(Yicai Global) Nov. 16 -- Shares of Tencent Music Entertainment Group skyrocketed after China's biggest online music provider reported a 39 percent jump in net profit for the third quarter of the year.

Tencent Music's Hong Kong-listed shares [HKG: 1698] closed 29 higher percent at HKD22.55 (USD2.88) each today, after earlier surging by as much as 33 percent. In New York yesterday, the firm’s stock [NYSE: TME] ended up 31 percent at USD5.81.

Net profit was CNY1.1 billion (USD154 million) in the three months ended Sept. 30, up 39 percent from a year earlier and 23 percent on the previous quarter, the Shenzhen-based firm, run by Chinese internet giant Tencent Holdings, announced yesterday.

Profit was buoyed by growth in income from online music subscriptions, cost-cutting, and improvements in operational efficiency, Tencent Music said.

Revenue fell 5.6 percent to CNY7.4 billion, mainly because of a 20 percent drop in revenue from social entertainment and other services to CNY3.9 billion, the company noted. Income from online music services rose 19 percent to CNY3.4 billion thanks to gains in music subscription revenue, digital album sales, and advertising.

Tencent Music said monthly active users for online mobile music services fell 7.7 percent to 587 million in the third quarter from a year earlier, while the number of paid subscribers to online music services surged 20 percent to 85.3 million. Average revenue per paying user slid to CNY8.8 (USD1.25) from CNY8.9.

Music platforms are selling out subscription products through discounted packages, which explains why Tencent Music's paid subscriber numbers rose while monthly ARPPU dropped in the quarter.

Short video apps are drawing away users. The reason for the decline in Tencent Music's MAU was that the platform did not improve its services, a music industry insider told Yicai Global, adding that videos, including short clips, are making music streaming services less attractive.

“When Jay Chou released his new album, I first listened to the clips on Douyin and then purchased the ones I liked on Tencent Music," a fan of the Taiwanese singer-songwriter told Yicai Global.

Tencent Music did not provide earnings guidance for this quarter, but according to a report by China Merchants Bank International Securities, annual revenue is expected to fall 11 percent to CNY27.7 billion (USD3.9 billion), mainly due to weak performance at its social entertainment and advertising businesses.

Revenue will likely recover to CNY297 billion and CNY317 billion in 2023 and 2024, the report said.

Editor: Futura Costaglione