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Despite 80m paying users, Tencent Music revenues fall 15%


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Bumpy times for China’s biggest music streaming company, Tencent Music Entertainment (TME). It announced its latest financial results this morning, revealing that its revenues fell 15% year-on-year to RMB 6.64bn (around $982.9m) in the first quarter of 2022.

Why? We’ll start by separating TME’s two business units: ‘online music services’ (its three streaming services: QQ Music, Kugou and Kuwo) and ‘social entertainment services’ (livestreaming and karaoke, mainly). Revenues for the first category fell by 4.8% to RMB 2.62bn ($387.9m) while those for the second fell by 20.6% to RMB 5.08bn ($752.1m).

So, if TME’s finances are taking a bath, it’s much more about the karaoke and livestreaming side of the business – which remain the majority of its revenues – than the music streaming services. However, the latter’s decline in revenues will still be a concern for the music industry.

What’s happening within these figures? TME is actually still doing a good job of turning free listeners into paying customers. While monthly active users for its three streaming services fell by 1.8% to 604 million in Q1 2022, its number of paying users grew by 31.7% to 80.2 million.

That’s 80.2 million people paying either for subscriptions, or digital music – downloads are still a part of the Chinese DSPs ecosystem – or a combination of the two. For context, TME had 22.3 million paying users for online music four years ago, in Q1 2018.

This element of its business has grown sharply, and TME made a point in its financials of breaking out its 17.8% year-on-year growth in music subscriptions to RMB 1.99bn ($294.7m) as a highlight.

Executive chairman Cussion Pang put the overall revenues decline down to “headwinds in an evolving market landscape”. That’s not just new regulations sweeping away DSP-exclusive deals with music rightsholders – but also a crackdown on social and video platforms that has affected TME’s social entertainment business.

This has already given TME’s share price a beating over the last year or so. The company’s market cap peaked at $53.81bn in March 2021, but has since sunk to $7.04bn. Which makes for an interesting-slash-terrifying comparison to Spotify, whose market cap peaked at $69.35bn in February 2021, and has since fallen to $19.47bn.

Some of the factors are different, while others – wobbly times for Big Tech stocks in general – are the same. But it’s a trend worth discussing: that during what many think of as a boom time for the music industry and streaming, the two biggest pureplay DSPs have seen a whopping $96.65bn wiped off their combined valuations in just 15 months.


Written by: Stuart Dredge