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Tencent Music Entertainment Group Sees Profit Soar in 2023

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ChinaÔÇÿs Tencent Music Entertainment Group saw its profit jump 36% to 5.22 billion yuan ($735 million) in 2023 as growth in paid subscriptions helped offset mixed results in its social media business, according to an earnings filing on Tuesday (Mar. 19).

The leading music streaming company in China ÔÇö Tencent Music operates QQ Music, Kugou and Kuwo as well as the social karaoke game WeSing ÔÇö reported that revenue from music subscriptions rose 39.1% to 12.10 billion┬áyuan ($1.70 billion) thanks to 18.2 million more net paying subscribers in 2023. (That compares to a net increase of 12 million paying subscribers in 2022.) Tencent MusicÔÇÖs paying subscribers now total 106.7 million, or nearly as many U.S.-based subscribers as both Spotify and Apple Music combined.

Still, the company reported that its full-year revenue of 27.75 billion yuan ($3.91 billion) fell 2.1% from 2022 and that its fourth-quarter 2023 revenue of 6.89 billion yuan ($957.06 million) fell 7.2% from the year-ago quarter due to a revenue drop in its social entertainment services business.

Tencent Music executives said that the companyÔÇÖs ÔÇ£dual engineÔÇØ strategy, which drove a 38.8% increase in year-over-year revenue for its core online music business, allowed it to absorb the hit to its social business.

ÔÇ£The fourth quarter recorded accelerated year-over-year growth in music subscription revenue, anchored by consistent increases in subscribers and (average revenue per paying user),ÔÇØ said Cussion Pang, Tencent MusicÔÇÖs executive chairman. ÔÇ£Online music servicesÔÇÖ strong performance mitigated headwinds from social entertainment services and contributed to expanded quarterly net profits.ÔÇØ

Revenue for the companyÔÇÖs social entertainment services business in full-year 2023 fell by 34.2% to┬á10.43 billion┬áyuan (US$1.47 billion) from 2022,┬ádue to ÔÇ£adjustments to certain live-streaming interactive functions and more stringent compliance procedures,ÔÇØ the company said. Tencent Music, along with other content platforms like NetEaseÔÇÖs Cloud Music, removed a popular live-streaming feature that analysts said was often exploited for gambling after the Chinese government launched a crackdown on gambling in mid-2023.

The crackdown prompted Tencent Music and others to disable their live-streaming services, which were popular and highly lucrative, leaving the social entertainment services division of Tencent Music to struggle to bounce back, Reuters reported.

U.S.-listed shares of Tencent Music had risen 6.8% by 2:30 p.m. ET following the earnings release.

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