Growing streaming subscriptions lifted the bottom line at Tencent Music Entertainment, in the third quarter of its financial year, despite a top line decrease in revenues. Net profits hit $173 million (RMB1.26 billion), representing a 16% year-over-year increase.
Tencent Music, which is a major stakeholder in both Spotify and Universal Music Group, reported figures on Tuesday, for the three months from July to end September 2023. Its predominantly mainland China operations divide into music streaming and social entertainment activities – karaoke, concert promotion and other related activities.
Group revenues came in at RMB6.57 billion ($900 million), representing a 11% year-over-year decrease, mainly due to the decline in revenues from social entertainment services and others. Within that total, revenues from music subscriptions were RMB3.19 billion ($438 million), representing 42% year-over-year growth. The number of paying users increased by 21% year-over-year to 103.0 million. That was also an increase of 3.6 million subscribers compared with the second quarter.
“Our dual-engine content-and-platform strategy continues to pay off. In the third quarter, we reported strong growth in our online music services despite the topline headwinds from the social entertainment business. The accelerated year-over-year subscription revenue growth was supported by expansion in both subscriber base and ARPPU [average revenue per paying user]. Our evolving ecosystem and resilient businesses enabled us to deliver a group-wide margin expansion. These achievements further unlock the value of music and pave the way for our sustainable development in the long run,” said Tencent Music executive chairman Cussion Pang.
“The third quarter results highlight efficiency gains across our platforms. Our ecosystem’s strength, platform’s scale and AI-empowered technological edges have enabled us to transition into an increasingly robust music powerhouse. Online music has more visibly become our core business, driving engagement and earnings growth, while we adjust our social entertainment offerings,” said Ross Liang, CEO of Tencent Music.
The group has a cash pile of RMB31 billion ($4.24 billion).
Its shares are listed in ADR form on the New York Stock Exchange and also in Hong Kong. At Tuesday’s closing price of HK$28.2 in Hong Kong, the company has a market capitalization of HK$96.2 billion ($12.3 billion).