Tencent Music Entertainment stock hit with social segment dragging on financials

Tencent Music Entertainment Group (NYSE:TME) stock fell more than 10%, in Tuesday’s early deals, after it reported lower revenue for its second quarter.

It would’ve been an otherwise upbeat operating performance but for increased regulatory scrutiny over streaming in China, which resulted in a sharp drop in revenue from live streaming features.

TME’s revenue for the quarter amounted to $999 million (RB 7.16 billion), and was down for the fourth quarter in a row. At RMB 1,07, earnings per share was below a market forecast pitched at RMB 1.10.

Online music services performed well, however, with revenue up 27.7% to $746 million (RMB 5.42 billion) thanks to a 17.7% increase in paying subscribers - which reached 117 million.

Its social entertainment segment saw a significant 42.8% decrease in revenue, however, as Tencent’s saw the discontinuation of several live-streaming features due to rule changes in China.

Cussion Pang, TME’s executive chair, described it as a “robust” performance.

“We remain optimistic about the music industry's long-term potential and are committed to sustainably achieving our mid- to long-term goals, at a healthy pace and with the right balance,” he said.

Ross Liang, TME chief executive, meanwhile, emphasised “user-centric innovation” and pointed to a “steady increase in both online music subscribers and retention.”

In New York, during early trade, the stock was down $1.65 or 12.57% to $11.48.

Nevertheless, these ADR securities are still some 50% higher in 2024 to date.

TME owns a number of music streaming and karaoke apps – such as QQ Music, KuGou, Kuwo, and WeSing – and it is estimated to have a market share in excess of 50% in China’s online music streaming market.