Tencent Music Cracks 71 Million Paid Users, Generates $1.22 Billion In Q3 Despite Exclusive-Music Crackdown

Tencent Music IPO Launches at Lowest Expected Price Range
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Despite being forced to nix most of its exclusive music agreements, Tencent Music posted a more than 37 percent year-over-year gain in paid subscribers during 2021’s third quarter.

The Shenzhen-headquartered music company, which operates the QQ Music, Kugou, and Kuwo streaming services as well as the WeSing karaoke app, revealed this and other details in a newly released performance analysis. During the three months ending on September 30th, Tencent Music generated RMB7.81 billion (approximately $1.22 billion at the present exchange rate), a roughly three percent YoY improvement.

Within this modest income uptick, however, Tencent Music’s “online music services” revenue jumped by about 24 percent from the same period in 2020 – including 30 percent growth for music subscriptions themselves, which brought in RMB1.9 billion ($297.16 million) on the quarter, according to the document. Also worth noting is that the business, in a stark contrast to several other streaming services, enjoyed a Q3 2021 net profit of RMB788 million ($123.24 million).

On the usership side, Tencent Music’s online music mobile MAUs declined slightly YoY, from 646 million to 636 million. Mobile MAUs for social entertainment fell further yet in Q3 2021, from 235 million to 205 million, whereas social entertainment’s paid-user total decreased from 10.5 million to 10 million.

Execs attributed the social-entertainment falloffs “to regulatory changes and industry competition” and said that the online music mobile MAUs dip “was primarily due to churns of our casual users served by other pan-entertainment platforms.”

Moreover, online music’s monthly average revenue per paid user (ARPPU) fell 5.3 percent from Q3 2020, to RMB8.9 ($1.39), compared to a 1.7 percent YoY decline (at RMB163.9/$25.63) for social entertainment. And total Q3 2021 operating expenses, at RMB1.64 billion ($256.50 million), swelled 14.4 percent YoY.

Notwithstanding these figures, though, Tencent Music’s online music paid users hiked by 37.7 percent YoY, as highlighted at the outset, to 71.2 million.

Additionally, Tencent Music said that long-form audio MAUs – the company in January dropped $415 million on audiobook and podcast platform Lazy Audio – “exceeded 140 million in the third quarter,” up 89 percent YoY, against a 100 percent YoY gain for long-form audio’s paid users (five million at Q3 2021’s end).

In concluding the Q3 2021 earnings report, Tencent Music noted that it’s exploring collaborative partnerships – including a concert-focused pact with Roblox as well as integration with other Tencent divisions – and working to improve its discovery and promotion features.

Similarly, “the number of indie musicians on the Tencent Musician Platform reached 260,000” as of Q3’s end, the document states – a noteworthy figure because certain indie releases are excluded from the initially disclosed crackdown on exclusive music agreements.

Plus, Tencent Music and Apple Music announced a deal today, allowing “record labels and artists who are part of TME Music Cloud” – the Chinese streaming service’s new distribution platform – to “distribute their music around the world via Apple Music.” Needless to say, this benefit could continue to attract indie creators to Tencent Music moving forward.

At the time of this piece’s writing, Tencent Music stock (NYSE: TME) was trading for $7.94 per share – a .13 percent loss from yesterday’s close. Having cracked $32 per share earlier this year, TME has thus far been unable to recover from the setback pertaining to exclusive music and a subsequent selloff. Tencent Music higher-ups in March announced a $1 billion stock-buyback program, under which the company spent roughly $239 million in Q3 2021.