Tencent Music Entertainment Revenue Grew 8% to $1B in Q4 as Subscribers Reach 121 Million

Tencent Music Entertainment surpassed revenue of $1 billion in the fourth quarter, representing an 8.2% increase from the prior-year period, while net profit climbed 47.3% to $284 million. 

The Chinese music streaming company operates three music streaming services — Kugou Music, QQ Music and Kuwo Music — as well as WeSing, a karaoke app. In recent years, Tencent Music’s business has become increasingly dominated by its music services as its social entertainment business continues to lose business. 

Online music revenue grew 16.1% to $799 million due to music subscription gains and growth in advertising revenue, while music subscription revenue jumped 18% to $552 million in the quarter as the number of subscribers increased 13.4% to 121 million. Additionally, gross margin jumped to 43.6% in the fourth quarter from 38.3% in the prior-year period. The company attributed the improvement to strong growth in music subscriptions and advertising revenue and increased usage of owned content, as well as its adoption of the Super VIP program, a subscription tier that costs five times the normal rate. Monthly average revenue per user (ARPU) grew to 11.1 RMB ($1.52) from 10.7 RMB ($1.47) due in part to the expansion of the Super VIP membership program.

The social entertainment business has suffered a sharp decline since the Chinese government began cracking down on the use of live-streaming apps to enable gambling in 2021. In the fourth quarter, social entertainment revenue fell 13% to $223 million and mobile monthly active users declined 21.2% to 82 million (the number stood at 223 million at the end of 2020). Monthly ARPU fell 9.7% to 70.4 RMB ($9.64), down from 172.1 RMB ($26.38) at the end of 2020, and paying users slipped 3.8% to 7.7 million. 

For the full year, revenue increased 2.3% to $3.89 billion while net profit climbed 36.2% to $974 million, and gross margin improved to 42.3% from 35.3%. Online music revenue grew 25.5% to $2.98 billion while social entertainment revenue fell 36.1% to $912 million. Full-year gross margin improved to 42.3% from 35.3% in 2023. 

Tencent Music Entertainment’s music platforms have evolved into one-stop shops that also include audiobooks, merchandise, downloads and live-streaming. In 2024, the company produced physical albums for Xiao Zhan and Lay Zhang and boosted album sales for Esther Yu by providing options to purchase merchandise along with her digital albums. It also partnered with the band Mayday for an online New Year’s Eve concert.

The company also announced a $273 million dividend and a share repurchase program of up to $1 billion over a two-year period that will commence this month. A $500 million share repurchase program announced in March 2023 will conclude this month. 

Tencent Music Entertainment’s shares, which trade on both the New York Stock Exchange (NYSE) and the Stock Exchange of Hong Kong, had risen 15.8% to $15.12 on the NYSE at the close of trading on Tuesday.