Tencent Music to see softer first quarter; beats fourth-quarter revenue estimates on paying user surge

Platform Industry: Tencent logo at an event

China’s Tencent Music Entertainment Group said the company would likely see “much softer” first-quarter revenue growth due to the COVID-19 outbreak, after it beat Wall Street estimates for fourth-quarter revenue on Monday. 

The company’s music streaming service added more paying users, its results showed, sending its shares up 3% in US extended trading.

“For the full year, even though total revenue growth is expected to be slower than original expectation due to the short-term impact in the first half, we expect revenue growth to improve in the second half,” said CEO Cussion Pang on an earning call after markets closed.

The firm mainly attributed the expected slowdown to licensing and advertising revenue decline. Subscription revenue, however, is likely to get a boost, it said.

Pang added that Tencent Music is already taking measures to mitigate any impact from the COVID-19 pandemic that is sweeping the world and causing jitters in financial markets, by launching live-streaming services in the first half of 2020 focusing on the discovery and cultivation of artists.

“While we don’t expect it to contribute to 2020 revenue in a significant manner, we do expect it to ramp up over a few quarters with more meaningful results, contributing to 2021,” said Chief Strategy Officer Tony Yip.

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Tencent Music, which has been shifting to a paid streaming model, has entered into multiple partnerships with international and domestic music labels to attract more paying users.

In December, a consortium comprising Tencent Music and parent Tencent Holdings Ltd said it would take a 10% stake in Vivendi’s Universal Music Group, the world’s biggest music label which houses Lady Gaga and The Beatles, giving Tencent Music access to more artistes.

Although Tencent Music’s user base is nearly three times that of Spotify Technology SA, it has fewer paying users.

Spotify, a stakeholder in Tencent Music, has currently about 124 million paid subscribers, while Tencent Music reported a 47.8% jump to 39.9 million in the fourth quarter.

While most of Tencent Music’s users are in its music streaming unit, the firm’s biggest revenue drivers are social entertainment services, including karaoke platforms, where users can live stream concerts and shows.

Revenue of the company rose 35.1% to 7.29 billion yuan (approx $1.04 billion), above estimates of 7.08 billion yuan, according to IBES data from Refinitiv.

(Via Reuters; Reporting by Munsif Vengattil in Bengaluru and Pei Li in Beijing; Editing by Maju Samuel and Christopher Cushing)

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