Tencent renews growth path in music and games, but loses ground in streaming video

China’s entertainment, social media and technology giant Tencent, renewed its profits growth in the first quarter of 2023, after reporting its first decline in 2022. And group revenue beat financial market estimates as China’s post-COVID reopening boosted economic activity.

Overall revenues in the three months from January to March 2023 reached RMB150 billion ($21.4 billion), an increase of 11% year-on-year and 3% quarter-on-quarter. Net profits in the period came in at RMB25.8 billion ($3.69 billion), a 10% year-on-year improvement.

The group is the world’s largest games firm in revenue terms and saw a return to growth in that sector. It saw growth in music subscriptions, where it already leads the China market. But it may have lost its crown as the Middle Kingdom’s leading long-form video streamer.

“Long-form video subscriptions decreased 9% year-on-year to 113 million while subscription revenue decreased 6% year-on-year, primarily due to delayed content releases. We are enhancing our content to cater to evolving user demands,” Tencent said on Wednesday. Earlier this week, rival streaming service iQiyi reported a 17 million surge in first quarter paid subscriptions and an average of 128 million daily subs through the quarter. Subscription measurement may differ between the companies, but Tencent Video’s decline caught market analysts by surprise.

“In April 2023, we released a self-commissioned drama series, ‘The Long Season,’ which became the highest-rated domestic drama series in the past five years, according to the Douban review aggregation website. We are extending our collaboration with short-form video services to expand our long-form content popularity and capture more monetization opportunities,” Tencent said in its regulatory filing.

The games business in China, hit by regulation and by economic woes, resumed growth, and saw revenues rise by 26% to RMB35.1 billion. “Honour of Kings” released ShanHaiJing-themed outfits with targeted marketing programs and generating record-high gross receipts. “CrossFire PC,” a game operated since 2008, attracted returning players with promotions targeting Internet cafes. Both “CrossFire PC” and “CrossFire Mobile” achieved record-high gross receipts in the first quarter.

Recently launched games also reached new milestones. “Fight of the Golden Spatula,” an auto-battler game released in 2021, increased gross receipts by more than 30% year-on-year and achieved a record-high average daily average users of over 10 million in April 2023. “Arena Breakout,” an extraction shooter game released in July 2022, attained record-high DAU and gross receipts.

International games revenues increased by 25% to RMB13.2 billion, or up 18% excluding the impact of currency fluctuations, driven by the strong performance of recently launched “Goddess of Victory: Nikke” and “Triple Match 3.” “Valorant” increased monthly average users year-on-year and the game’s gross receipts increased by more than 30% year-on-year, driven by popular Japan-themed and alien-themed weapon items. Variety