China’s leading music streaming company Tencent Music Entertainment Group (TME) reported on Tuesday a 9.3% decline in the company’s annual revenues last year, as falling earnings from its social entertainment services business compounded a decline in monthly active users on its music platform.

TME’s total revenues fell to RMB 28.34 billion (USD $4.11 billion) in 2022 from RMB 31.24 billion 2021, with revenues for the fourth quarter ending Dec. 31 having fallen by 2.4% to RMB 7.43 billion ($1.08 billion) compared to the fourth quarter in 2021.

TME, which owns streaming platforms QQ Music, Kugou and Kuwo, plus karaoke app WeSing, said revenues from its social entertainment services and others fell 19.8% in 2022 to RMB 15.86 billion ($2.30 billion). The number of paying users fell 24.3% due to the macroeconomic environment, competition from other platforms and COVID-19, the company said. 

Revenues from music subscriptions rose 18.6% to RMB 8.70 billion ($1.26 billion) helping TME’s online music services revenues to increase overall by 8.9% to RMB 12.48 billion ($1.81 billion) for 2022. The number of paying subscribers grew by 22.7%. However, average revenue per user was slightly lower — RMB 8.6 in 2022 compared to RMB 8.9 in 2021 — due to higher marketing costs, and the number of mobile monthly active users (MAU) of its online music division fell 7.8% to 567 million in the fourth quarter.

“During the fourth quarter, as a result of macro headwinds, increased competition from other platforms and the surge in COVID cases social entertainment services MAUs and paying users declined year over year,” said Tony Yip, TME chief strategy officer, on a call discussing the company’s earnings on Tuesday.

China’s late-year increase in COVID cases as it loosened pandemic restrictions and increased competition also led to the year-over-year decline in online music mobile MAUs, Yip said.

Declining social entertainment services revenues held one benefit for TME: lower revenue sharing fees in 2022. That contributed to a savings of more than RMB 2.27 billion, as its cost of revenues for the year fell 10.4% year-over-year to RMB 19.57 billion ($2.84 billion).

This helped TME achieve an operating profit up nearly 17% to RMB 4.44 billion ($644 million) in 2022. Operating income is the income that remains after accounting for nearly all costs of doing business.

TME expects 2023 total revenues and profitability to be up from last year, and for the share of quarterly revenues coming from online music services will exceed those coming social entertainment services at some point this year as they continue to achieve “high quality growth in both subscription and non-subscription revenue,” Yip said.

Tencent Music Entertainment Group’s 2022 Highlights: