Image source: Visual China
Tencent Music Entertainment Group (NYSE:TME), a Chinese online music and audio entertainment platform, released its unaudited financial results for the first quarter ended March 31, 2022.
According to the data, TME's total revenue in the first quarter was RMB6.64 billion (US$1.05 billion), down 15.1% year-on-year, and net profit was RMB649 million (US$102 million). Net profit attributable to shareholders of the Company was RMB609 million, down 34% year-on-year.
By business, music subscription revenue was 1.99 billion yuan, an increase of 17.8% year-on-year; online music service revenue was 2.62 billion yuan, down 4.8% year-on-year; social entertainment services and other revenue was 4.03 billion yuan, down 20.6% year-on-year.
However, due to the intensification of industry competition and changes in the macro environment, TME in the first quarter of social entertainment MAU and paying users have declined in the same period last year.
Overall, TME's performance in the first quarter of this year is in line with expectations. It is worth noting that after the release of the financial report, Tencent Music's management responded about the recent strengthening of supervision of live broadcasts and the impact of epidemic control measures, including in Shanghai and other places.
In terms of live broadcasting-related performance, Tencent Music Group disclosed that Kugou Live launched the "Goddess Festival" event in March, attracting female users with high-quality ARPPU to participate in the audio live broadcast route.
By increasing the live education content, the target song user group of the national K song was introduced, which solved the needs of the elderly, online learning and sharing, such as square dance, calligraphy and traditional Chinese quotation courses.
Our first live live singing event co-hosted by QQ Music Live and National K Song brought high-quality karaoke content to the live broadcast. QQ Music Live has steadily advanced, the number of hosts has increased rapidly, and the number of daily active hosts in the first quarter has reached a record high of 10,000.
What is considered to be the most stringent regulatory policy currently facing the live broadcasting industry has been implemented. On May 7, the Central Civilization Office, the Ministry of Culture and Tourism, the State Administration of Radio and Television, and the State Internet Information Office issued the Opinions on Regulating Online Live Broadcast Rewards and Strengthening the Protection of Minors, further regulating areas such as minors' live broadcast rewards and engaging in anchors.
The measure requires all online platforms to prohibit minors from participating in live broadcast rewards, and strictly control minors from engaging in anchors.
At the same time, the website platform should cancel all tip lists within 1 month of the release of this opinion, prohibit ranking, drainage, and recommendation of network anchors based on the tip limit as the sole basis, and prohibit ranking users based on the tip limit.
In addition, during the daily peak period, the number of "Lianmai PK" in a single account live broadcast shall not exceed 2 times, and the "PK punishment" link shall not be set, and the "PK punishment" shall not be provided with technical implementation methods to avoid inducing and misleading minors.
The implementation of the policy has had a significant impact on the social entertainment platform with audio and video as the core business.
In this regard, Tencent Music Group believes that the latest regulation, especially the live broadcast regulation , around the chart ranking and the new restrictions around PK will take effect in June. The Group expects thatLive streaming revenue will be affected for the rest of the year, but it is not yet possible to quantify the impact. They will work closely with regulators to figure out exactly how to be fully compliant。
At the same time, Tencent Music will invest in audio live streaming, as some of the recently announced restrictions are not evident in audio live streaming.
Like most companies, Tencent Music is also planning to accelerate the pace of going global to offset the possible impact of domestic regulatory hammers on the business. Tencent Music executives said, "As our social entertainment business expands internationally, we see opportunities in Southeast Asia, Japan and the Middle East. In the long run, we will build a metacostem space experience through TMELAND. ”
For the impact of regulatory policies on enterprises, another aspect comes from the implementation of epidemic containment and control measures.
As for the impact of the epidemic control measures in Shanghai since the first quarter, at the financial report, the management of Tencent Music said,From the perspective of traffic, the sealing control did not see a negative impact, and the number of monthly active users of QQ Music alone actually increased year-on-year. In the social entertainment business, during the quarantine period, we also saw an increase in the activity of online K songs.
However, from the perspective of revenue, the blocking has led to a large number of advertisers in the city in lockdown, which has a greater impact on Tencent Music's advertising revenue. At the same time, live broadcast revenue is also reduced due to the reduction of anchor activities, affecting the user's willingness to spend in live broadcasting.
Tencent Music's management disclosed that advertising revenue was affected by the epidemic and regulation, and fell year-on-year in the first quarter. However, for subcategories in ad revenue, we're seeing positive momentum in new ad formats, one example of which is video-rewarded ads. Despite the overall advertising environment, this new form of revenue is growing continuously.
Currently, it only accounts for a lower single-digit percentage of our advertising revenue, but it is expected to grow. In the long run, the advertising business still has great potential, and it is expected that the advertising business will recover in the second half of the year. As far as the industry is concerned, FMCG, traditional staple food products, and online game advertising businesses continue to perform well, while cosmetics perform weakly.