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Shares of Tencent Music Entertainment Group plummeted after the company announced a decline in its monthly active users for the 16th straight quarter, raising concerns about intensified competition in the digital music industry. Despite reporting a 36% increase in net profit during the third quarter, investors responded negatively.
The company’s Hong Kong stock closed down 10.7%, trading at HKD75.60 ($9.73) per share, while its U.S.-listed shares dropped 8.4% to $19.01 yesterday.
In the three months ending September 30, the average number of monthly active users (MAUs) for Tencent Music’s online platforms decreased by 4% to 551 million. However, paid subscriber numbers grew by 6%, reaching 125.7 million, with average monthly revenue per paying user increasing by 10% to CNY11.90 ($1.68).
The company posted a third-quarter profit of CNY2.2 billion ($302 million), and revenue increased by 21% to CNY8.5 billion ($1.2 billion), driven mainly by a 27% rise in income from online music services, which totaled CNY7 billion.
“Our third-quarter results were strong, supported by the well-rounded growth of our online music business,” said the company’s executive chairman. “Innovations in content, expansion of services to include more live experiences, and continued development of subscription revenue have driven consistent growth, especially in concert and artist merchandise sales.”
While last quarter’s performance aligned with expectations, rising concerns about competition from TikTok’s parent company, ByteDance, have heightened among investors. BofA Securities noted that Tencent Music did not disclose the number of premium Super VIP subscribers, which stood at 15 million in the previous quarter.
Meanwhile, Qishui Music, a new app spun off from TikTok’s sister platform Douyin, is rapidly gaining ground in China’s online music scene. Its MAUs soared 91% year-over-year to 120 million in September, placing it fourth among mobile music apps in the country, behind Tencent’s Kugou, QQ Music, and NetEase’s Cloud Music, according to QuestMobile.
In comparison, Kugou’s MAUs declined 8% to 210 million, QQ Music’s dropped 3% to 190 million, while Cloud Music saw a modest increase of 1.5% to 147 million.
To bolster its position amid fierce competition, Tencent Music is actively expanding its content ecosystem, notably acquiring China’s leading online audio platform Ximalaya for $2.9 billion in June. However, the company has not disclosed any operational details related to Ximalaya.
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