By Josh Ye, Harshita Mary Varghese and Akash Sriram
(Reuters) -China’s Tencent Music beat third-quarter revenue estimates on Tuesday, as steady growth in paid subscriptions on its streaming platforms helped offset the impact of Beijing’s ongoing crackdown on online gambling.
Tencent Music, which operates music streaming platforms such as QQ Music and Kugou Music, said its total revenue fell 10.8% to 6.57 billion yuan ($901 million) in the three-month period to the end of September versus the same period last year.
However, Tencent Music’s results exceeded Wall Street revenue estimates of 6.31 billion yuan, LSEG data showed.
Controlled by Chinese tech giant Tencent, the company is among a list of online entertainment groups, including Huya and Cloud Music, that have been feeling the impact of Beijing’s crackdown on online gambling this year.
While companies like Tencent Music explicitly prohibit online gambling, regulators began targeting live streaming platforms’ game-like features such as virtual lucky draws earlier this year, saying that they could be abused by malicious users for gambling purposes.
Many companies including Tencent Music then opted to remove these popular and lucrative features from their platforms. As a result, the group’s social entertainment services posted a 48.8%drop in revenue for the quarter.
“The decrease was mainly caused by our adjustments to certain app streaming interactive functions and the more stringent procedures as we have implemented,” Tencent Music Chief Financial Officer Min Hu said.
Tencent Music had already posted a 24% revenue decline for its social entertainment services in the previous quarter.
Its executive chairman Cussion Pang said Tencent Music is confident that it can get the issue under control next year.
“For 2024, our primary target is to stabilize the business and better serve our core users. As part of our holistic music ecosystem, we expect our social entertainment business to continue generating a healthy cash flow for us,” he said.
Excluding items, Tencent Music earned 89 yuan per American depository share (ADS), slightly above expectations of 88 yuan.
Net profit attributable to equity holders rose to 1.71 billion yuan, from 1.06 billion yuan a year earlier.
($1 = 7.2924 Chinese yuan renminbi)
(Reporting by Harshita Mary Varghese and Akash Sriram in Bengaluru; Editing by Pooja Desai and Alexander Smith)
