Chinese regulators have asked Tencent Music to pay a fine, waive exclusive music rights, and sell some music assets.
Tencent Music Entertainment Group confirmed on Tuesday that it faces increased scrutiny from Chinese regulators, adding that it is “actively cooperating” with them and pledged to comply with all laws “including those related to it. to the anti-trust ”.
This is the first time that the Tencent group has publicly commented on the issue.
Reuters reported last month that Tencent Holdings, which controls music streaming company Tencent Music, was asked by Chinese anti-trust regulators to pay a fine, give up its exclusive music rights and sell some of its music assets. . Tencent then made no comment.
The action against Tencent came amid a massive anti-trust crackdown by China against its internet giants.
“In recent months, we have been subject to increased regulatory scrutiny from relevant authorities, and we have actively cooperated and communicated with relevant regulators,” said Tony Yip, Chief Strategy Officer of Tencent Music, on a results conference call.
Yip declined to comment further or predict the outcome of discussions with regulators, but said, “We are committed to complying with all relevant laws and regulations, including those related to anti-cartel efforts.”
Actions under pressure
On Monday, Sony Music Entertainment announced digital distribution agreements with Tencent Music and NetEase Cloud Music, ending an exclusive deal with Tencent Music.
News of regulatory oversight put pressure on Tencent Group shares over the past month, with Tencent Music falling more than 14%.
Tencent Music beat quarterly earnings and revenue forecasts on Monday, thanks to strong growth in subscription and advertising revenue from its music streaming platform. But the number of its monthly active users has dropped.
The company, known as Spotify in China, has expanded its music library through new partnerships and multi-year license agreements. This, combined with efforts to diversify its content base through feature-length broadcasts and live talk shows, has helped attract more paid users as well as advertisers.
Although paid users for its music platform jumped, monthly active users (MAU) for music and social entertainment platforms fell by 6.4% and 14.2% respectively.
“Users have stopped growing in general; last year was a high base due to COVID, ”said Tian Hou, analyst at TH Capital Research.
Profit attributable to shareholders of Tencent Music rose to 926 million yuan ($ 143.94 million) in the quarter, from 887 million yuan ($ 137.8 million) a year earlier.
Excluding items, the company earned 69 yuan ($ 10.7) per American Depository Share (ADS), above estimates of 55 yuan ($ 8.5) per ADS.
Revenue rose 24% to 7.82 billion yuan ($ 1.21 billion), while analysts expected 7.73 billion yuan ($ 1.2 billion), according to IBES data. by Refinitiv.