Tencent Music Entertainment Group (NYSE: TME) reported a 6.4% increase in earnings for the third quarter of 2019 as music subscriptions, sales of digital music albums, online karaoke, and live streaming services drove revenues higher. The results exceeded analysts’ expectations.
Net income increased by 6.4% year-over-year to RMB1.03 billion or $144 million. The non-IFRS net profit attributable to equity holders grew by 8% to RMB1.24 billion or $173 million. The earnings per American Depository Shares (ADS) were $0.09 per share for the third quarter and the adjusted non-IFRS earnings per ADS were $0.10 per share.
Total revenues climbed by 31% to RMB6.51 billion or $910 million. Online music paying users reached 35.4 million, an increase of 42.2% year-over-year.
The number of online music paying users grew by 4.4 million, up from 2.6 million in the second quarter and 1.4 million in the first quarter of 2019, representing the largest net increase since 2016 and continuing the accelerating growth trend.
For the quarter, the company continued to invest in product innovations to further expand its user base and increase user engagement. The company’s online music subscription revenue jumped significantly by 48.3% year-over-year, driven by strong growth of paying users and average revenue per paying user (ARPPU) expansion.
On the online music front, monthly average revenue per paying user grew 5% and paid users base climbed by 42%. Mobile monthly active users rose modestly by 0.9%.
Social entertainment offerings saw good growth across all its metrics. MAUs rose 7.6%, while paid users rose 23.2%. The monthly average revenue per paying user increased by 7.4% over the prior year.
The improved paying user retention rate and increased number of paying users drove music subscription revenue higher by 48.3% for the third quarter while experiencing a decline in sublicensing revenues from other music platforms.
The company faced an increase in costs and expenses due to a rise in market prices for licensed and original music content, revenue sharing fees, increased spending on branding, paying user conversion, and an increase in investment in research and development.
Tencent Music’s rival Spotify Technology (NYSE: SPOT) posted a jump in earnings for the third quarter of 2019, backed by a 28% top-line growth. The results surpassed analysts’ expectations. Spotify also announced the retirement of finance chief Barry McCarthy early next year.