Chinese music-streaming giant Tencent Music Entertainment (TME) has published its financial results for the third quarter of 2022.
They show that its revenues fell by 5.6% year-on-year to RMB 7.37bn ($1.04bn) in Q3, while its mobile monthly active users for online music declined by 7.7% to 587 million.
The good news for TME is that the number of people paying for its online music services continued to grow: up 19.8% to 85.3 million in Q3 2022.
Unlike western streaming services, this is not just a measure of monthly subscriptions: in China, people can also buy digital albums from services like TME’s QQ Music, Kugou and Kuwo.
The company said that its revenue from music subscriptions grew by 18.3% year-on-year to RMB 2.25bn ($316m), and thus accounted for just over 30.5% of its overall revenue.
TME suggested that the results reflected the success of its strategy to focus on growing its number of paying users, while cutting costs and finding ‘efficiencies’ elsewhere in its business to make the company more profitable.
On that front, TME reported an operating profit of RMB 1.26bn ($177m) in Q3, up from RMB 919m this time last year. Its net profit was RMB 1.09bn ($154m).
Online music – the three streaming services named above – is only one part of TME’s business. The other is ‘social entertainment’, which includes livestreaming and online karaoke, and this is where the biggest challenges are for the company.
While TME’s overall revenues were down 5.6% year-on-year, its revenues from online music actually rose by 18.8% to RMB 3.43bn ($482m).
What dragged the total down was the social entertainment business, where revenues fell by just under 20% to RMB 3.94bn ($553m). Its number of mobile monthly active users fell 24.4% to 155 million, but its number of paying users also fell – by 26% to 7.4 million.
For a sense of how TME’s business is shifting, look back three years to its financial results for the third quarter of 2019.
Then, it had 12.2 million people paying for its social entertainment services, and 35.4 million paying for its online music services. The former has shrunk by 39.3% since then, while the latter has grown by 140.9%.
Another spin on that: three years ago, social entertainment services accounted for 71.6% of TME’s overall revenues. Now they’re down to 53.5%. In the near future, online music may well become the biggest part of TME’s business.
Some other notes of interest from the company’s latest financials include its investment in ‘Lingyin Engine’ – synthetic voice technology – which it has used to create its own “AI singer lineup” based on the voices of real stars.
“As of the end of the third quarter, we have launched over 1,000 songs with AI synthetic voices,” revealed TME in its financials announcement.
There were also an updated stat for its Tencent Musician platform, which lets independent artists upload their music directly to TME’s services. More than 350,000 of them are now doing that, up from 260,000 a year ago.
TME also hosted 32 online and offline concerts in Q3 through its TME Live initiative, including hosting a virtual concert in its TMELAND virtual world with Pepsi which attracted more than four million viewers.
Like its global equivalent Spotify, Tencent Music has endured a bumpy ride in terms of its share price since becoming a public company. Its market cap (valuation) peaked at $53.81bn in March 2021, but it closed yesterday at $7.54bn.
However, TME recently completed its secondary listing on the Hong Kong stock exchange, which executive chairman Cussion Pang said “demonstrates our commitment to protecting long-term value for shareholders”.