Tencent Music shuffles leadership as Q1 content costs outpace subscriber growth

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Screenshot of Tencent Music Entertainment Group’s official website. (Image Credit: TechNode)

Tencent Music Entertainment Group (TME) recorded healthy growth in total revenues, operating profit, and paying users in the first quarter of 2019.

Driven by a significant increase in paying users, revenues in the three months ended March 31 grew close to 40% year on year to RMB 5.74 billion ($855 million) but still fell short of analyst estimates of RMB 5.8 billion. Operating profit increased by nearly 30% year on year to RMB 1.15 billion.

Mobile monthly active users (MAUs) for online music and social entertainment services rose slightly, but paying users for the two segments increased by more than 27% and 12% year-on-year respectively, reaching 28.4 million and 10.8 million. However, the percentage of paying users remained flat at around 4% of the total mobile MAU for TME’s online music service, same as in 2018.

Monthly average revenue per paying user (ARPPU) for social entertainment, which include online karaoke platform WeSing and concert live-streaming platforms Kogou Live and Kuwo Live, grew substantially, rising 28% year-on-year to RMB 127.5. Monthly ARPPU for online music remained roughly unchanged at RMB 8.3 compared with the first quarter of 2018.

Cost of revenues surged more than 50% year on year to RMB 3.70 billion, primarily due to content and revenue-sharing fee increases. The company attributed the higher content fees to the increased market prices and amount of licensed music content as well as investments.

The ratio of operating expenses over revenue for the first quarter of 2019 saw some improvement, dropping from close to 20% in the first three months of 2018 to around 18%.

TME also announced on the same day a number of management changes. The co-president of the company, Xie Guomin, would resign on June 6 due to personal reasons. Xie Zhenyu, previously the company’s co-president and board member, was named the chief technology officer. Chen Linlin and Shi Lixue, both TME vice presidents, were appointed to oversee Kugou Live and Kuwo Live, respectively.