Tencent Music Entertainment reported better-than-expected revenue for the second quarter thanks to an increase in paying subscribers. The rise in paying subscribers can be attributed to the platform putting more effort into its original content which helped attract these users.
Tencent Music’s US shares were up 5.9 percent on the announcement that the company’s paying subscribers increased to 82.7 million in the second quarter. The company added that its subscription revenue was up 18 percent. Apart from the increase in paying subscribers and the push for original content, the company also benefitted from its partnership with Tencent Holdings to produce songs for popular game titles.
For the second quarter ended June 30th, the company reported revenue of 6.91 billion yuan, or $1.02 billion. This surpassed the 6.62 billion yuan that analysts had forecast for the second quarter, according to Refinitiv IBES data.
While on a call with analysts on Tuesday, the company’s Chief Strategy Officer Cheuk Tung Yip told analysts that the company will continue to ramp up efforts and build up its paywall to increase its revenue. “We expect more content partners will be added to the paywall in the second half,” he said. Non-paying members are not left out. The company has plans to cater to this category which generates about 10 percent of its advertising revenue, according to Cheuk Tung Yip.
Although it surpassed analysts’ forecast, the company’s revenue was down 13.8 percent from the same period a year ago. This decline is a result of increasing competition and an economic slowdown that has been taking a toll on businesses in China.
The company’s biggest revenue driver – its social entertainment business, saw its revenue drop 20 percent. Its karaoke app WeSing and live concert platform Kuwo Music fall in this category.
Tencent Music earned 0.63 yuan per American depository share (ADS) in the second quarter excluding items, beating the estimate of 0.56 yuan per ADS that was expected.
The company’s Chief Strategy Officer also mention that Tencent Music is making a moderate recovery from advertisers in the second half as the covid situations in big cities including Shanghai and Beijing have been brought under control, adding that its other segments are starting to participate in this recovery.