Tencent Music Hit All The Right Notes With Its Latest Quarterly Report

Tencent Music Entertainment Group TME defied expectations with its fourth quarter report. A strong profit growth despite a slight revenue dip is a testament to the company’s strategic agility as growth in paid subscriptions helped offset mixed results in its social media business and the regulatory hit. Moreover, Tencent Music gathered almost as many paid subscribers as both Spotify Technology S.A. SPOT and Apple Music combined have in the U.S. According to Music Watch’s latest annual study, platforms such as Spotify and Apple Music gathered 109 million paid users in 2023.

Fourth Quarter Highlights

For the quarter ended on December 31, 2023, Tencent Music showed revenue dropped 7% YoY as it amounted to $957.02 million or 6.89 billion yuan, still surpassing LSEG’s estimate of 6.71 billion yuan.  The YoY revenue decline is a partly result of last year’s China's regulatory crackdown on music platforms' chance-based features. But despite the revenue decline, net profit rose 16.9% YoY to $198 million. The base of paying users expanded 21% YoY to 106.7 million.

The core music streaming services reported a significant YoY increase of 41.1% YoY as sales amounted to $707 million, because Tencent Music did a good job at converting free users into paying subscribers with expanded content offerings and personalized features. Online music service segment whose revenue consists of music subscriptions also reported strong YoY growth of 45.3% as sales amounted to $481 million, reflecting that Chinese consumers are willing to pay for premium music. Online music-paying userbase of its Spotify-like music streaming platform grew 20.6% YoY as it reached 106.7 million users at the end of the reported quarter. Moreover, the average monthly revenue generated per paying user expanded 20.2% YoY, reflecting the company’s ability to extract higher value from its users through value-added services.

Fiscal Year 2023 Highlights

As for the full year, 2023 revenues also declined by 2.1% to $3.91 billion but net profits rose 36% to $735 million. Core music streaming business reported substantial growth as sales reached $2.44 billion, translating to a 38.8% YoY increase. Music subscriptions alone brought $1.70 billion to the revenue table, translating a rise of 39.1% on a YoY basis.

Tencent Is Tuned Up For A Strong Year Despite A Challenging Backdrop

The latest quarterly report from China's leading online music and audio entertainment platform reflected the company’s dominance in the world's fastest-growing music streaming market. Moreover, Tencent Music showed its potential as it strategically repositioned itself for sustained long-term growth in key areas while navigating a complex environment. Tencent Music, along with Spotify and Apple Music, are a testament to streaming music becoming ingrained in our everyday lives. Moreover, Tencent Music continues to explore opportunities to unlock new revenue streams within the online music field and offer a diversified experience for its massive userbase.

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