Tencent Music Second Quarter Earnings Beat Expectations

Tencent Music

Tencent Music Entertainment Group, or TME, reported their second quarter 2019 financial results. The online music entertainment conglomerate has pioneered a music streaming service with an inherently social element, allowing users to sing karaoke with friends, and seamlessly share content with each other.

Despite beating profit expectation and growing its number of paying users to a record level, TME’s stock slid 7.3% after hours following its earnings announcement. TME’s revenue during the second quarter was $859 million, beating analyst expectations by $18.07 million.

In terms of user metrics, the company’s mobile MAUs for its online music services increased by 1.2% to 652 million, while MAUs for social entertainment services increased by 4.8% to $239 million. Paying users rose 33% in online music to a record 31 million, while paying users in social entertainment rose 16.8% to 11.1 million. Monthly ARPPU (average revenue per paying user) for online music dropped 1.1% to 8.6 yuan, while monthly ARPPU for social entertainment increased 16.5% to 130.2 yuan.

In terms of strategic growth, Chief Strategy Officer Tony Yip spoke about the company’s intent to forge partnerships with leading IoT manufacturers including automobile, smart speakers and wearables, to develop an immerse music experience in daily life. In addition Yip spoke about TME’s internationalization efforts, including the potential expansion of their social karaoke app, WeSing, into Southeast Asia.

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While TME engaged in a share swap with Spotify, TME’s focus on social entertainment services working in tandem with online music really sets it apart from the Swedish company. The monthly ARPPU in TME’s social entertainment segment far outpaces that of online music, differentiating it from the traditional model of online music streaming subscriptions services.