Chinese company Tencent Music Entertainment has reported its first-quarter earnings. The company’s revenue fell 15 percent in the quarter but its shares were up on Tuesday as stocks in the sector experienced a surge.
The earnings report comes amid regulatory crackdowns on Chinese tech giants. For Tencent Music, regulators stripped it of its music exclusivity rights unleashing it into a competitive space with rivals like Cloud Music and TikTok’s Chinese counterpart Douyin.
Tencent said its revenue declined to 6.64 billion yuan ($979 million) in the first quarter which ended on the 31st of March. The company blamed reduced ad sales and a fresh outbreak of Covid-19 cases in China for the revenue decline it experienced in the quarter. For the quarter, net income attributable to equity holders dropped to 609 million yuan.
Tencent Music Entertainment reported a 21 percent fall in its social entertainment services which is its biggest revenue driver. Paying users dropped from 9 million in the previous quarter to 8.3 million in the first quarter. Analysts and investors weren’t bothered by the company’s first-quarter earnings results mostly because it comes amid a period of increased regulation on tech giants.
Ivan Su, senior equity manager at Morningstar said that “The company has given analysts ahead of time a very low expectation. And the decline seen in the social entertainment segment is also widely expected considering pressure from macroeconomics and regulation.”
The company reported that online music paying users grew by 4 million from the previous quarter. 5 million users were added in the previous quarter. For the first quarter, however, the average revenue per paying user declined. It fell to 8.3 yuan from 9.3 yuan from the same period from the previous year.
The company has also revealed plans to have a secondary listing in Hong Kong. It, however, failed to provide ample details. ”We will strive to move things forward in an expedited manner and obtain the necessary regulatory approvals in due course,” Cheuk Tung Yip, Tencent Music’s chief strategy officer, said in a call with analysts.