Tencent Music Entertainment (TME) said on Tuesday a 17%-surge in music subscription revenue drove higher first quarter revenue for China’s fast-growing streaming platform.
Total revenues rose 8.7% to RMB7.36 billion (US$1.01 billion), with music subscription revenue up 16.6% to RMB4.22 billion (US$581 million) for the quarter ending March 31, 2025, compared to the same time period a year ago. TME’s total subscriber base now stands at 122.9 million, up 8.3% from a year ago. While that is still less than half of Spotify’s total number of paying subscribers — Spotify reported 268 million subscribers in the first quarter — it drove monthly average revenue per paying user (ARPPU) up to RMB11.4 ($1.57) from RMB10.6 ($1.47) a year ago.
“With the sound foundations we have built, a thriving music ecosystem, and healthy financial position, we are well equipped to navigate global uncertainties,” TME’s executive chairman Cussion Pang said in a statement. “We remain on track … to achieve sustainable growth in 2025.”
The Chinese music streaming company operates three music streaming services — Kugou Music, QQ Music and Kuwo Music — as well as WeSing, a karaoke app. In recent years, Tencent Music’s business has become dominated by music services, while its social entertainment business has declined.
Online music revenue increased by nearly 16% to RMB5.80 billion (US$800 million) from a year ago, driven by the rise in music subscription revenues and an increase in advertising revenue. The business also benefitted from higher merchendise revenue from physical album sales for artists like Teens in Times and Silence Wang, and offline performance revenue.
Chinese genres are still the most popular music streamed on its platform, TME executives said, but the growing popularity of Korean, English and Japanese tracks on Tencent Music drove the company to expand existing partnerships with South Korea’s Starship Entertainment and YG Entertainment and Japan’s ACG entertainment company during the quarter.
The company also disclosed it signed a new multi-year licensing agreement with Sony Music Entertainment and extended agreements with Emperor Entertainment Group and Rock Records during the quarter.
TME’s social entertainment business, which has been in decline in part due to government crackdowns on social platforms, fell by nearly 12% to RMB1.55 billion (US$214 million). TME said the decline was “mainly the result of adjustments to certain live-streaming interactive functions and more stringent compliance procedures implemented.”
The strength in subscription revenues drove TME’s gross margin to 44.1% from 40.9%, with a total operating profit of RMB4.84 billion (US$666 million) in the first quarter of 2025, a whopping 146.9% increase from a year ago. Net profit attributable to equity holders was RMB4.29 billion (US$591 million), representing 201.8% year-over-year growth.
The company also said it received 2% equity stake in Universal Music Group in March as a result of a “distribution-in-kind from one of our associates” worth RMB2.37 billion (US$327 million).
Pershing Square Holdings, the hedge fund run by UMG board member Bill Ackman, sold 50 million shares of its UMG holdings — approximately 2.7% of UMG’s outstanding stock — in mid-March as part of a campaign to get UMG to list in the United States.
