On the afternoon of May 13th, Tencent Music Entertainment Group (hereinafter referred to as “Tencent Music”) announced the cessation of unaudited financial activities for the first quarter ending on March 31, 2024. Among them, the total expenditure was not 6.77 billion yuan, a year-on-year increase of 3.4%, mainly due to the decrease in expenses for social, cultural and entertainment services and other services, which was offset by the increase in expenses for online music services.
Since the third quarter of 2021, the social, cultural and entertainment services of Tencent Music (including the national karaoke and live broadcast) have not risen or fallen. The reason is that a large number of platforms such as Tiktok, Kwai and Station B compete for users’ attention, and the restrictions faced by live broadcast business are more strict.
Unlike the rise and fall of expenses for social, cultural, and entertainment services, Tencent Music’s online music expenses have not continued to rise. Among them, online music service expenses increased by 43% year-on-year to 5.01 billion yuan; Online music subscription expenses increased by 39.2% year-on-year to 3.62 billion yuan.
From a data perspective, Tencent Music’s support structure is shifting towards a music dominated business, which helps to reduce the risk of constraints in the live streaming industry and better focus on its main business.
In the first quarter, the company’s consolidated net profit was 1.81 billion yuan, a year-on-year increase of 23.9%, setting a new historical high for a single quarter. By joining 2024, Tencent Music has continuously implemented a strategy of increasing costs and efficiency, focusing on key business leaders. Sales and marketing expenses have continued to rise and fall, thereby increasing net profits.
Similarly, the number of online music payment users with high renovation rates reached 113.5 million, a year-on-year increase of 20.2%, and a net increase of 6.8 million in a single quarter. The reason for this is not related to the conservative Chinese holiday of summer and new year, which includes pregnancy in the first quarter – the Spring Festival is often a conservative promotional campaign period for digital entertainment platforms. Tencent Music’s multi-channel promotion has attracted more payment users than expected.
However, compared to overseas collaborations, there is still a lot of room for increase in the number of user subscriptions in China’s digital music industry. For example, Spotify, a leading music streaming company, had as many dull monthly users as 619 million in the first quarter of this year, and as many paid subscription users as 239 million, compared to Tencent Music.
For the next stage of growth focus, Tencent Music CEO Liang Zhulayer stated that the company will continuously optimize algorithms, downgrade product efficacy, and enrich the application of AIGC.
In April, QQ Music, a subsidiary of Tencent Music, launched the “AI Release” feature, which requires users to create AI audio on the Tencent Music Qimingxing platform and upload it to QQ Music. The audio uploaded in this form will be labeled as “AI born”, and subsequent users will stop reading and displaying it on their personal pages, but it will not be added to the substantive selection pool of QQ Music.
The company stated in its financial report that the new AI assistance being attempted will provide users with stronger interactivity and convenience.
On the same day as the financial report was released, Tencent Music also announced that it would receive its annual dividend for the first time. It is estimated that it will pay approximately $210 million in cash dividends for the 2023 fiscal year to shareholders registered on the date of cessation of deregistration, including $0.0685 per common share or $0.1370 per American Depositary Receipt (ADS).
On that day, Tencent Music’s Hong Kong stock price also experienced a significant decline, with a maximum increase of no more than 8%, reaching a historic high of HKD 57.3. The lead price was HKD 54.850, a decrease of 4.08% worldwide.