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Tencent Music (TME) continues to grow the number of people who are paying for streaming subscriptions or music downloads from its services in China.

The company ended 2021 with 76.2 million ‘online music paying users’, up by 36.1% year-on-year, according to its financial results. It added five million paying users in the final quarter of 2021 alone.

However, it’s not all good news. In Q4, TME’s overall revenues were RMB 7.61bn ($1.19bn), down 8.7% year-on-year. That’s despite 4.3% growth for its online music revenues, including 23.5% growth for music subscriptions specifically – to RMB 1.95bn ($306m).

What pulled the overall figures down was TME’s other key business segment: social entertainment services (largely karaoke and livestreaming). Those revenues fell by 15.2% year-on-year to RMB 4.73bn ($742m), and since social entertainment is nearly two thirds of the company’s business, that caused the overall decline.

TME, understandably, stressed the positive. Its full-year revenues in 2021 were up by 7.2% to RMB 31.24bn ($4.9bn), including 22.7% growth for online music services to RMB 11.47bn ($1.8bn). Subscriptions accounted for RMB 7.33bn ($1.15bn) of that, and grew by 31.9% year-on-year.

In his official statements accompanying the financials, TME’s executive chairman Cussion Pang blamed “increasing competition and changing macro environment” for the Q4 drop in social entertainment revenues.

Other stats worth knowing about Tencent Music’s business: it ended 2021 with 615 million monthly active users of its online music services, down from 622 million the year before. The 76.2 million paying users of those services means that TME’s conversion rate is now 12.4% – a big step up from 9% a year ago.

Also watch what TME is doing with original (exclusive) music and independent musicians. In the company’s earnings call, Pang talked about its work on AI-powered hit-spotting tools for example.

“Our proprietary predictive model enables forecasting and data mining for songs with blockbuster potential by determining intricate user preferences and using melody, lyrics, voice and rhythms, which in turn makes original song production more cost effective,” he said. One track identified in this way, ‘Lonely City’, did nearly 1bn streams in Q4 alone.

TME also now has 300,000 independent musicians uploading to its services through its Tencent Musician arm, and is working with other companies “in the broader Tencent ecosystem” (i.e. subsidiaries and firms it has invested in) to create original tracks. 117 of those were released in 2021 based on games, animation, books and TV shows.

Also of interest: TME recently launched TMELAND, a music-focused virtual world, holding an online music festival there on New Year’s Eve. The company plans to partner with artists to create bespoke environments for their virtual concerts – including ones where they perform as avatars – while also applying TMELAND to the company’s karaoke business.

The metaverse is also extending into TME’s streaming services. “Looking ahead into 2022, QQ Music will see an upgrade with a metaverse feature, where user will have its own individual room where you can put your own music into that virtual room, friends can come and visit, you can listen to the music together, you could play instruments together,” chief strategy officer Tony Yip told analysts.

“And for artists, we will be also opening kind of virtual showrooms for these partnering artists to display all of their albums in this virtual world, and users can come into this virtual showroom, listen to all their audio music under different audio effects.”

There are even experiments splicing music with virtual pets: M-PETS on TME’s QQ Music service, and Music Elf on its Kugou Music service “to provide companionship to our music users”. A niche? TME said these have “already been adopted by millions of users”.

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