MBW’s Stat Of The Week is a series in which we highlight a data point that deserves the attention of the global music industry. Stat Of the Week is supported by music data analytics firm Chartmetric.
Tencent Music Entertainment (TME), China’s largest operator of music streaming services, has roughly half as many paying music users as Spotify – but in terms of growth in paying subscribers in 2024, it’s actually keeping pace withDaniel Ek‘s green machine.
Both services added approximately 10 million paying subs in the 12 months to end of June.
TME, which operates the QQ Music, Kugou, and Kuwo platforms and the karaoke app WeSing, had 117 million paying users of its online music platforms at the close of June, according to the firm’s Q2 report released on Tuesday (August 13).
That total paying user base for TME was slightly less than half of the 246 million paying subscribers that Spotify reported in the same quarter.
However, in the first six months of 2024, TME’s results mean that it added 10.3 million paying music streaming subscribers vs. the end of December 2023 — with 6.8 million subscribers added in Q1 and 3.5 million added in Q2.
That’s neck-and-neck with Spotify’s own real-time growth rate in paying users: Spotify reports having added 10 million Premium subscribersin the first six months of 2024 (with 3 million added in Q1, and 7 million added in Q2).
“With over 10 million net subscriber additions in the first half of 2024 and ARPPU expansion, we continue to break new grounds within China’s streaming landscape… We remain optimistic about the music industry’s long-term potential.”
Cussion Pang, Tencent Music Entertainment
Cussion Pang, Executive Chairman of TME, commented today: “With over 10 million net subscriber additions in the first half of 2024 and ARPPU expansion, we continue to break new grounds within China’s streaming landscape.
“We remain optimistic about the music industry’s long-term potential and are committed to sustainably achieving our mid- to long-term goals, at a healthy pace and with the right balance.”
Speaking of ARPPU (average revenue per paying user), the average TME subscriber in Q2 2024 was paying 10.7 RMB (USD $1.47) per month.
That figure was up 10.3% on where it was in the prior-year quarter, but some way behind Spotify’s global ARPPU in the same period of EUR €4.62 (USD $5.08), reflecting the lower spending power of TME’s Chinese consumers versus the ‘developed’ music markets where Spotify is dominant.
TME’s revenue from music subscriptions came in at RMB 3.74 billion (USD $515 million) in Q2 2024, a 29.4% YoY jump.
Overall revenues from music services – including ad revenue and downloads, plus subscriptions – came in at RMB 5.42 billion ($746 million) for the quarter, up 27.7% YoY.
Tencent attributed that success to a “unique blend of premium benefits, original content, and a variety of engaging use cases” that “drove sustainable subscriber growth”.
The company noted its advancements in sound quality, including the introduction of “Premium Panoramic Sound 2.0” on QQ Music, and “Viper Ultra Sound” on Kugou Music.
(By comparison, Spotify may finally unveil high-fidelity audio as part of the “Super-Premium” subscription tier that CEO Daniel Ek hinted at during the company’s recent earnings call.)
TME said it introduced “more personalized privileges to strengthen member loyalty,” including proprietary players and ringtones based on famous IP and artists, as well as original content “that appeals to different music preferences,” which has “proven to be increasingly effective for subscriber conversion.”
The company also stressed its “Super VIP” service, which provides “a holistic listening experience across various devices and scenarios, including music and long-form audio content, with additional benefits such as priority access to digital albums and ticket booking for offline performances.”
The company additionally noted that it upgraded its middleware to enable “a more personalized music discovery experience,” resulting in nearly 40% of streams being generated from recommendations during the quarter.
TME also said it employed AI-generated content to improve sound quality and interactive streaming in Q2, and credited a rewards program for “more frequent and longer listening sessions.”
“Our focus on user-centric innovation continued to pay off, as we have seen a steady increase in both online music subscribers and retention,” TME CEO Ross Liang said in a note to investors.
“This achievement is the result of further enriched membership benefits as well as unique streaming experiences delivered to a broader user base. We are delighted to see improved user loyalty on our platform, thanks to multi-faceted product and technological advancements that bring out [an] increasingly engaging and entertaining music journey for each user.”
Overall, TME’s revenues fell 1.7% YoY to RMB 7.16 billion, as the company’s strong music revenues weren’t enough to offset the ongoing struggles in its social entertainment division, which has seen steep declines since China’s government launched a crackdown on online gambling in 2023.
TME’s social entertainment and others category recorded a 42.8% YoY drop in revenue, to RMB 1.74 billion ($239 million) in the quarter.
“The continued decrease was mainly the result of adjustments to certain live-streaming interactive functions and more stringent compliance procedures we started to implement in the second quarter of 2023, as well as increased competition from other platforms,” TME said in its note to investors.
While the number of paying social entertainment users recorded a 5.3% YoY increase, to 7.9 million, monthly ARPPU fell 45.8% YoY, to RMB 73.20.
Nevertheless, thanks in part to decreases in cost of revenue and total operating expenses, TME reported an operating profit of RMB 2.20 billion ($302 million), a 42.8% YoY increase.
“Our focus on user-centric innovation continued to pay off, as we have seen a steady increase in both online music subscribers and retention.”
Ross Liang, Tencent Music Entertainment
Net profit came in at RMB 1.79 billion ($247 million), up 33.1% YoY. Diluted earnings per American depositary share came in at RMB 1.07 ($0.15), up from RMB 0.82 in the same quarter a year earlier.
Chartmetric is the all-in-one platform for artists and music industry professionals, providing comprehensive streaming, social, and audience data for everyone to create successful careers in music.Music Business Worldwide
