Tencent Music Entertainment, parent of China’s biggest streaming music platforms, ended 2019 with 39.9m paying music users worldwide.
TME, which runs QQ Music, Kugou and Kuwo in China (but is not actually a Chinese company) told investors in a full-year update today (March 16) that its online music subscribers paid $160m to the firm during the course of Q4 2019.
A few more important stats to peruse about TME’s performance in 2019:
- Across the course of calendar 2019, according to MBW’s calculations, TME generated $514m from paying online music subscribers, and $1.03bn in terms of total online music revenues – including streaming plus downloads;
- TME’s paying music users figure in Q4 2019 (39.9m) was up 47.8% year-on-year, and up by 4.5m on the prior quarter (Q3 2019, see chart below). For comparison, Spotify’s subscriber number at the end of the same period (Q4 2019) was 124m, up by 11m on the prior quarter;
- TME’s revenues from online music subscribers ($160m) in Q4 2019 was up 60.1% year-on-year;
- TME’s monthly ARPPU (Average Revenue Per Paying User) in terms of online music stood at 9.3 RMB (approximately $1.33) in Q4 2019 – an 8.1% improvement on the equivalent figure from Q4 2018.
In potentially troubling news for record labels banking on TME to drive their revenues in China, however, the company continues to commit to growing what it calls “long-form audio” – i.e. podcast and audiobooks – on its platforms, which could potentially eat into music royalty payouts in the future.
The bulk of TME’s overall revenues continue to come outside of online music revenues – via ‘social entertainment services’, including online singing competitions. This segment of TME’s business generated $2.62bn in 2019.
In total, with online music services combined with ‘social entertainment services’, TME – which trades on the New York Stock Exchange – generated $3.65bn last year, with an operating profit of $664m.
Cussion Pang, Chief Executive Officer of Tencent Music, said: “2019 marked a year of healthy growth across our businesses. We made significant contribution to upholding music copyright protection, supporting original content creation and designing innovative monetization models to unlock the intrinsic value of music.
“We are proud to say that our all-rounded services to support original music content have made our indie musician program a powerful platform for talents to demonstrate skillsets and stage their singing careers. Our strategic transition to pay-for-streaming service has started to pay off, contributing to paying [user] ratio expansion for online music services to 6.2% in the fourth quarter of 2019, up significantly from 4.2% for the same quarter of 2018.”
“For 2020, we will continue to innovate to bring an even more engaging music experience to the users on our platform, and expand via partnerships with China Literature and others into the broader audio entertainment space.”
Cussion Pang, Tencent Music (pictured, main)
Added Pang: “As a further testament to the quality of our online music paying user growth, we recorded a 4.5% quarter-over-quarter ARPPU expansion, in addition to continuously improved user retention. Our unique capability in operating a fan-based economy also showed strong momentum in 2019, achieving high double-digit year-over-year growth in the number of users buying digital albums.
“In addition to forming partnership with international and domestic music labels, we also attracted more content creators to our increasingly vibrant ecosystem. Our powerful music content underlies the accelerating growth in online music subscribers on our platform. For 2020, we will continue to innovate to bring an even more engaging music experience to the users on our platform, and expand via partnerships with China Literature and others into the broader audio entertainment space.”
Tony Yip, Chief Strategy Officer of Tencent Music, added, “We concluded 2019 with many accomplishments, one of which was our significantly improved promotional capabilities, which not only leverage TME’s own platform but also through cooperation with external channels.
“In addition, our social entertainment ecosystem has become increasingly dynamic. Our annual flagship social entertainment galas, providing hosts, KOLs and music lovers with interactive experiences, attracted record high participation of performers and users, and contributed to solid paying user growth and average spend expansion in the fourth quarter of 2019.
“Our upgraded applications of QQ Music and Kugou Music, coupled with enhanced data analytics capability, have continuously improved user engagement, contributing to a sequential double digit increase in daily streams driven by recommendation in the fourth quarter of 2019. For 2020, we look forward to launching live streaming service on our QQ Music application, and tapping into China’s massive but under-penetrated long-form audio market starting from our strategic cooperation with China Literature, a leading online literature platform in China.
“These new initiatives, supported by our industry leadership and operational track record, will enable us to build a stronger foundation and take our company to the next level of growth.”
“Revenues from our online music services grew 40.7% year-over-year, fueled by music subscription revenues increase of 60.1% year-over-year as a result of record growth of paying users and improvement in ARPPU.”
Shirley Hu, Tencent Music
Shirley Hu, Chief Financial Officer of Tencent Music, said: “We achieved strong financial results with revenue growth of 34.0% year-over-year and non-IFRS net profit of RMB4.9 billion for full year 2019 and revenue growth of 35.1% year-over-year for the fourth quarter of 2019.
“In particular, revenues from our online music services grew 40.7% year-over-year, fueled by music subscription revenues increase of 60.1% year-over-year as a result of record growth of paying users and improvement in ARPPU. We are also very pleased to see continuous improvement in overall gross margin in recent quarters, driven by online music services.
“Our non-IFRS net profit attributable to equity holders of the Company for the quarter was RMB1.3 billion and increased by 46.5% year-over-year, reflecting our continued focus on operating efficiency. Looking forward, we will remain focused on content investments to further enhance user engagement and monetization and continue to expand our product and service offerings such as live streaming in QQ Music and long-form audio product.”Music Business Worldwide