Tencent Music hits low pitch after first earnings report exposes costs

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Chinese streaming firm Tencent Music Entertainment Group delivered its first earnings report as a public company, meeting market expectations but ...

BEIJING: Chinese streaming firm Tencent Music Entertainment Group delivered its first earnings report as a public company, meeting market expectations but exposing soaring licence and content production costs which pulled its shares down 6 percent.

Tencent Music has been profitable at an operating level for the last two years, whereas Spotify only posted its first-ever quarterly operating profit in the fourth quarter. Tencent Music, controlled by Chinese technology giant Tencent Holdings Ltd and backed by Spotify, said quarterly revenue jumped 50.5 percent to 5.4 billion yuan , versus analysts' average estimate of 5.3 billion yuan.But fees for content and revenue sharing as well as in-house production costs jumped 63 percent, crimping its gross margin to 34 percent from 38.9 percent a year earlier.

There is a lot of growth potential given the paying ratio is still very low in comparison with international peers, he said.

 

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