Tencent Music Entertainment grew its 2022 profits by 21% to $533 million (RMB3.68 billion), helped by cost cutting and a growing subscription base. It achieved this despite a 9% decrease in revenues to $4.1 billion (RMB28.3 billion).
The group, which is backed by Chinese tech and entertainment giant Tencent and has stock market listings on the New York Stock Exchange and in Hong Kong, is China’s largest digital music outfit and controls large equity stakes in Spotify and (in a consortium with Tencent) Universal Music Group.
Tencent Music’s own operations divide loosely into two clusters: mass market music streaming, with paid-for and free tiers; and “social entertainment,” including karaoke and other derivative products.
After a period of reengineering, the group said 2023 is the year that it finally “expects [..] quarterly revenues from online music services will exceed those from social entertainment services.”
“Revenues from online music services for the full year of 2022 increased by 8.9% year-over-year to RMB12.48 billion ($1.81 billion). The increase was driven by strong growth in music subscription revenues, supplemented by growth in revenues from long-form audio, despite a decrease in sublicensing revenues and advertising revenues. Revenues from music subscriptions were RMB8.70 billion (US$1.26 billion), representing an 19% year-over-year growth, primarily due to the 23% increase in the number of paying users,” Tencent Music said in a filing.
Average revenues per music subscriber fell slightly as a result of promotional efforts in the first half of the year. It ended 2022 with 88.5 million music subscribers, up from 76.2 million at the end of 2021.
The social side was weaker. Revenues from social entertainment services and others decreased by 20% year-over-year to RMB15.86 billion ($2.30 billion). Average revenue per social user increased by 5.9%, but the number of paying users of social entertainment services decreased by 24%. The company explained that this was “mainly due to the impact of the evolving macro environment, increased competition from other platforms and the impact related to COVID-19.” The year saw widespread lockdowns that restricted Chinese people’s ability to socialize away from home.
Describing the 2022 group performance across both segments, Cussion Pang, executive chairman, said, “Amid a fast-changing macro environment in 2022, we continued to innovate our services and carried out effective cost optimization measures, leading to strong growth in our full-year profitability as well as steady growth in online music subscriptions throughout the year.”
Pang said that the group had completed its $1 billion share buyback, and that further growth is on the cards for the current year. “Our relentless focus on executing growth strategies and operating efficiencies, we are confident to achieve year-over-year growth in total revenues and profitability as well as continuous improvement in user quality in 2023 while fueling the thriving music industry,” he said.
“In the future, we will continue to explore the application of large language models (LLMs) in the fields of pictures, texts, video and other content, as well as music recommendation and search, to meet the massive demand for music-related content,” he added.
