Author： Li Zhujiang
Compile：Xia Xiaodou
Source: GPLP
On May 11, Tencent Music (TME.NYSE) released its unaudited financial report for the first quarter ended March 31, 2020, claiming revenue of 6.311 billion yuan, a year-on-year increase of 10.02%; net profit of 887 million yuan, a year-on-year down 10.13%
Tencent Music’s revenue was lower than market expectations. Earlier, Wall Street analysts had expected Tencent Music ’s first-quarter revenue to reach $ 898 million, but in fact Tencent Music ’s first-quarter revenue was 6.311 billion yuan (about $ 891 million).
In addition, the growth rate of revenue cost in the first quarter is much higher than the growth rate of revenue and net profit.
Data show that Tencent Music’s operating costs in the first quarter were 4.334 billion yuan, a year-on-year increase of 17.04%. Tencent Music stated that it was due to higher revenue sharing fees and increased content spending.
It is worth noting that at this time, it will be three years before Tencent Music launches the musician program. In July 2017, Tencent Music launched a musician program. At that time, CEO Peng Jiaxin promised to “make musicians’ income reach 500 million yuan in three years.” Now, two months will be over three years, and GPLP specifically sent a verification letter to Tencent Music for the implementation process of the musician program, but no response has been received as of press time.
The financial report shows that Tencent Music’s gross profit in the first quarter was 1.997 billion yuan, a year-on-year decrease of 2.75%; gross profit margin was 31.3%, a year-on-year decrease of 4.1％. In this regard, Tencent Music said that it was mainly due to the increase in revenue sharing fees, which was due to the impact of promotional activities and live streaming interactive function adjustments for live paying users, as well as an increase in the revenue sharing ratio with online karaoke performers .
It should be noted that Tencent Music has not relaxed its investment in music content. On March 31, Tencent Music announced that its consortium led by Tencent Holdings has completed the acquisition of a 10% stake in Universal Music Group. It is reported that the deal valued Universal Music Group at 30 billion euros. In other words, Tencent Music acquired a 10% stake in Universal Music Group for 3 billion euros.
From the perspective of revenue structure, Tencent Music’s online music service revenue in the first quarter was 2.044 billion yuan, an increase of 27.35% year-on-year; social entertainment services and other revenue were 4.267 billion yuan, an increase of 3.29% year-on-year.
In terms of paying users, online music paying users reached 42.7 million, an increase of 50.4% year-on-year, and online music ARPPU increased 13.3% year-on-year; however, the online music mobile MUA only increased 0.5% year-on-year.
In addition, the ARPPU of social entertainment also declined in the first quarter, down 12.9% year-on-year. Tencent Music said that due to the impact of the COVID-19 outbreak and the impact on the adjustment of certain interactive functions in real-time streaming media.
