Streaming growth helps boost profits by a third

Tencent Music Entertainment, China’s largest online music company, reported a one-third rise in profit in the second fiscal quarter (April to June), despite a slight decline in revenue.

The company reported revenue of RMB7.16 billion ($985 million) in the three months, down 2% year-on-year, and net profit of RMB1.79 billion ($247 million). For the first half of the year, revenue fell 2% to RMB13.9 billion, while net profit rose 30% to RMB3.32 billion.

The data analysis shows that the company’s profitable social music businesses (karaoke and other related music services) saw a massive 45 percent decline in average revenue per paying user (ARPPU), a 31 percent decline in occasional users, and only a modest (5 percent) increase in subscribers.

These setbacks were more than offset by growth in the streaming music business, with the number of paying users up 17% year-on-year to 117 million, while ARPPU simultaneously rose 10%.

The growth in paying users was primarily due to high-quality content, attractive membership benefits, and optimized user operations and effective promotions. During this period, Tencent Music renewed contracts with Sodagreen and Korea’s CJ ENM.

Zhou Shen Shen’s digital album Shenself was the platform’s top-selling album this year. Digital albums by Lay Zhang and Korean aesp were also strong.

The streaming service also saw an increase in advertising revenue. The company explained that this was primarily due to a more diverse product portfolio and innovative ad formats, the introduction of ad-supported mode and sponsored advertising. Additionally, growth in offline performance revenue also contributed to the growth in online music service revenue.

Meanwhile, the continued decline in social music “was primarily the result of adjustments to interactive live streaming features, more stringent compliance procedures, and increased competition from other platforms.”

“With over 10 million net new subscribers in the first half of 2024 and the expansion of ARPPU, we continue to blaze new trails in China’s streaming landscape. We remain optimistic about the long-term potential of the music industry and are committed to sustainably achieving our medium- and long-term goals, at a healthy pace and with the right balance,” said Cussion Pang, Executive Chairman of the company. “This approach has been key in the past as we successfully navigated through different stages of development and changing external environments, and will continue to drive innovation and growth in the years to come.”

Parent company Tencent will release second-quarter financial data on Wednesday.