Chinese regulators told Tencent Music to pay a fine, waive exclusive music rights and sell some musical assets.
Tencent Music Entertainment Group confirmed Tuesday that it faces intense scrutiny by Chinese regulators, adding that it was “actively cooperating” with them and pledged to comply with all laws “including those related to antitrust.”
This is the first time the Tencent group has made public comments on the matter.
Reuters reported last month that Chinese antitrust regulators told Tencent Holdings, which controls music streaming company Tencent Music, to pay a fine, waive exclusive music rights and sell some of its music assets. Tencent made no comment then.
The action against Tencent came amid a sharp antitrust reduction by China over its Internet giants.
“In recent months, we have received increased regulatory oversight from competent authorities and have been actively cooperating and communicating with relevant regulators,” Tony Yip, director of strategy at Tencent Music, said at a conference. results.
Yip declined to comment further or predict the outcome of talks with regulators, but said “we are committed to complying with all relevant laws and regulations, including those related to antitrust.”
Actions under pressure
On Monday, Sony Music Entertainment announced digital distribution agreements with Tencent Music and NetEase Cloud Music, ending an exclusive agreement with Tencent Music.
News of regulatory scrutiny has put pressure on the Tencent group’s shares over the past month, with Tencent Music below 14%.
Tencent Music topped quarterly earnings and revenue estimates on Monday, driven by strong growth in subscription and advertising revenue from its music streaming platform. But its monthly active users declined.
The company, known as China’s Spotify, has been expanding its music library through new partnerships and multi-year license offerings. This, coupled with efforts to diversify its content base through long-running programs and live chats, has helped attract more paying users and advertisers.
While paid users for their music platform increased, monthly active users (MAUs) of music and social entertainment platforms decreased by 6.4 percent and 14.2 percent, respectively.
“Users have stopped growing in general; last year was a high base due to COVID, ”said Tian Hou, an analyst at TH Capital Research.
Earnings attributable to Tencent Music shareholders rose to 926 million yuan ($ 143.94 million) in the quarter from 887 million yuan ($ 137.8 million) in the previous year.
Excluding items, the company earned 69 yuan ($ 10.7) per U.S. deposit (ADS) share, above estimates of 55 yuan ($ 8.5) per ADS.
Revenue rose 24 percent to 7.82 billion yuan ($ 1.21 billion), while analysts expected 7.73 million yuan ($ 1.2 trillion), according to Refinitiv’s IBES data.