Tencent Music Expects Setback From Rules

Tencent Music’s govt chairman Cussion Pang stated the corporate is in conversations to license content material from firms that had unique content material with different platforms. “We shall be absolutely dedicated to bringing the highest quality of music and proceed to develop our music library for our customers,” he stated.

With regulatory restrictions on licensed music, Tencent Music can function on the nice line between forbidden, unique music and “differentiated” content material that doesn’t require a license from a big document label. Tencent Music takes self-produced music from impartial artists and co-produces music with its father or mother firm, tech large Tencent — an association that has already resulted within the co-production of “two dozen” profitable music with fashionable artists and which Tencent Music signaled it intends to take higher benefit of. Reside streaming additionally offers Tencent Music a possibility to present customers distinctive — however not unique — experiences akin to a stay occasion held by two of the corporate’s companies, Kugou Reside and WeSing. Cross-platform performances produce “a major enhance in revenues” and attracts “extra paying customers,” stated Yip.  

Yip insisted the laws wouldn’t impede the corporate’s music subscription revenues, which grew 32.8% to $277 million within the second quarter from the prior-year interval, and that the corporate anticipated to proceed so as to add 4 million to five million subscribers per quarter. “From a regulatory standpoint, we imagine regulators are additionally eager to advertise the general, wholesome improvement of the music trade and having a viable and long-term monetization mannequin is a crucial a part of that.”

Analysts have been warning buyers about Tencent Music’s dire scenario for weeks. On Wednesday, Deutsche Financial institution downgraded TME from a purchase to a maintain score with out altering its $9 worth goal. That follows downgrades by J.P. Morgan on Aug. 12 and Morgan Stanley on July 16. TME shares have fallen 45.7% — from $14.36 to $7.80 — since July 26, when a Chinese language regulator ordered Tencent Music to finish its unique licensing agreements with document labels. The share worth dropped 0.3% on Wednesday and 12.3% on Tuesday after Tencent Music’s early launch Monday of its second-quarter monetary statements.

Regulators’ calls for will damage the corporate in varied methods, nonetheless. Yip stated the music companies’ promoting income shall be decrease than beforehand anticipated. And on account of laws about content material security and tipping habits, the corporate “anticipate[s] the second half [of 2021] to see additional strain” on margins,” he stated.

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