Net profits at Tencent Music Entertainment, China’s largest digital music operation, grew by 89% in the first quarter of the new year, hitting RMB1.15 billion ($167 million), even as revenue progressed by only 5% to RMB7.0 billion ($1.02 billion).
The group, which is backed by Chinese tech and entertainment giant Tencent and has stock market listings on the New York Stock Exchange and in Hong Kong, controls large equity stakes in Spotify and (in a consortium with Tencent) Universal Music Group.
Its own music operations divide loosely into two clusters: mass market music streaming, with paid-for and free tiers; and “social entertainment,” including karaoke and other derivative products.
For the first time, the company said that streaming revenues had caught up with social music. Revenues from online music services increased by 34% year-over-year to RMB3.50 billion ($510 million). Revenues from social entertainment services and others decreased by 13% year-over-year to RMB3.50 billion ($510 million).
The number of users paying for online music increased by 18% year-over-year to 94.4 million, which took the online music paying ratio to a record high at 15.9%. Average revenue per paying user expanded to RMB9.2 per month, marking its fourth consecutive quarter of growth.
The company said that the decline in social music revenues had led to a new focus on competitiveness through ongoing product innovation and initiatives in social entertainment services, such as audio live streaming, real-time interactive experiences and international expansion.
“We started 2023 with great momentum as our strategic emphasis on quality growth propelled a strong increase in our online music revenues. We are pleased to see that the revenue size of our online music services has now caught up with social entertainment services for the first time. This signifies that our long-term commitment to developing a sustainable online music business model is bearing fruit. Our total revenues experienced healthy growth in the first quarter, while our focus on efficiency optimization also drove robust net profit growth,” said Cussion Pang, executive chairman of Tencent Music Entertainment.
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