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Chinese regulators require Tencent Music to pay fines, give up proprietary music rights and sell some music assets.
Tencent Music Entertainment Group (Tencent Music Entertainment Group) confirmed on Tuesday that it is under strict scrutiny by Chinese regulators, adding that it is “actively cooperating” with them and is committed to complying with all laws “including antitrust laws.”
This is the first time Tencent Group has made public comments on the matter.
Reuters reported last month that Chinese antitrust regulators had notified Tencent Holdings, which controls music streaming company Tencent Music, to pay fines, give up exclusive music rights and sell some of its music assets. Tencent did not comment at the time.
The lawsuit against Tencent comes on the occasion of China’s comprehensive antitrust sanctions against its Internet giants.
“In recent months, we have been scrutinized by more and more regulatory agencies from relevant authorities, and have been actively cooperating and communicating with relevant regulatory agencies,” said Ye Junjie, chief strategy officer of Tencent Music, in a conference call.
Mr. Ye declined to comment further or predict the outcome of the meeting with regulators, but said that “we are committed to complying with all relevant laws and regulations, including those related to antitrust.”
Stocks under stress
On Monday, Sony Music Entertainment announced digital distribution agreements with Tencent Music and NetEase Cloud Music, thus ending the exclusive agreement with Tencent Music.
News of the regulatory review has put pressure on Tencent Group’s stock in the past month, and Tencent Music has fallen by more than 14%.
Due to strong growth in subscription and advertising revenue from its music streaming platform, Tencent Music exceeded its quarterly profit and revenue expectations on Monday. But its number of monthly active users has dropped.
The company, known as Spotify of China, has been expanding its music library through new partnerships and multi-year licensing agreements. This, coupled with efforts to diversify the content base through long programs and live talk shows, has attracted more paying users and advertisers.
Although the number of paid users on its music platform has soared, the monthly active users (MAU) of its music and social entertainment platforms have fallen by 6.4% and 14.2%, respectively.
“Users have generally stopped growing; TH Capital Research analyst Tian Hou said: “Due to COVID, the base last year was very high. “
The profit attributable to shareholders of Tencent Music in the quarter increased to 926 million yuan ($143.94 million) from 887 million yuan ($137.8 million) in the same period last year.
Excluding special items, the company’s earnings per American Depository Receipt (ADS) were 69 yuan ($10.7), higher than the expected 55 yuan ($8.5) per ADS.
According to Refinitiv’s IBES data, revenue rose 24% to 7.82 billion yuan ($1.21 billion), while analysts expected 7.73 billion yuan ($1.2 billion).
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