Tencent Music's quarterly profit rose 28% on growing subscriber base

Tencent Music Entertainment Group executives said on Monday that higher-than-expected subscriber growth pushed its first-quarter profit up 28 percent to RMB 1.53 billion ($212 million).

Through marketing promotions around the Chinese New Year holidays, TME was able to add nearly 7 million new subscribers in the quarter – the most it has ever added in a single quarter – contributing to a nearly 40% increase in music subscription revenue 3, RMB 62 billion ($501 million).

“Our effective marketing campaigns led to higher than expected growth in music subscribers in the first quarter,” said TME's CEO Ross Liang he said in a statement. “We are pleased to see a steady recovery in our user base thanks to our streamlined operational efforts.”

Tencent Music had 113.5 million paying subscribers as of March 31 — about half the subscribers of its more global rival Spotify. However, total revenue fell 3.4% compared to last year to RMB 6.77 billion ($937 million) due to another quarter of declining revenue from social entertainment services.

Social entertainment services have seen revenue decline since TME pulled a popular live streaming service amid concerns it could be used for gambling. Revenue in the quarter from social entertainment services fell nearly 50% to RMB 1.76 billion ($244 million) from RMB 3.5 billion in the same period last year. Increased competition also contributed to the steady downward trend in monthly active users across its social entertainment products, with 97 million, or 28% fewer monthly active users, in the first quarter of this year compared to last year.

The impact of the decline in social entertainment segment revenue was mitigated by a 43% increase in online music segment revenue, which totaled RMB 5.01 billion ($693 million) and came from music subscription and advertising service revenue.

Average monthly users of TME's online music platform fell 2.4% to 578 million, but the money TME makes from paying users on its site rose. In the first quarter, TME earned RMB 10.6 ($1.47), up 15.2% from RMB 9.2 ($1.27) in the previous quarter, in monthly average revenue for each of its paying users its online music service.

Tencent Music operates QQ Music, Kugou and Kuwo as well as social karaoke game WeSing.