Tencent Music Entertainment Group Announces Fourth Quarter and Full Year 2020 Unaudited Financial Results

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SHENZHEN, China, March 22, 2021 /PRNewswire/ — Tencent Music Entertainment Group (“Tencent Music,” “TME,” or the “Company”) (NYSE: TME), the leading online music entertainment platform in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2020.

Financial and Operational Highlights

In the three months ended December 31, 2020:

  • Online music paying users reached 56.0 million, increasing by 40.4% year-over-year. On a sequential basis, the number of online music paying users grew by 4.3 million. Paying ratio was 9.0%, up from 8.0% in the third quarter of this year and 6.2% in the fourth quarter of last year.
  • Total revenues were RMB8.34 billion (US$1.28 billion), representing an increase of 14.3% year-over-year.
  • Online music service revenues grew by 29.0% year-over-year, up from 25.9% in the third quarter of 2020. Revenues from music subscriptions were RMB1.58 billion (US$242 million), representing 41.9% year-over-year growth. Advertising services recorded over 100% year-over-year growth in the fourth quarter of 2020.
  • Net profit attributable to equity holders of the Company was RMB1.20 billion (US$183 million).
  • Non-IFRS net profit attributable to equity holders of the Company[1] was RMB1.35 billion (US$207 million).

In the full year ended December 31, 2020:

  • Total revenues increased by 14.6% year-over-year to RMB29.15 billion (US$4.47 billion).
  • Net profit attributable to equity holders of the Company increased by 4.3% year-over-year to RMB4.16 billion (US$637 million).
  • Non-IFRS net profit attributable to equity holders of the Company[1] increased by 0.9% year-over-year to RMB4.95 billion (US$759 million).

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[1] Non-IFRS net profit attributable to equity holders of the Company was arrived at after excluding the combined effect of amortization of intangible assets and other assets arising from acquisitions, share-based compensation expenses, net losses/gains from investments, fair value change on puttable shares and income tax effects.

“In 2020, we demonstrated resilience and agility during and after the COVID-19 pandemic. We forged ahead with our operations, invested in technologies to customize services and introduced new products to meet the evolving demands of our users. Our fourth quarter results were underpinned by strong performance in online music services, which registered outstanding year-over-year revenue growth of 42% from subscriptions and over 100% from advertising. Even against the backdrop of macro-economic uncertainty and a changing competitive environment, our social entertainment services delivered steady revenue growth alongside moderation in margins as we proactively invested some profit to pave the way for future growth,” said Mr. Cussion Pang, Chief Executive Officer of Tencent Music. “By investing in various musical genres across multiple formats and enriching long-form audio content, we have further strengthened our content leadership and improved user engagement, reflected in the sequential increase in total user time spent on our platform. Our initial investment in long-form audio started to pay off with 15% long-form audio penetration of our user base in the fourth quarter of 2020, up from 6% for the same period last year.” 

“We have already started 2021 with exciting accomplishments, including expanding our online music and audio entertainment ecosystem, deepening user engagement and further diversifying our business model. Motivated by our fundamental dedication to continually improve the user experience, we are confident to be on the cusp of new opportunities and sustainable growth for many years to come,” concluded Mr. Pang.

Recent Operational Highlights

  • TME’s online music and social entertainment services key operating metrics*

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4Q20

4Q19

YoY %

Mobile MAU – online music (million)

622

644

(3.4%)

Mobile MAU – social entertainment (million)

223

233

(4.3%)

Paying users – online music (million)

56.0

39.9

40.4%

Paying users – social entertainment (million)

10.8

12.6

(14.3%)

Monthly ARPPU – online music (RMB)

9.4

9.3

1.1%

Monthly ARPPU – social entertainment (RMB)

172.1

136.3

26.3%

We achieved solid progress across full business spectrum in 2020, in terms of scale, industry leadership, content diversification and enrichment, monetization, and innovation, solidifying our position as a leading all-in-one music and audio entertainment platform in China, and building a strong foundation for our music content ecosystem:

  • On the music content front, we strived for comprehensive coverage through category expansion and deepening penetration, inspired to better serve the evolving needs of our diverse users:
    – We made significant progress in trend-setting genres during the fourth quarter through: a) increasing new hit content coverage substantially, driven by our proprietary trend prediction algorithms and expanding promotional capabilities; b) comprehensive partnerships with leading rap music labels such as GOSH and 404 Rapper; c) notable breakthroughs in promoting hip-hop and Chinese ancient style music, latter of which was streamed over 100 billion times in 2020.
    Tencent Musician Platform continued to expand rapidly: a) the number of participating indie musicians continued to grow over 100% year-over-year in the fourth quarter; b) the number of exclusive indie musicians increased by 13 times in the fourth quarter, compared to the same period a year ago; c) the number of original songs uploaded doubled year-over-year, reaching over 1 million by the end of 2020; d) as of the end of 2020, efforts to promote diversity and gender equality resulted in nearly 40% of total artists on our Tencent Musician Platform being female, compared with industry average of around 20% in China.
    – In January 2021, the Tencent-led consortium in which we have approximately 10% equity interest increased total equity stake in Universal Music Group (“UMG”) to 20%, following the multi-year extension of our licensing agreement with UMG in 2020.
    – In March 2021, we extended our multi-year strategic licensing agreement with Warner Recorded Music (“WRM”) upon its future expiration. As part of the extension, we also agreed to establish a new joint venture record label in China as well as expand the partnership to a wider range, including the usage of WRM’s content across all our music and entertainment platforms, as well as developing new opportunities in music-for-business solutions and connected devices.
     
  • Positioning music as a home ground, we upgraded our products to be more social, personalized and visually appealing to improve user experience in the fourth quarter:
    – Putong Community achieved a steady sequential increase in user penetration and user retention. Fans Club, Kugou Music’s new community channel, recorded a 15% sequential increase in total user time spent. Of note, almost half of combined users of Putong Community and Fans Club are in their teens and mid 20’s.
    – Our pioneering embedded MVs in Kugou Music streaming page experienced over 70% sequential increase in users, driving a rapidly increasing daily total time spent on MVs.
    – Personalized recommendation streams as a proportion of total streams increased sequentially.
     
  • Extending our business boundaries, we vigorously developed long-form audio through a two-pronged approach by integrating with our music applications as well as launching a standalone application, and achieved significant milestones. During the fourth quarter:
    – We significantly enriched long-form audio content offering with the number of licensed titles increased by 370% year-over-year.
    – MAU penetration increased to 14.8%, from 5.5% for the same period last year, together with a sequential uplift in average daily user time spent on long-form audio.
    – In January 2021, we entered into a definitive agreement to acquire 100% equity interest of Shenzhen Lanren Online Technology Co, Ltd (“Lazy Audio” or “Lanren tingshu”), to significantly enrich our audio content offering and boost our production of audiobooks. 
  • While our online music MAUs slightly declined, core users on our platform are increasingly engaged and we saw a year-over-year increase in average daily user time spent on our platform during the fourth quarter. This is a result of our concerted efforts to enrich music and audio content offering as well as launches of innovative product features and services for Putong Community and TME Live.  
  • Apart from being a pioneer of digital albums in China, we continue to transform and innovate a fan-based economy to include music chart operations and recently successfully rolled out online concerts with virtual fan-idol gatherings. In the fourth quarter, we released various digital albums, including:
    – “π-volume.4” by LUHAN, a well-known trend-setting male singer;
    – “THE ALBUM” by BLACKPINK, a top Asian female band;
    – “In My Thoughts” by Zhang Yunlei, an up-and-coming artist who is a singer and a Chinese comedian; and,
    – three digital releases by JJ Lin, including his fourteenth album, “Drifter • Like You Do”, which topped multiple music charts on the first day of its release.
     
  • Centering on singing, we added more playful elements to online singing rooms and multi-genre remix and auto-tune tools which have further bolstered the social and entertainment aspects of WeSing, and contributed to stabilization of MAUs and improvement on user engagement and monetization efficiency.
     
  • Tapping into the prevailing trend of accelerated internet penetration, we built an innovative online-merge-offline performance ecosystem to pursue additional growth. TME Live has been growing from strength to strength and its audience and influence has continued to expand. Leveraging its influence, we expect to expand TME Live’s coverage beyond top artists and provide performance opportunities to foster a wider range of musicians:
    – Hosted more than 50 online live concerts since its launch with 25 in the fourth quarter for musicians from home and abroad including aMei, Mayday, Stefanie Sun, Billie Eilish and Tomorrowland.
    – Benefiting from increasing brand awareness, TME Live continued to attract sponsorships from reputable brands, paving the way for further monetization opportunities.
     
  • We strived to establish a fair and most credible content evaluation system for China’s music industry which in turn enhanced our promotional capabilities as well as industry influence. Our Uni Chart was awarded the most influential digital music chart of 2020 by Tech Innovators Conference organized by PingWest, a service provider and a voice for the global technology community.

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[*] For the definitions of the cited key operating metrics, please refer to the introduction section in the Company’s 2019 20-F filed on March 25, 2020. The monthly ARPPU of social entertainment services is calculated based on revenues from social entertainment and others, including advertising services provided on our social entertainment platforms.