(Yicai Global) Aug. 17 -- Driven by rising revenue costs and operating expenses, Tencent Music Entertainment Group’s second-quarter net profit fell 12 percent to CNY827 million (USD128 million) from a year earlier.

The leading Chinese online music entertainment platform reported CNY8.01 billion (USD1.24 billion) in revenue, representing an increase of 15.5 percent year-on-year.

The Shenzhen-based company, which yesterday released its earnings report for the three months ended June 30, did not provide an outlook for the current half nor a reason for the decline in second-quarter profit.

Its revenue costs jumped 17 percent to CNY5.57 billion, primarily due to increased content expenditure related to royalties and revenue-sharing fees. Operating expenses were up 29 percent to CNY1.68 billion, driven by a jump in sales and marketing expenses as well as general and administrative costs.

The company had 66.2 million online music paid users as of June 30, an almost 41 percent annual increase.

The number of online music paying users grew 5.3 million, the largest quarterly net increase since 2016. The paying ratio was 10.6 percent, up from 7.2 percent in the second quarter of 2020.

Following an official investigation into Tencent’s takeover of China Music in 2016, China’s State Administration for Market Regulation said on July 24 that Tencent and its affiliates, which include Tencent Music, must end their exclusive rights with record labels within 30 days and pay a fine of CNY500,000 (USD77,140).

Tencent Music CEO Ross Liang said on an earnings conference call today that the company fully accepted the decision of the regulatory authorities. But the move was unlikely to have a significant impact on the firm’s online subscriptions, he added.

Editor: Peter Thomas