What’s new: China’s largest online music platform, Tencent Music Entertainment Group (TME), has reported a year-on-year drop in its third-quarter profit, after the firm was forced to give up its exclusive music licensing rights in the recent antitrust crackdown.
TME’s quarterly net profit plunged 34.5% year-on-year to 740 million yuan ($115 million), while its revenue rose 3% to 7.81 billion yuan, according to Monday’s earnings report. Its gross profit margin fell to 29.6% from 32.4% in the same period last year, mainly due to the firm’s new focus on user-generated original products that demanded revenue sharing fees and additional investment.
Sales of social entertainment services, including music-focused livestreams and online karaoke, made up about 63% of its quarterly revenue, which came in at 4.92 billion yuan, down 6.4% year-on-year. Its paid users jumped 4.8% to 10 million.
Online music services, another major revenue source that includes subscriptions, generated revenue of 2.89 billion yuan, up 24.3% year-on-year for the quarter. Its paid users also jumped 37.7% to 71.2 million. However, after losing its exclusive licensed music, the company saw the average revenue per paying user of its subscription service fall to 8.9 yuan, down from 9.4 yuan earlier this year.
Tencent Music has now reported a drop in its net profit for two consecutive quarters. In the second quarter, its net profit slumped 12% year-on-year.
Background: In July, Beijing ordered Tencent Holdings Ltd. to relinquish all its exclusive global music licensing deals within 30 days, fining the company 500,000 yuan for anti-competitive practices. That came after an official probe of Tencent’s 2016 purchase of a major stake in China Music Corp. concluded that the deal had breached China’s Anti-Monopoly Law, as it helped the company net the rights to 80% of the exclusive music licensed in China.
Contact reporter Manyun Zou (manyunzou@caixin.com) and editor Heather Mowbray (heathermowbray@caixin.com)
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