Tencent Music returns to growth as online music offsets crackdown hit

(Reuters) -Tencent Music Entertainment reported a return to quarterly revenue growth on Tuesday, after four straight quarters of decline, as strong performance in its online music services offset the impact of China's online gambling crackdown on its social entertainment business.

For the three months through September, the company's revenue rose 6.8% from a year earlier to 7.02 billion yuan ($970.23 million), narrowly missing analysts' average estimate of 7.04 billion yuan, according to data compiled by LSEG.

Revenue at the online music unit rose 20.4%, as the number of paying users increased 15.5% to 119 million.

Tencent Music's premium Super VIP (SVIP) membership, which combines long-form audio content, online karaoke services and high-quality sound, has gained significant traction among users.

However, the social entertainment unit continues to weigh on overall growth, due to the removal of certain live-streaming features to comply with Beijing's anti-gambling regulations.

For the third quarter, revenue from the social entertainment services business, which includes karaoke app WeSing and live concert platform Kuwo Music, fell 23.9%. Still, that was less than the 42.8% year-over-year drop in the previous quarter.

Tencent Music CEO Ross Liang said in an earnings call that the social entertainment business had started to stabilise, partly driven by better than expected advertising business on its WeSing platform. Liang said that the company expected the social entertainment business to be stable in 2025.

The company's U.S.-listed shares were down 6.49% in pre-market trading.

($1 = 7.2354 Chinese yuan renminbi)

(Reporting by Harshita Mary Varghese in Bengaluru and Yelin Mo in Beijing; Editing by Shilpi Majumdar, Kirsten Donovan and Mark Potter)