Tencent Music Entertainment Group (TME)

Tencent Music Entertainment Group – 2024 Annual Report

Report Date: 2025-04-30
Period Covered: Full Year 2024
Form Type: 20-F

1. Financial Highlights

• Total Revenue: RMB 28.401 billion, +2.4% YoY
  • Online Music Services: RMB 21.742 billion (+25.5%)
  • Social Entertainment & Other: RMB 6.659 billion (–36.1%)
• Gross Profit: RMB 12.025 billion, +22.8% YoY
  • Gross Margin improved to 42.3% (2023: 35.3%)
• Net Profit: RMB 7.109 billion, +36.2% YoY
  • EPS (basic): RMB 2.15 (2023: RMB 1.58)
• EBITDA (non-IFRS): RMB 8.136 billion, +30.7% YoY

2. Profit & Debt Analysis

• Profit Drivers:
  • Strong growth in paying subscribers and higher ARPPU for music subscriptions
  • Operating‐leverage in content licensing and tech infrastructure
• Profit Headwinds:
  • Regulatory adjustments in live-streaming interactive features reduced social entertainment revenues
• Debt Profile:
  • Two senior unsecured notes: US$300 M @ 13.75% due 2025; US$500 M @ 20.00% due 2030
  • Total principal: US$800 M; interest cost US$119 M in 2024
  • Net debt remains modest relative to cash balances—strong liquidity

3. Key Reasons for Profit Change

Upside

• Conversion of ~11.8 million paying music subscribers; ARPPU rising to RMB 206
• Sharp cost control in live-streaming revenue share
• One-off gains on financial investments

Downside

• Social entertainment adjustments under new regulations
• Continued content royalty and premium licensing investments

4. Pros & Cons

Pros

• #1 market share in China’s online music (570 M MAUs)
• Strong conversion from free to paid—11.76 M music subscribers
• Scalable AI-driven recommendation/search capabilities
• Diversified offerings: live streaming, karaoke, audiobooks

Cons

• Regulatory scrutiny of VIE structure and live-streaming
• Currency/FX volatility (RMB/USD swings)
• Content licensing cost inflation

• Revenue Breakdown (2024):
– Online Music Services: RMB 21.742 bn (76.6%)
– Social Entertainment & Other: RMB 6.659 bn (23.4%)

• Usage & Monetization Metrics (Dec 2024):
– MAUs: 570 million (music), 126 million (social entertainment)
– Paying Users: 11.76 million (music)
– Monthly ARPPU: RMB 206 (music), RMB 702 (social entertainment)

• Segment Growth (YoY):
– Music MAUs: –3.2%
– Music Paying Users: +16.5%
– Monthly ARPPU (music): +20.5%

Tencent Music is on a sustainable growth trajectory as it further monetizes its massive user base and leverages AI for personalization and content discovery. The company’s financial health remains solid, with low leverage, strong cash flow, and consistent profitability.

Growth Opportunities:

• Expand longform audio & podcast ecosystems
• Deeper AI-powered user engagement & creator tools
• Cross-sell to WeChat/Tencent ecosystem

Challenges:

• Regulatory risks around VIE structure and data security
• Content licensing cost pressures
• Currency fluctuations in RMB/USD

Overall, Tencent Music’s leading market position, diversified revenue streams, and technology investments position it well, but it must navigate evolving regulations and rising content costs to maintain momentum.