Tencent Music Posts 31.7% Paid-User Growth — And a 15.1% Revenue Dip — In Q1 2022 After Canceling Exclusive Deals

Days Before Tencent Music's IPO Launch, a Mysterious Investor Claims to Own 80% of the Company

Tencent Music suffered a 15.1% year-over-year revenue decrease during Q1 2022 after giving up most exclusive music deals, but nevertheless managed to generate $96.32 million (CNY 649 million) in net profit, according to a newly released earnings report.

Tencent Music (NYSE: TME), which operates the QQ Music, Kugou, and Kuwo streaming services in China, just recently posted its performance specifics for the three months ending on March 31st. Towards 2022’s start, Beijing barred all domestic streaming platforms from signing exclusive deals – to the particular detriment of Tencent Music – while TikTok parent ByteDance launched a music service called Qishui Yinyue in April.

Amid this enhanced competition and regulatory scrutiny, NetEase Cloud Music, in which Sony Music has a $100 million interest, closed out April by suing Tencent Music. The latter’s shares finished today at $4.09 apiece – down about 1.5% from yesterday’s close and over 72% from mid-May of 2021.

Bearing in mind these details, Tencent Music said that its revenue had dipped by 15.1% YoY in Q1 2022, as initially disclosed, to ¥6.64 billion ($985.50 million at the present exchange rate).

Meanwhile, TME’s net profit for 2022’s opening quarter jumped from $85.64 million (¥577 million) in Q4 2021 to $96.32 million (¥649 million), as highlighted. This boost was driven in part by a 31.7% YoY hike in online music paid users, who numbered 80.2 million at Q1’s conclusion, Tencent Music relayed.

The figure likewise reflects an increase of approximately four million from Q4 2021 and enabled revenue attributable to music subscriptions to touch $295.35 million (¥1.99 billion), up 17.8% YoY and 2.6% QoQ.

But the effects of the aforementioned competition from ByteDance and NetEase appeared to bring about a decline in TME’s online music mobile MAUs (604 million, down from 615 million in Q1 2021) and average monthly revenue per paid user for online music ($1.23/¥8.3, a 10.8% YoY dip).

Similarly, although the Tencent subsidiary reported an 8.1% gain for average monthly revenue per paid user for social entertainment ($24.01/¥161.8), social entertainment’s mobile MAUs decreased by 27.7% YoY to 162 million. Plus, social entertainment’s paid users fell by 26.5% YoY to 8.3 million, and Tencent Music chalked the falloffs up to “industry and macro headwinds.”

Lastly, Tencent Music reduced its Q1 2022 cost of revenues by 10.7% YoY to $709.44 million (¥4.78 billion), cut its “selling and marketing expenses” by 50.9% YoY to $48.98 million (¥330 million), and upped its “general and administrative expenses” by 14.6% YoY to $149.90 million (¥1.01 billion), execs said.

Under the $1 billion share buyback program that TME unveiled in late March of last year, $674 million worth of company stock had been repurchased as of Friday, May 13th, 2022, according to the report.