Tencent’s Shenzhen headquarters. Photo Credit: Donald Wu
Despite suffering a close to 5% year-over-year monthly active user (MAU) decrease during Q2 2023, Tencent Music Entertainment (NYSE: TME) saw its paid streaming subscriber total jump to almost 100 million, according to a newly released earnings report.
The Shenzhen-headquartered company behind China’s QQ Music, Kugou, and Kuwo streaming services as well as the WeSing karaoke app posted its financials for April, May, and June of 2023 today. Per the analysis, the business as of June’s end had 594 million streaming MAUs – down 4.7% from the same point in 2022 amid stiff competition from NetEase Cloud Music and ByteDance’s streaming service.
Meanwhile, social entertainment mobile MAUs, referring to the fans who (among other things) attended virtual events including livestream performances, fell 18.1% YoY to 136 million during Q2, Tencent Music communicated. Similarly, the same category’s paid users dipped by 5.1% YoY to 7.5 million, and monthly average revenue per paid user declined by approximately 21% YoY to CNY 135 (currently $18.54).
Citing “certain adjustments to live streaming functions and more stringent compliance procedures” as the reason for the “weaker than expected” social entertainment revenue showing, higher-ups forecasted “a low-to-mid teens percent” YoY revenue slip for the segment during Q3 as well as “a low-to-mid single-digit percent decrease for the full year 2023.”
However, TME is still banking on heightened social entertainment profit for 2023 and monthly revenue stability during Q4, execs specified during their company’s earnings call.
“I think the motivation behind these adjustments are to create a more music-centric livestreaming atmosphere for our users,” elaborated outgoing chief strategy officer Tony Yip, who’s set to step down at August’s end. “And these adjustments include stricter compliance procedures and also adjustments in certain livestreaming functions. It enables us to better control potential risks that the platform may face in the future.”
Returning to the initially mentioned improvements on the paid streaming side, though, Tencent Music reported boasting 99.4 million online music paid users as of Q2’s conclusion – up 20.2% YoY.
This record paid-user total was accompanied by an all-time-high monthly average revenue per paid user of CNY 9.7/$1.33 (up 14.1% YoY), which has per TME climbed for five consecutive quarters. During the three-month stretch, QQ launched a bolstered in-car version, Kugou debuted a new app “featuring a more intuitive interface and an engaging unlimited music discovery function,” and the overarching Tencent Music in June made a Duo-like couples plan available to users.
On the financial front, the business identified CNY 4.25 billion ($583.61 million) in online music income, which hiked by nearly 48% YoY and outperformed social entertainment in terms of overall revenue for the first time.
As a whole, Tencent Music pinpointed CNY 7.29 billion/$1.00 billion in Q2 2023 revenue (up 5.52% YoY), including the aforementioned online music sum as well as CNY 3.04 billion/$417.46 million from social entertainment (down 24.58% YoY). Additionally, the Lazy Audio owner disclosed a second-quarter operating profit of CNY 1.54 billion/$211.47 million (up 47.27% YoY).
In terms of other noteworthy takeaways from Tencent Music’s Q2 2023 earnings report and call (a portion of which was delivered in Mandarin), the entity in June upgraded its Venus production and promotion offering. Through Q2’s end, Venus is said to have generated CNY 10 million ($1.37 million).
More interesting yet is Tencent Music’s apparent embrace of artificial intelligence across both its consumer-facing products and its music library. As Spotify continues to expand its AI DJ, TME is rallying behind an “AI music companion” called Xiaoqin, which execs say can “join users’ music-listening journey, share a variety of topics including her views on music, and recommend songs or playlists based on their real-time interaction.”
Meanwhile, per an AI translation of his Mandarin-language remarks, CEO Ross Liang touched upon TME’s ongoing buildout of artificial intelligence “virtual gifts,” voice tools, “lyrics support,” music-separation options, and “intelligent covers,” to name just some.
At the time of this writing, Tencent Music stock (NYSE: TME) was worth $6.42 per share, up 4.39% from Monday’s close but down 25.35% from 2023’s start.