(Reuters) – China’s Tencent Music Entertainment Group (TME.N) missed Wall Street estimates for quarterly revenue on Monday as the COVID-19 pandemic impacted the company’s social entertainment services business, sending its shares down 4.5% in extended trade.
FILE PHOTO: Tencent Music Entertainment celebrates the company’s IPO at the New York Stock Exchange (NYSE) in New York, U.S., December 12, 2018. REUTERS/Bryan R Smith
Unlike peers such as Spotify Technology SA (SPOT.N), which is also a stakeholder in Tencent Music, the company generates only a fraction of revenue from music subscription packages, and instead relies heavily on services popular in China such as online karaoke and live streaming.
Monthly average revenue per paying user from its social entertainment services, which include karaoke platform “WeSing”, “Kugou Live” and “Kuwo Live,” where users can live-stream music performances and concerts, fell 12.9% to 111.1 yuan ($15.65). It reported 256 million users for the segment during the quarter, a rise of 13.3% from a year earlier.
“While acknowledging the impact on our social entertainment services from the COVID-19 pandemic, we have started to see a moderate recovery recently,” Chief Executive Officer Cussion Pang said in a statement.
The music streaming service had warned in March that it would likely see “much softer” revenue growth in the first quarter due to the coronavirus crisis.
Paid users of the company’s online music service jumped 50.4% to 42.7 million in the quarter.
Spotify’s paid music subscribers surged to 130 million in the first quarter, as its business model proved more resilient than expected amid the coronavirus lockdowns.
Tencent Music, controlled by Chinese tech giant Tencent Holdings Ltd (0700.HK), said revenue rose about 10% to 6.31 billion yuan ($889.08 million) in the first quarter ended March 31. Analysts were expecting revenue of 6.33 billion yuan, according to IBES data from Refinitiv.
Excluding items, the company reported a profit of 0.66 yuan per American depository share (ADS), above estimates of 0.63 yuan per ADS.
The company’s cost of revenues increased by 17% to 4.33 billion yuan, primarily due to higher revenue sharing fees and increase in content expenses.
Reporting by Akanksha Rana in Bengaluru and Pei Li; Editing by Shailesh Kuber