Shares in Tencent Music Entertainment (TME) tumbled more than 7% in after-hours trading on Monday after the streaming service posted its slowest growth since its New York Stock Exchange debut last December.

Why it matters: TME, often dubbed China’s Spotify, is the country’s largest music streaming company with a 78% market share as of 2017. It operates popular music apps, including QQ Music, Kugou, and Kuwo.

  • China was ranked the seventh-largest market for music globally last year. China’s digital music market continues to grow as the country’s internet penetration rate expands.

“We are pleased with second-quarter results driven by the strength of both our online music and social entertainment businesses… The growth in our online music paying users accelerated during the quarter, with 2.6 million paying users added sequentially. We continued to expand our music content leadership by partnering with more music labels, as well as adding more content including music-centric variety shows, short-form videos, and long-form audio such as audiobooks and podcasts.”   

Cussion Pang, CEO of Tencent Music Entertainment

Details: Total revenue rose to RMB 5.9 billion ($836 million) in the second quarter from RMB 4.5 billion a year earlier, narrowly missing IBES estimates of RMB 5.95 billion.

  • TME posted a net income of RMB 928 million for the second quarter, up from RMB 903 million a year earlier.
  • The music streaming company reported 652 million mobile monthly active users (MAUs) for its online music business and 239 million monthly active users on its social entertainment platforms, which include online karaoke platform WeSing and concert live-streaming platforms Kogou Live and Kuwo Live
  • Although the bulk of users are on its music streaming business, its social entertainment services remain more significant revenue drivers.
  • Mobile MAUs for online music and social entertainment increased by 1.2% and 4.8%, respectively. However, paid users for the two segments increased by 33.0% and 16.8%, reaching 31.0 million and 11.1 million, respectively.
  • The monthly average revenue per paying user (ARPPU) for TME’s social entertainment platforms saw a 16.5% increase to RMB 130.2, unremarkable compared with a 28% rise last quarter. Monthly ARPPU for online music was RMB 8.6, remaining roughly unchanged compared to the first quarter of 2018.

Context: TME spun off from Chinese social media giant Tencent last year. The company holds a large share of China’s streaming market but faces fierce competition and challenges posed by the country’s crackdown on piracy. TME has been trying to diversify its revenue streams in response.

  • The company went public in the US last December, with a market capitalization of $21.3 billion. The IPO was the fourth largest among Chinese firms in 2018 by deal value.
  • The company underwent a leadership shuffle in May.

Nicole Jao is a reporter based in Beijing. She’s passionate about emerging trends, news, and stories of human interest within the world of technology. Connect with her on Twitter or via email:

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