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Tencent Music published a report for Q1 2022 that showed an expected revenue decline as the platform struggles with stiff competition.
Tencent Music Entertainment Group (TME) posted its Q1 2022 financial report revealing largely underwhelming revenue. However, much of the core takeaways from the report were in line with analysts’ expectations as the audio streaming service faces tense competition.
Tencent Music Q1 2022 Details
For the period ended March 31st, Tencent Music’s total revenue dropped 15.1% to 6.64 billion yuan ($979.03 million) year-over-year (YoY) as expected by Wall Street. This was partly due to renewed Covid-induced lower ad sales as China continues to battle fresh virus outbreaks. Furthermore, Tencent Music executive chairman Cussion Pang also attributed the revenue decline to “headwinds in an evolving market landscape”. Pang was referring not only to increased competition but also to the challenges posed by increased regulations in China.
The Tencent Music Entertainment Q1 2022 report revealed a 34.2% fall in net income attributable to company equity holders. As it stands, that figure is now at 609 million yuan, or $96 million. In addition, Tencent Music’s social entertainment services plunged 20.6% in the fourth quarter to 4.03 billion yuan, or $635 million. In response to this, the Chinese music streaming service provider pledged to improve competitiveness through product innovations in the industry. These include “audio live streaming, international expansion, and virtual interactive product offerings.”
Tencent Music’s net profit stood at 649 million yuan, or $102 million, while non-IFRS net profit was 939 million yuan, or $148 million, a 7.6% increase on a sequential basis. Furthermore, revenue from music subscriptions was 1.99 billion yuan, or $314 million, representing a YoY 17.8% increase. For the first quarter of this year, Tencent Music stated that there was a 31.7% YoY increase in online music paying users. This represents a 4 million sequential-basis growth to the current 80.2 million figure. In addition, paying ratio was 13.3% for the three-month period, marking a 9.9% YoY increase.
Although Tencent Music saw an increase in paying customers for Q1 2022, the platform is fighting harder for market share. The competition currently comes in the form of Cloud Village, a relatively new music streaming platform spinoff from fellow Chinese tech giant Netease. In addition, Tencent Music is also competing alongside Douyin’s new music service, Quishiu Yinyue. Douyin is the Chinese version of TikTok and is owned by TikTok parent company Bytedance.
Competition with Tencent Music took on an even more significant meaning after Chinese regulators removed special privileges. These include suspending exclusive music contracts with big music labels that Tencent Music had in 2021. At that time, the company focused on emphasizing original content and tools for independent musicians to expand their audiences. As Pang put it:
“In an era of increasing entertainment choices, the ability to sustain a competitive advantage is awarded to those who offer users a differentiated experience.”
According to Tencent Music chief strategy officer Cheuk Tung Yip, the company is collaborating more with Tencent Holdings. In the next few quarters, Tencent Music will work on fusing live concerts and live streaming with WeChat, Tencent’s major messaging platform.