Business and Economics News acknowledges that Tencent Music has more regulatory scrutiny

Tencent Music was told by Chinese regulators to pay a fine, grant exclusive music rights and sell some active music.

Tencent Music Entertainment Group on Tuesday confirmed that it has greater scrutiny of Chinese regulators, adding that it is “actively cooperating” with them, and is committed to complying with all laws “including anti-trust laws”.

This is the first time the Tencent team has publicly commented on the issue.

Reuters reported last month that they had told Tencent Holdings, which controls the music reproduction company Tencent Music, to pay a fine to Chinese anti-monopoly regulators, grant them exclusive music rights and sell some of their active music. Tencent did not comment then.

The action against Tencent came amid a drastic reduction in China’s reliance on its internet giants.

“In recent months, we have stepped up regulatory review of key authorities and actively collaborated and communicated with relevant regulators,” said Tony Yip, head of strategy at Tencent Music, in a profit conference call.

Yip declined to comment further or announce the outcome of talks with regulators, but said “we are committed to complying with all applicable laws and regulations, including those related to antitrust.”

Shares under pressure

On Monday, Sony Music Entertainment announced digital distribution agreements with Tencent Music and NetEase Cloud Music, and an exclusive deal with Tencent Music was concluded.

News of the regulatory review has put pressure on Tencent group shares over the past month, with Tencent Music falling more than 14 percent.

Tencent Music earned quarterly earnings and surpassed revenue calculations on Monday, driven by large increases in subscription and ad revenue from its music streaming platform. But the number of active monthly users dropped.

The company, known as China’s Spotify, has been expanding its music library through new partnerships and multi-year licensing agreements. This, along with an effort to diversify the base of its content through long-form sessions and live interviews, has helped attract more paid users and advertisers.

Although they paid their music platform users, monthly active users (MAUs) fell 6.4 percent and 14.2 percent, respectively, from music and social entertainment platforms.

“Users have generally stopped growing; it was a high base due to COVID last year, ”said Tian Houk, an analyst at TH Capital Research.

Earnings by Tencent Music’s equity owners reached 926 million yuan ($ 143.94 million) in the quarter, up from 887 million yuan ($ 137.8 million) a year earlier.

Excluding items, the company earned 69 yuan ($ 10.7) per U.S. Depository Share (ADS), 55 yuan ($ 8.5) above the estimates for each ADS.

Revenue rose 24% to 7.882 billion yuan ($ 1.21 billion), while analysts expected 7.773 billion yuan (1.2 billion euros), according to Refinitiv’s IBES data.