Tencent Music, which has achieved steady growth, is still helpless in the face of the continuous "departure" of monthly active users.
On August 15, online music market "One Brother" Tencent Music announced the second quarter report of 2023.
According to financial report data, as of June 30, Tencent Music's total revenue in the second quarter was 7.29 billion yuan (US$1.01 billion), a year-on-year increase of 5.5%; Net profit attributable to shareholders was RMB1.30 billion (US$179 million), up 51.6% year-on-year; Non-IFRS net income attributable to shareholders was $1.53 billion (US$211 million), up 48.6% year-on-year.
Overall, as a leading platform in the industry, Tencent Music's performance is still growing steadily. However, it still faces development difficulties: the two core businesses "one up and down", contributing to the revenue and the other; Although the online music payment rate has reached a record high, the problem of monthly active user loss has not improved.
The social entertainment business continues to come under pressure
From the perspective of business structure, Tencent Music Entertainment Group mainly has two core businesses, one is online music business including subscription membership, advertising, etc., and the other is social entertainment business including live streaming and K songs.
In the second quarter of 2023, Tencent Music's online music service revenue increased by 47.6% year-on-year to RMB4.25 billion. In its earnings report, the company highlighted that the revenue contribution of online music services reached 58.3%, surpassing social entertainment services for the first time in the company's history, which is a major milestone in the company's development path.
From the previous performance of Tencent Music, social entertainment services have always been the source of revenue that accounts for the lion's share, but in recent quarters, the revenue of the two major businesses has continued to "increase and decrease", and the revenue structure has shown obvious changes.
For the whole year of 2022, Tencent Music's total revenue decreased by 9.3% year-on-year to RMB28.34 billion, of which online music service revenue increased by 8.9% year-on-year to RMB12.48 billion, and social entertainment services and other revenue decreased by 19.8% year-on-year to RMB15.86 billion, accounting for 44% and 56% of the two core businesses respectively.
In the first quarter of this year, Tencent Music's total revenue was 7 billion yuan, a year-on-year increase of 5.4%, the revenue of online music services increased by 33.8% year-on-year to 3.5 billion yuan, and the revenue from social entertainment services and other sectors fell 13.0% year-on-year to 3.5 billion yuan, and the revenue of the two core businesses reached a flat state.
It can be seen that online music services have caught up today, on the one hand, the growth of their own business, on the other hand, the continuous shrinkage of social entertainment services. In the second quarter of 2023, revenue from social entertainment services and other services decreased by 24.6% to RMB3.04 billion from RMB4.03 billion in the same period of 2022, not only widening the year-on-year decline, but also down 13.1% from the previous quarter.
Regarding the decline in this business, Tencent Music explained in its financial report: "It is mainly due to our initiative to take some service improvement and risk control management measures to provide a user experience that is more focused on music." ”
Tencent Music also admitted in its financial report that social entertainment services will continue to face pressure in the second half of 2023, so it is expected that the total revenue in the third quarter will drop to more than ten percentage points year-on-year, and the total revenue for the whole year will decline to a mid-single-digit percentage percentage year-on-year.
Monthly active users continue to churn
Executives of Tencent Music Entertainment Group highlighted in the financial report that in June this year, the company ushered in a milestone moment of exceeding 100 million paid online music users.
Behind the 47.6% year-on-year increase in online music service revenue in this quarter, one of the main reasons is the rapid growth of online music subscription revenue, behind which Tencent Music's online music paying users in this quarter increased by 20.2% year-on-year to 99.4 million, and the online music payment rate also rose to a record high of 16.7%. The average monthly revenue of this individual paying user reached 9.7 yuan, a year-on-year increase of 14.1%, the fifth consecutive quarter of growth.
According to the financial report, the average monthly revenue growth of paying users and individual paying users is mainly due to refined operation strategies, attractive membership privileges and music content, and prudent promotional activities.
However, it should be noted that while paying users are growing, monthly active users are constantly churning. In the second quarter of 2023, the number of monthly active users of online music services was 594 million, down 4.7% from 623 million in the second quarter of 2022; In the previous quarter, the number of monthly active users of online music services was 592 million, and in the first quarter of 2022, it was 636 million, down 6.9% year-on-year.
The loss of mobile monthly active users of social entertainment services is even worse, with the number of monthly active users in the second quarter of 2023 being 136 million, down 18.1% year-on-year and two percentage points higher than the 16.0% year-on-year decline in the previous quarter.
Gao Dongxu, founder and chief analyst of China Entertainment Think Tank, said that since the beginning of last year, Tencent Music's active users have been declining, and there are many reasons behind this, the most important reason is that the lipstick effect under the epidemic and the disappearance of China's mobile Internet demographic dividend have begun to affect the online music market.
The competitive landscape of the mainland's online music market is "one super and one strong", of which one mainly refers to Tencent Music and the other refers to NetEase Cloud Music, which occupies about ninety percent of the market share.
But Tencent Music doesn't just face competition between online music apps. Internet industry analyst Ding Daoshi told reporters that the competition for music market share is not only between music apps, Tencent Music's competitors are far more than NetEase Cloud Music, broadly speaking, Douyin, Kuaishou, video number, B station These can be counted, in fact, many users are using these apps to listen to songs.
With the cancellation of exclusive copyrights, changes in the industry environment, and latecomers joining the competition, Tencent Music's market pattern as the industry leader is not unbreakable.
Previously, ByteDance launched two music apps, Soda Music and Tomato Listening Music, which are aimed at young users and the sinking market respectively. At present, it is difficult to shake the status of Tencent and NetEase, but ByteDance has not given up its "music dream". According to 36Kr, Douyin has integrated multiple businesses such as live programs (including events, concerts, etc.), music, variety shows, film and television dramas, and stars into a larger entertainment department, which is still undergoing organizational restructuring.
In addition to competitors, the impact of Tencent Music's own increase in membership prices on monthly activity is also a variable. Previously, a number of media reported that QQ Music will adjust the price of the existing automatic renewal members in the luxury Green Diamond membership from July 4, 2023. After this adjustment, the price of continuous monthly membership will be increased from 13 yuan/month to 15 yuan/month, the price of continuous monthly membership will be increased from 35 yuan/quarter to 45 yuan/quarter, and the continuous annual membership price will increase from 138 yuan/year to 158 yuan/year. In addition, this price adjustment is only for "QQ Music Stock Auto-renewal Members", that is, users who are already Deluxe Green Diamond Auto-renewal Members before midnight on May 1, 2022 and have not interrupted the auto-renewal status.
The price increase of content platform members has long been not a new thing, and the previous price increase of "Youai Tenmang" has long caused user dissatisfaction, but some platforms subsequently rely on the output of high-quality content to achieve new growth, but whether the online music platform can copy the membership price increase strategy of the long video platform, whether the user pays, and whether it will be reflected in the next performance, needs to be further observed.
In Gao Dongxu's view, the price increase of Tencent Music membership fee is a normal business operation, a market behavior in line with market laws, and the reason for users' core payment is high-quality content, under the premise of ensuring high-quality content, a certain range of price increases, most members are recognized. But if the price is excessive, multiple times and the user is harvested excessively, the user will definitely vote with his feet, which will affect the monthly activity.
Reporter Cai Shumin
Edited by Ma Jack
Responsible editor Sun Xiao