Tencent Music Entertainment was listed on the New York Stock Exchange on December 12, New York time, and is priced at US$13 per ADS, with a valuation of US$21.3 billion and total fundraising of US$1,066 million.
Tencent Music is a special presence in the online music platform.
In terms of business model, it is socially driven; in terms of performance, profitability far exceeds that of other domestic and foreign music platforms. For such an online music platform that is very different from Spotify, the US stock market has exerted great imagination and used the analogy of the past to outline Tencent music. According to Bloomberg, Tencent Music is “Spotify +YouTube +Facebook in China.” After Tencent Music released its prospectus, foreign media used a large space to discuss how much the “TME model” would affect the business layout of streaming media music giants.
Socially driven profit model
Tencent’s latest announcement stated that TME Group’s issue price was priced at US$13 and was listed on the New York Stock Exchange on December 12. According to the latest information in the prospectus, Tencent Music intends to issue 82 million shares of ADS. If it is calculated at the issue price of US$13, it plans to raise funds of US$1.067 billion.
According to the data, Tencent Music achieved revenue of 13.588 billion yuan in the first three quarters of 2018, an increase of 83.7%, net profit of 2.707 billion yuan, an increase of 245%, and adjusted profit of 3.257 billion yuan. It is worth noting that after achieving profitability in 2016, its profitability is growing steadily. Tencent Music’s 203 Q3 revenue was 4.969 billion yuan, a 10% increase from the previous month and a 71% increase from the same period last year. In 2018, the net profit of Q3 was 964 million yuan, an increase of 7% from the previous month and an increase of 147% from the same period last year.
It’s not that online music platforms don’t live up to expectations. It’s really hard to make old models.
Before Tencent Music, the online music platform that has already landed on the US stock market, whether it is Pandora or Spotify, is struggling in the business model of “copyright-music service payment”, and the profit prospects are bleak. After entering the copyright era, other major music platforms in the country are also.
As of the third quarter of this year, Spotify has a global subscription fee of 87 million, accounting for 45.55% of MAU. But such a high rate of payment is still not enough to support its profitability. Spotify’s current main income comes from paid subscriptions and advertising, with the former accounting for up to 90% and copyright spending at around 80% of the cost.
Where is the growth of Tencent Music in the future?
From the financial report data, Tencent Music’s profit growth is very healthy; the company predicts that the compound annual growth rate from 2017 to 2023 will reach 36.7%. Tencent Music’s social entertainment services, such as music live broadcast business, have no revenue and rely on Tencent’s entire social system to have greater market advantages, can save a lot of marketing costs, and the absolute advantage of the content music library makes its music in music properties. Users in the live broadcast and karaoke business are stickier. How to maintain high growth in the future has become a problem that Tencent Music needs to consider.