music is hoping to help Chinese artists and labels get more listeners globally, via its new ‘TME Music Cloud’ distribution service. One of its first agreements, announced today, is with Apple Music, and will see Chinese music added to that service via TME’s distro pipes.

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Stuart Dredge

Music Ally's Head of Insight

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