Tencent Music Entertainment (TME) announced slightly worse-than-expected first quarter results on Monday, with strong growth in the music subscription sector but significant losses in its social entertainment services.
The company’s revenue for the first quarter was $891 million, growing 10.0% year on year but falling short of the average estimate of $898 million compiled by Yahoo Finance. The company’s shares fell 3.5% during after-hours trading on the New York Stock Exchange after the results were announced on Monday.
TME’s first quarter revenue marked a 15.1 % quarter on quarter decrease, primarily attributable to underperformance of the company’s social entertainment services during the COVID-19 outbreak.
The number of paying users for TME’s online music services jumped 50.4% year on year to 42.7 million in the first quarter, with average revenue per paying user (ARPPU) increasing by 13.3% compared to the same period last year. The increase drove the company’s online music subscription revenue up by 70% year on year to $170 million.
Revenue from social entertainment services took a heavy hit during the first quarter of 2020. Despite having increased by 3.3% year on year to $603 million and accounting for 67.7% of the company’s total revenue for the period, social entertainment revenue shrank by 18.5% compared to the fourth quarter of 2019. The drop mainly came from reduced monthly ARPPU for the period, which dropped 12.9% year on year or close to 20% quarter on quarter.
“While acknowledging the impact on our social entertainment services from the COVID-19 pandemic, we have started to see a moderate recovery recently,” said Cussion Pang, CEO of TME.
Gross profit for the first three months of 2020 dropped by 2.8% year on year to $279 million, mainly attributable to the increasing number of promotions to paying users of the company’s live streaming services. Net profit attributable to shareholders also decreased by 10.1% compared to the same period last year to $125 million.
Tencent Music has been trying to boost the number of paid users for its online music services. In December 2019, the company and its parent Tencent Holdings led a consortium to acquire 10% of Universal Music Group, one of the world’s largest music labels. In January, the company also signed a five-year partnership with China Literature to license and produce audiobooks.