Tencent Music’s Q1 revenue downbeat, shares rise amid hopes for regulatory easing

As a part of a broad clampdown on China’s web corporations that started final yr, regulators stripped Tencent Music of its unique contracts with massive music labels, spurring competitors from rivals like Cloud Music and Bytedance-owned brief video sharing platform Douyin.

Analysts mentioned the income drop had been nicely flagged by Tencent Music, and shares gained 3.4% in after-hours New York buying and selling as Chinese state media reported the nation’s high political consultative physique was internet hosting a gathering on Tuesday with some corporations on the best way to promote the digital economic system. The Hang Seng TECH Index in Hong Kong climbed 4.24%.

Tencent Music mentioned income dropped to six.64 billion yuan ($979 million) within the first quarter ended March 31, partly on account of decrease advert gross sales after a contemporary bout of COVID-19 instances in China. Net revenue attributable to fairness holders of the corporate fell by a 3rd to 609 million yuan.

The agency, 49%-owned by tech big Tencent Holdings, reported its greatest income driver, social leisure providers, noticed a 21% fall in quarterly gross sales. Paying customers within the phase fell to eight.3 million from 9 million within the earlier quarter.

Investors and analysts shrugged off the weak spot within the first-quarter efficiency.

“The company has given analysts ahead of time a very low expectation. And the decline seen in the social entertainment segment is also widely expected considering pressure from macroeconomics and regulation,” mentioned Ivan Su, senior fairness analyst at Morningstar.

The firm additionally confirmed its plan to hunt a secondary itemizing in Hong Kong is “in an active execution phase”, with out offering additional particulars.

“We will strive to move things forward in an expedited manner and obtain the necessary regulatory approvals in due course,” Cheuk Tung Yip, Tencent Music’s chief technique officer, mentioned in a name with analysts.

The firm reported that on-line music paying customers elevated by 4 million from the prior quarter, when it added about 5 million paying customers. However, the common income per paying person slipped within the first quarter, falling to eight.3 yuan from 9.3 yuan in the identical interval final yr.

Yip mentioned the corporate has deepened cooperation with Tencent Holdings in an effort to spice up income. A spotlight for the approaching quarters can be on selling reside streaming and reside concert events on WeChat, Tencent’s flagship messaging platform with a billion-plus person base.

(Reporting by Josh Ye in Hong Kong and Eva Mathews in Bengaluru; Editing by Amy Caren Daniel and Kenneth Maxwell)

By Josh Ye and Eva Mathews

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