(Reuters) Tencent Music Entertainment Corp beat analyst estimates for third-quarter revenue and profit on Tuesday, as more paying users signed up on the Chinese music streaming company’s platform.
A recovery in advertising sales helped the company, which has been ramping up its original content slate to help put more users behind a paywall.
Still, the Chinese economy has slowed this year due to Beijing’s “zero-COVID” policy that has locked down large swaths of the population under some of strictest restrictions globally.
Total revenue fell 5.6% to $7.37 billion yuan ($7.37 billion) in the quarter ended Sept. 30, but beat analysts’ average estimate of $7.07 billion, according to Refinitiv data.
Paying users at its online music streaming service rose to 85.3 million in the quarter from 82.7 million in the second quarter.
Net profit attributable to equity holders was 1.06 billion yuan, up from 740 million yuan in the same period last year.
Excluding items, the company earned 86 yuan per American depository share (ADS), above expectations for a profit of 71 yuan per ADS.
Cheuk Tung Yip, Tencent Music’s chief strategy officer, said in a call that improving profitability and cost optimization remained the focus for the company despite an overall decline in revenue this year.
“Even though for the full year, we saw revenue decline on a year over year basis, we are looking forward … to achieving positive revenue growth next year, and as a result, positive growth for profitability as well.”
Yip added that the third quarter marked the second straight quarter of advertising revenue growth on a quarter-to-quarter basis.
“Provided that the macroeconomic conditions continue to improve,” he said, “We are optimistic about the outlook on the advertising business” in China.
Yip said that Tencent Music expects its long-form audio content to break even on a gross margin basis by the end of next year.
The company was paying close attention to competition from short video platforms such as ByteDance’ Douyin, TikTok’s sister app in China, Yip said.
But he said Tencent Music still offered content that was different from those platforms.
“There continues to be a wide gap between the content offerings by their service compared to our service,” he said, “So obviously, we watching the competitive dynamics extremely carefully … and we stand ready to react.”
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Source: Reuters; Reporting by Eva Mathews in Bengaluru; Editing by Shinjini Ganguli and Bernadette Baum November 15, 20226:27 AM PST