Tencent Music Profit Jumps 35% on Subscriber Growth

Tencent Music Entertainment reported a 35% uptick in profit on Tuesday after the Chinese music streamer added 2 million subscribers over the third quarter.

TME reported net profit for the third quarter of RMB1.71 billion ($244 million), and total revenues of  RMB7.02 billion ($1 billion)–increases of 35.3% and 6.8% respectively from the third quarter last year. Music subscription revenue grew by more than 20%, which offset the continued decline in social entertainment services revenue TME has seen for more than a year.

“This quarter’s robust music subscription performance, with better-than-expected net subscriber additions and an expanding ARPPU, highlights the effectiveness of our balanced approach to achieve growth, which is important to drive paying user base expansion in the coming years,” TME’s chief executive officer Ross Liang said in a statement.

TME added 2 million new paying users during the third quarter to bring its total number of subscribers to 119 million, which drove a 4.9% expansion of the company’s monthly average revenue per paying user (ARPPU). That metric now stands at RMB 10.8 ($1.50). Music subscriptions revenue grew to RMB3.84 billion ($547 million) representing 20.3% year-over-year growth.

The company’s gross margin — the percentage of company revenue that remains after expenses are taken out — rose to 42.6% from 35.7% in the year-ago quarter, thanks to increased revenues from subscriptions and advertising.

Notably, TME said its number of SVIP subscribers — a premium tier that costs five times more than the regular version — topped 10 million in the quarter ending Sept. 30.

Tencent Music executives said partnering with Galaxy Corporation this quarter for K-pop icon G-Dragon upcoming tour boosted its content offerings with audiences.

G-Dragon released his first single in seven years, “POWER,” in October ahead of his tour of Southeast Asia, the Middle East, Hong Kong, Macao, Taiwan, Australia and New Zealand.

TME’s stock was trading at $10.46, down 9.48% at 10:25 a.m. in New York. TME’s stock has declined by nearly 18% in the past month, but is still up 19.7% year to date.