Financial Results Overview
Tencent Music Entertainment, the largest Chinese music streaming company, has predicted its financial results for the fourth quarter and 2024, with annual subscription revenue surpassing $2 billion.
The annual subscription income is projected to grow 25.9% year in 2024, reaching 15.23 billion yuan (2.12 billion US dollars at the average exchange rate for 2024), up from 12.1 billion yuan in 2023 (1.71 billion US dollars at the average exchange rate for 2023), according to TME’s latest financial report released on Tuesday (March 18).
The company credits this achievement to a sequential increase in its paid user base and enhanced average revenue per paying user (ARPPU), which has partially bolstered the ‘Super VIP’ (SVIP) tier.
Paid TME subscribers grew 13.4% year to 121 million in the fourth quarter of 2024, compared to 106.7 million in the same quarter of 2023. This also reflects the addition of 2 million subscribers between the third and fourth quarters of 2024, with ARPPU rising to Rmb 11.10 ($1.54) in the fourth quarter from 10.70 yuan ($1.49) in the same quarter of 2023.
Company Growth and Initiatives
“2024 was a year of significant progress for TME, highlighted by robust performance in our online music business, which stimulated overall revenue growth and increased profitability,” stated Kussan Pang, Executive Chairman of TME, in the income release.
Ross Liang, the CEO of TME, mentioned: “Our SVIP initiative also showed strong performance in the fourth quarter, resulting in enhanced user engagement and an increase in ARPPU.”
In the third quarter, Tencent Music noted that 8% of its subscribers were SVIP, equating to 10 million users. The SVIP subscription is positioned at around Rmb 40 per month, five times the standard Rmb 8 subscription rate.
The success of the SVIP tier for Tencent Music coincides with Spotify reportedly preparing to launch its own super-premium offering. During a call last July, Daniel Ek, CEO of Spotify, indicated that the company would initiate a new Deluxe tier, potentially providing access to a Superfan Club along with exclusive songs and song management tools.
TME highlighted that its SVIP tier gained significant traction following the launch of high-quality audio features, including AI-assisted sound enhancements and voice extraction, as well as an expanded library of digital albums and enhanced online concert benefits, such as high-definition modes for select shows.
Annual Revenue and Industry Outlook
For the entire year, TME reported that income from online music services surged 25.5% year to 21.74 billion yuan ($3.02 billion), compared to 17.33 billion yuan ($2.45 billion) in 2023. The company attributed this increase to substantial growth in music subscription revenues alongside advertising revenues. Overall, total revenue for 2024 increased 2.3% year to 28.40 billion yuan ($3.95 billion).
In the fourth quarter alone, revenues from online music services grew 16.1% year to 5.83 billion yuan ($811.1 million), contributing to a total quarterly income increase of 8.2% year to 7.46 billion yuan ($1.04 billion), surpassing analysts’ average estimates of 7.30 billion yuan, based on data compiled by LSEG.
Despite solid streaming music performance, TME’s Social Entertainment Services, which includes the Karaoke app Wesing and the live concert platform Kuvo music, saw a decline, reporting a revenue drop of 13% year to 1.63 billion yuan ($226.7 million) in the fourth quarter. The company attributed this decline to “adjustments in certain interactive functions and stricter enforcement of regulations.”
Mouse revenue for the social entertainment segment fell 21.2% year to 82 million in the fourth quarter, while the number of paying users dropped by 3.8% to 7.7 million. The ARPPU in the social entertainment sector also decreased by 9.7% to Rmb 70.40 ($9.79).
TME’s net profit attributable to shareholders for 2024 rose 35% year to 6.64 billion yuan ($923.6 million), or Rmb 4.24 per diluted share. In the fourth quarter alone, net profit attributable to shareholders surged 49.8% year to 1.96 billion yuan ($272.6 million), or Rmb 1.26 per share, exceeding analysts’ consensus of 1.22 yuan.
In addition to its reported financials, TME announced the integration of the Chinese Deepseek AI model (which ignited global market excitement earlier this year) into its song creation features. The company stated that the integration of DeepSeek enhances “user engagement in music creation.”
With its adoption of AI, TME also revealed an expansion of its content library, now featuring 260 million licensed and co-produced musical and audio tracks, significantly more than the 100 million reported by Spotify in its latest financial update.
TME stated that its AI implementation goes beyond content creation, enhancing user personalization through integrations with AI assistants, comment sections, and recommendations.
Looking ahead to 2025, Liang emphasized that the company aims to “leverage the power of AI to personalize our services and bring new experiences to users.”
Tencent Music now generates over $2bn from music streaming subscriptions annually
