Tencent Music Shares Dip 8% Following a Monstrous $127 Million Quarterly Loss

Tencent Music Entertainment continues to grow, but after receiving bad news yesterday, investors punished the company’s stock.

Several days ago, Tencent Music Entertainment (TME) shares reached an all-time high.

Investors had pushed the Chinese streaming music giant’s stock to $19.97.

Then, Tencent Music published its first earnings report following its IPO.  Currently, the company’s shares have dropped 8%.

For the fourth quarter of 2018, Spotify’s Chinese rival reported a net loss of ¥876 million ($127 million).  But executives pinned the loss on a one-time ¥1.5 billion ($221 million) share-based charge.  This was related to equity issuance to label partners Warner Music Group (WMG) and Sony Music Entertainment (SME).

Without taking into account the one-time charge, Tencent Music’s net profit attributable to equity holders reached ¥916 million ($133 million).  Q4 2018 revenue also grew 50.5% year-over-year to ¥5.4 billion ($785 million).

In an IPO prospectus note, TME had noted that both WMG and SME had acquired shares for an ‘aggregate cash consideration’ of around $200 million.  This, wrote the company, would deepen ‘strategic cooperation.’  In return, both major label investors divided 68 million TME shares between them.

For its full-year 2018 report, Tencent Music’s revenue grew 73% to ¥1.8 billion ($2.8 billion).  Including the one-time equity charge, the company posted a net profit of $267 million.

Breaking down the company’s metrics, TME had 644 million monthly active users, up 6.8% over 2017.  Of this amount, paying subscribers rose 39.2% to 27 million.  On average, each subscriber paid around ¥8.6 ($1.28) per month.  Tencent Music owns three streaming music services in China – QQ Music, Kugou Music, and Kuwo Music.

TME also owns mobile karaoke and live streaming apps.  The company’s social entertainment category ended the year, growing 9.1% to 228 million mobile monthly active users (MAUs).  Of this amount, 10.2 million paid for the services, up 22.9%, and spent around ¥126.7 (nearly $19).  The social entertainment category generated around $2 billion in revenue for Tencent Music.

For online music, monthly average revenue per user (ARPU) declined 1.1%.  Under the social entertainment category, ARPU grew 24.3% over 2017.

Highlighting its 2018 achievements, the company detailed its catalog expansion through new licensing deals.  Tencent Music also produced in-house chart-countdown shows and live-streamed video talk shows along with long-form audio content, including radio shows.

The company explained that it has empowered “independent artists through the Tencent Musician platform to distribute high-quality original music content.”


Featured image by Dean Hochman (CC by 2.0).