Net profits at Tencent Music Entertainment, China’s largest digital music company, climbed 36% to reach $735 million (RMB5.22 billion) in 2023 – despite revenues declining by 2% to $3.91 billion.
Fourth quarter profits were worth $198 million (RMB1.41 billion), earned from revenues 7% down at $971 million (RMB6.89 billion).
The final figures cap a year in which the New York and Hong Kong listed subsidiary of Tencent saw monthly active user (MAU) numbers fall as it successfully organized the transition of a growing number of free users into paying subscribers.
In the full year, revenues from music streaming subscriptions grew by 39% to $1.70 billion. That resulted from a 21% growth in the number of paying subscribers (from 88.5 million to 107 million) and a 20% increase in the average revenue per subscriber to RMB10.7 or $1.49. MAUs for online music dropped from 601 million to 576 million, but still means that more than 40% of China’s massive population uses Tencent’s music streaming services on a monthly basis.
The streaming gains more than offset the mixed performance of the more lucrative ‘social entertainment’ part of TME’s business. Here MAUs were down a hefty 28% to 104 million, paying users were up a modest 5% to 8 million, but monthly ARPU was down a steep 54% to RMB78 ($10.8).
“2023 marked a pivotal transition at TME. As we continue to shape and propel the music industry’s robust development, we are excited about its vibrant growth potential for years to come. The fourth quarter recorded accelerated year-over-year growth in music subscription revenue, anchored by consistent increases in subscribers and ARPPU,” said Cussion Pang, executive chairman of TME.
“Online music services’ strong performance mitigated headwinds from social entertainment services and contributed to expanded quarterly net profits. Looking ahead, we are well positioned to capture more multi-faceted opportunities, underpinned by our content and platform dual engines and supported by the online music business’ relatively counter-cyclical nature.”
Ross Liang, CEO of TME, said, “Expanded user privileges, together with AI-empowered products and tools, contributed positively to subscriber conversion and retention.”
The company uses artificial intelligence in different ways. In music streaming, large language models make music discovery increasingly intelligent and the company upgraded its virtual DJ with more songs for users. On the social entertainment side, it introduced Venus’ AI composition tool to support artists’ music creation through text prompts and rhythm clips.
Tencent Music, is a major stakeholder in both Spotify and Universal Music Group.
