The music platform also planned to list by introduction in Hong Kong, as profits dwindled
Brand logo of Tencent science and Technology Park
Tencent Music Entertainment Group (TME: NYSE) (Chinese: 腾讯音乐) reported on March 22 a revenue of CNY 7.61 billion (USD 1.196 billion) in the fourth quarter of 2021, down 8.7% over the previous year, and a net profit of CNY 536 million in the same period, registering a year-on-year decrease of 55%.
According to its unaudited financial results, the company also recorded a full-year revenue of CNY 31.24 billion in 2021, up 7.2% year on year.
The company’s main revenues included subscriptions, advertisements, and live streaming. In the fourth quarter, online music service revenues accounted for CNY 2.88 billion, up 4% year on year, while other revenues, including socializing and entertainment services, represented CNY 4.727 billion, down 15% over the previous year.
This decrease came after regulators tightened control over advertisements last July, putting restrictions on the number of and income from ads. Last August, the government also cracked down on “fandom,” prohibiting fans from repeatedly buying digital records.
Besides, the company’s live streaming services faced fierce competition from short video platforms such as Douyin, the Chinese version of TikTok, and Kuaishou.
“Tencent Music needs to innovate its profit mode to accelerate its growth again,” said Tao Ye, an analyst at Huatai Securities.
In terms of online music services, Tencent Music’s revenue from its music subscription business reached CNY 1.95 billion in the fourth quarter of 2021, up 23.5% over the previous year.
The paying subscribers numbered 76.2 million, up more than 36% year on year. Paid subscriptions also accounted for 12.4% of the total users, compared to 11.2% in the third quarter.
Meanwhile, the company’s financial results showed if approved by regulators, Tencent Music will “list by introduction” on the main board of the Hong Kong Stock Exchange, a mechanism that will allow it to float shares without raising capital or issuing new stock.
The company has completed over 50% of the USD 1 billion share repurchase program announced on March 2021. “We plan to complete the rest of the program in 2022,” said Executive Chairman Cussion Pang.
According to its financial results, the company’s total operating expenses were CNY 1.82 billion in the fourth quarter, representing a year-on-year increase of 8.2% and accounting for 23.9% of total revenue in the fourth quarter, up from 20.1% in the same period of 2020.
It also reported sales and marketing expenses of CNY 750 million in the fourth quarter, down 3% year on year.
Its major competitors include NetEase Cloud Music and Kugo Music.