Tencent Music Social Entertainment Services Slump Overshadows Upbeat Quarter

China’s Tencent Music will pursue a secondary listing of its shares on the Hong Kong Stock Exchange, the company said on Monday, after reporting a 15 percent fall in revenue at its mainstay social entertainment services business

While most of Tencent Music users are in its music streaming unit, social entertainment services including karaoke platforms where people can live stream concerts and shows are its biggest revenue drivers.

Revenue from social entertainment services and others fell 15.2 percent to 4.73 billion yuan ($742 million), while paying users in the social entertainment category slumped 16.7 percent.

The weakness was wrought by stiff competition from rivals and the changing macro environment, Executive Chairman Cussion Pang said in a statement on Monday.

A resumption of in-person events in the quarter after COVID-19 receded in the country was expected to weigh on the company’s results, according to analysts.

The results come against the backdrop of China’s intense regulatory crackdown on local tech firms and threats of U.S. penalties if Beijing supports Moscow in its invasion of Ukraine.

In a bright spot, Tencent Music’s online music services business posted revenue growth of 4.3 percent. Total revenue of the Tencent Holdings-controlled company fell 8.7 percent to 7.61 billion yuan, in line with market estimates, according to Refinitiv data.

Excluding items, the company earned 0.50 yuan per ADS, meeting analysts’ expectations.

In an earnings call on Tuesday, Chief Executive Officer Ross Liang said the company would going forward “try out a lot of things” in the metaverse, a concept aimed at further blurring the online and offline worlds.

Besides pushing concerts and karaoke rooms in the metaverse, Liang said the company was developing a metaverse music app that could be released at the end of this year.

($1 = 6.36 Chinese yuan)