Tencent Music Beats Profit Estimates Despite Decline in Users
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Tencent Music Entertainment Group delivered a stronger-than-expected quarterly performance, reporting a 36% jump in profit and solid revenue growth.Photo: VCG
Tencent Music Entertainment Group delivered a stronger-than-expected quarterly performance, reporting a 36% jump in profit and solid revenue growth, even as the Chinese music streaming company grappled with a declining user base in an increasingly crowded market.
The company, which is listed in New York and Hong Kong, said third-quarter revenue rose 20.6% from a year earlier to 8.5 billion yuan ($1.2 billion), exceeding analysts’ expectations, according to a statement released Wednesday. Net profit attributable to shareholders reached 2.2 billion yuan. Shares of its U.S.-listed stock climbed more than 3% in premarket trading following the results.
But behind the upbeat financials lies a key challenge: monthly active users (MAUs) of Tencent Music’s online services fell 4.3% year-on-year to 551 million, as rising competition from rivals — including apps owned by TikTok parent ByteDance Ltd. — continues to bite.
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- Tencent Music’s Q3 2023 profit rose 36% to 2.2 billion yuan, with revenue up 20.6% to 8.5 billion yuan ($1.2 billion), despite a 4.3% drop in monthly active users.
- Rivals ByteDance and NetEase Cloud Music grew rapidly, increasing competitive pressure, while paying users on Tencent Music climbed 5.6% to 125.7 million.
- The company enhanced international partnerships, expanded concerts, but saw social entertainment revenue fall 2.7% due to regulatory challenges.
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Who’s Who
- Tencent Music Entertainment Group
- Tencent Music Entertainment Groups reported strong quarterly results with a 36% jump in profit and 20.6% revenue increase to 8.5 billion yuan ($1.2 billion). Despite a declining user base due to competition from ByteDance and others, the company is confident in its sound quality, karaoke features, and multi-device compatibility, and is expanding its offline presence.
- ByteDance Ltd.
- ByteDance Ltd. operates music streaming apps Qishui Yinyue and Fanqie Changting. Qishui Yinyue reached 120 million monthly active users (MAUs), and Fanqie Changting had 38.2 million users in September, both experiencing over 90% growth from the previous year. These apps are significant competitors to Tencent Music's services.
- NetEase Cloud Music
- NetEase Cloud Music is identified as a key competitor to Tencent Music by CEO Liang Zhu. It operates in the increasingly crowded Chinese music streaming market, alongside rivals like ByteDance's Qishui Yinyue and Fanqie Changting. Tencent Music's CEO acknowledges the competitive pressure from NetEase Cloud Music and other services.
- Qishui Yinyue
- Qishui Yinyue is a music streaming app developed by ByteDance, the parent company of TikTok. It is a significant competitor to Tencent Music's services. In September, Qishui Yinyue reached 120 million monthly active users, demonstrating over 90% growth from the previous year. Tencent Music's CEO, Liang Zhu, specifically named Qishui Yinyue as a key rival.
- Fanqie Changting
- Fanqie Changting is a music streaming app that poses significant competition to Tencent Music. In September, it reported 38.2 million monthly active users, showcasing over 90% growth compared to the previous year. Tencent Music's CEO, Liang Zhu, recognized Fanqie Changting as a key rival in the increasingly crowded Chinese music streaming market.
- Dreamus
- Dreamus, a South Korean label, renewed its partnership with Tencent Music. This collaboration strengthens Tencent Music's position in offering high-quality music content, particularly within the K-pop ecosystem.
- King Records
- King Records is a Japanese record label that has signed a new deal with Tencent Music. This partnership strengthens Tencent Music's ties within the music industry and helps them offer high-quality music content, as highlighted by executive chairman Peng Jiaxin.
- Cereal
- Cereal is a South Korean record label. Tencent Music Entertainment Group recently signed a new deal with Cereal, demonstrating its commitment to strengthening its connections within the K-pop industry. This partnership highlights Tencent Music's strategy to offer high-quality music content to its users.
- KuGou
- KuGou is one of Tencent Music Entertainment Group's flagship apps. Alongside QQ Music, KuGou's monthly active users (MAUs) have experienced a decline. Despite this, Tencent Music's CEO emphasized the company's strong position, highlighting KuGou's sound quality, karaoke features, and multi-device compatibility as key strengths.
- QQ Music
- QQ Music is a flagship music streaming application owned by Tencent Music. While Tencent Music reported strong financial performance, QQ Music, along with KuGou, experienced a decline in monthly active users due to increasing competition. Despite this, QQ Music is innovating with monetization tools, having introduced "Bubble," a feature allowing users to pay for one-on-one artist chats, initially with K-pop artists and later expanding to Chinese artists.
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