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).