Tencent Music Entertainment (TME), the largest operator of music streaming services in China, has seen its quarterly revenue pass the $1 billion mark as the company’s ‘Super VIP’ tier continues to attract large numbers of new subscribers.
TME reported RMB 7.36 billion in revenue for calendar and fiscal Q1, which the company calculates was equal to USD $1.01 billion at the exchange rate on March 31, the last day of Q1.
That beat expectations of RMB 7.27 billion, according to a survey of analysts’ expectations from LSEG, as cited by Reuters.
Of that total, RMB 4.22 billion ($581 million) came from music streaming subscriptions, an increase of 16.6% from the same quarter a year earlier.
The growth in subscription revenue was driven by both an increase in ARPPU (average revenue per paying user) and by an 8.3% YoY increase in the number of paying users, reaching 122.9 million.
ARPPU rose 7.5% YoY to RMB 11.4 ($1.57) from RMB 10.6 a year earlier. TME attributed the growth to the increasing popularity of its Super VIP (SVIP) subscription tier, which costs five times as much as a standard paid subscription, as well as to “more disciplined promotional activities.”
The growing success of TME’s Super VIP tier comes amid reports that the long-awaited “Music Pro” tier at Spotify, which could prove to be a major boost to music rightsholders’ incomes, could land as soon as this year.
In its Q1 earnings report released on Tuesday (May 13), TME offered some insights into which features have proven to be magnets for SVIP subscriptions. Key among them is premium audio quality, which TME says is used by about 50% of SVIP subscribers.
Other features driving SVIP adoption include album discounts, special badges, early access to live events, and merchandise, TME said.
The company also noted that long-form audio content “boosted SVIP retention,” noting that an audio adaptation of the hit fantasy book series The Grave Robbers’ Chronicles became the fastest series to surpass 10 million streams on TME’s platforms.
TME operates QQ Music (its flagship streaming app) along with Kugou, Kuwo, and karaoke app WeSing.
The growth in TME’s music subscription segment was partly offset by continuing declines in its social entertainment division, which has seen several years of shrinking revenues due to a crackdown on online gambling by the Chinese government.
Social entertainment revenues fell 11.9% YoY to RMB 1.55 billion ($214 million) in Q1, TME said.
The company reported an operating profit of RMB 4.84 billion ($666 million) in Q1, a 146.9% YoY increase. Net profit nearly tripled to RMB 4.39 billion ($605 million).
“We’re encouraged by the continued rise in user lifetime value, a testament to our continued investment in compelling content and innovative, differentiated products delivered across diverse formats,” TME CEO Ross Liang said in a note to investors.
“This momentum has driven further growth in both our paying user base and ARPPU, with particularly strong adoption by our SVIP memberships. As we look ahead, we remain committed to enhancing our core competitiveness and pioneering new ways to inspire deeper and broader music engagement.”
TME’s earnings report noted that the company recently renewed its licensing agreement with Sony Music Entertainment, which included giving SVIP subscribers access to Sony’s 360 Reality Audio feature. That follows last year’s renewal of TME’s agreement with Universal Music Group.
TME also highlighted agreements it has inked with music companies across East Asia.
“While Chinese genres remain the cornerstone of music streaming, we are seeing increasing popularity for Korean, English, and Japanese tracks,” TME said.
“To cater to this rising interest, we recently deepened collaborations with South Korea’s Starship Entertainment and YG Entertainment, alongside Japan’s leading ACG entertainment company, further strengthening our international music offerings and enhancing cultural diversity across our platform.”
The earnings release didn’t mention reports that TME is in advanced talks to buy Chinese podcasting company Ximalaya, for a reported sum of $2.4 billion.
TME Executive Chairman Cussion Pang stressed the company’s sound financials amid an increasingly uncertain economic backdrop in China and worldwide.
“With the sound foundations we have built, a thriving music ecosystem, and healthy financial position, we are well equipped to navigate global uncertainties with confidence. Following a good start to the year, we remain on track and well positioned to achieve sustainable growth in 2025 and beyond,” Pang said in a note to investors.Music Business Worldwide
