China's Tencent Music Entertainment posted a 15% slump in first-quarter revenue, matching expectations, but saw its shares join a sector-wide surge on Tuesday as hopes grew for a loosening of regulatory curbs on China's tech giants.
Tencent Music said revenue dropped to CNY 6.64 billion (USD 979 million) in the first quarter ended March 31, partly due to lower ad sales after a fresh bout of COVID-19 cases in China. Net income attributable to equity holders of the company fell by a third to 609 million yuan. The firm, 49%-owned by tech giant Tencent Holdings, reported its biggest revenue driver, social entertainment services, saw a 21% fall in quarterly sales. Paying users in the segment fell to 8.3 million from 9 million in the previous quarter.
The company reported that online music paying users increased by 4 million from the prior quarter when it added about 5 million paying users. However, the average revenue per paying user slipped in the first quarter, falling to CNY 8.3 from CNY 9.3 in the same period last year. As part of a broad clampdown on China's internet firms that began last year, regulators stripped Tencent Music of its exclusive contracts with big music labels, spurring competition from rivals like Cloud Music and ByteDance-owned short video sharing platform Douyin.
Cheuk Tung Yip, Tencent Music's chief strategy officer, said in a call with analysts that the company has deepened cooperation with Tencent Holdings in an effort to boost revenue. A focus for the coming quarters will be on promoting live streaming and live concerts on WeChat, Tencent's flagship messaging platform with a billion-plus user base.