The business map of Tencent Music has been adjusted.
On March 19th, Tencent Music released the unaudited financial performance report for the fourth quarter and the whole year as of December 31st, 2023.
In the fourth quarter of 2023, the total revenue of Tencent Music was RMB 6.89 billion, down 7.2% year-on-year; The net profit was 1.41 billion yuan, a year-on-year increase of 16.9%.
In 2023, the total revenue of Tencent Music was 27.75 billion yuan, down 2.1% year-on-year; The net profit was 5.22 billion yuan, a year-on-year increase of 36%.
After the financial report was released, before the US stock market closed on March 19th, the share price of Tencent Music rose by 0.48%, corresponding to a market value of $17.813 billion.
In terms of business, Tencent Music is still in the process of adjusting its business structure and continues to focus on online music services. In Q4 of 2023, Tencent Music’s online music service revenue reached 5.02 billion yuan, a year-on-year increase of 41.1%; The income from social entertainment services and other services dropped by 51.6% year-on-year to 1.87 billion yuan. Correspondingly, in Q4 of 2023, the operating cost of Tencent Music decreased by 14.6% year-on-year to 4.25 billion yuan due to the decrease in revenue sharing cost corresponding to the decrease in social entertainment service revenue.
In the whole year of 2023, thanks to the accelerated growth of online music subscription revenue and advertising service revenue, as well as the growth of sales revenue around artists, Tencent Music’s online music service revenue was 17.33 billion yuan, a year-on-year increase of 38.8%; As the company adjusted some live interactive functions and implemented stricter compliance procedures, the revenue from social entertainment services and other services was 10.43 billion yuan, down 34.2% year-on-year.
With the concentration of live broadcast traffic to the short video platform in the head, Tencent Music is also changing its strategy. Nowadays, online music service has become Tencent’s music business accounting for over 70%, and this proportion is increasing — — From 37.1% in Q1 in 2023 to 72.9% in Q4, and achieved good profits. Earlier, Tencent Music’s social entertainment service accounted for 70% of the company’s total revenue.
In this process, Tencent Music has tapped the paying potential of users, and both the number of paying users and the average monthly income of users of its online music service have increased. The former increased by 20.6% to 107 million in Q4, while the latter increased by 20.2% to 10.7 yuan.
In addition, Zhu Liang, CEO of Tencent Music, said at the performance meeting that Tencent Music pays more attention to the overall activity and liquidity of long audio content and the promotion of long audio content in the car market. In 2023, the long audio service achieved more than the expected results in the transformation of Tencent Music. Next, Tencent Music will continue to promote the distribution and commercial efficiency of long audio content on the entire music platform.
Cussion Pang, executive chairman of Tencent Music, said in the financial report, "2023 is a crucial year for the transformation of Tencent Music." "The strong performance of online music services not only eased the pressure on social entertainment services, but also promoted the steady increase of quarterly net profit."
However, Tencent Music, which has successfully transformed, is not without worries. On the one hand, the number of monthly active users of online music service, which has been regarded as the main business, has decreased for several consecutive quarters. In Q4 of 2023, the number of monthly active users of this service was 576 million, a year-on-year decrease of 4.2% and a quarter-on-quarter decrease of 3.03%. The number of monthly mobile users of social entertainment services also decreased by 28.8% year-on-year to 104 million.
On the other hand, although the net profit performance is good, but reducing costs and increasing efficiency has not changed its overall income decline. In 2023, the total revenue of Tencent Music decreased by 2.1% year-on-year.
Regarding the loss of Q4 users, Liang Zhu said that there are quarterly reasons, and the mobile terminal itself continues to be affected by short videos, and the traffic has the pressure of natural loss; In 2023, the promotion and marketing expenses of Tencent Music were also reduced, and the distribution channels were also reduced.
In addition, in 2023, the average monthly income of users of Tencent Music’s online music service increased, which also caused negative user feedback. The topic of "QQ music members’ price increase" was once on the hot search in Weibo. In addition, Tencent Music’s MOO Music, which focuses on young users and targets Netease Cloud Music, was shut down on December 31, 2023.
Netease Cloud Music, the main competitor of Tencent Music, released its financial report on March 1st. The latter also embarked on the road of reducing costs and increasing efficiency and adjusting its business structure, and also experienced a decline in income and an increase in profits — — In Q4 of 2023, the net income of Cloud Music was 1.986 billion yuan, down 16.4% year-on-year; Gross profit was 601 million yuan, up 42.32% year-on-year.
According to the financial report of Tencent Music, as of December 31, 2023, the total balance of cash, cash equivalents and time deposits of Tencent Music was 32.22 billion yuan. In addition, according to the $500 million share repurchase plan announced on March 21, 2023, as of December 31, 2023, Tencent Music has repurchased about 25.3 million shares of american depository receipts from the open market for $174.5 million in cash.