(Yicai) Aug. 14 -- Shares of Tencent Music Entertainment Group tumbled after the Chinese streaming giant reported a drop in revenue from social entertainment platforms, a segment that includes its karaoke app WeSing, and its stock was downgraded by Daiwa Securities.

Tencent Music [HKG: 1698] lost 18.1 percent in Hong Kong today to close at HKD43.80 (USD5.62) a share. Its New York-listed stock [NYSE: TME] finished 15.3 percent lower at USD11.12 yesterday.

Income from social entertainment services sank 43 percent to CNY1.74 billion (USD244 million) in the three months ended June 30 from a year earlier, due to live-streaming function adjustments and more stringent compliance procedure, the Shenzhen-based company said in an earnings report released yesterday.

Online music services revenue jumped 28 percent to CNY5.42 billion, driven by growth in music subscriptions and advertising services, the report showed.

Tencent Music’s overall revenue fell 1.7 percent to CNY7.16 billion (USD985 million) in the period, while net profit climbed 33 percent to CNY1.79 billion (USD247 million).

Analysts at Daiwa Securities downgraded Tencent Music from ‘Buy’ to ‘Hold’ and cut the price target for its shares to HKD46 from HKD52, saying they expect underwhelming subscription revenue growth, prompting a 5 percent reduction in projected revenue. 

Tencent Music’s paying users for online music rose 18 percent to 117 million in the second quarter, with 3.5 million new subscribers from the first quarter. Monthly average revenue per paying user reached CNY10.7 (USD1.50), boosted by high-quality content and improved user operations, the company said. Monthly active users fell 3.9 percent to 571 million.

Executive Chairman Cussion Pang said Tencent Music remains optimistic about the music industry’s long-term potential and is committed to sustainably achieving its mid- to long-term goals “at a healthy pace and with the right balance.

“With over 10 million net subscriber additions in the first half of 2024 and ARPPU expansion, we continue to break new ground within China's streaming landscape,” Pang said.

During the June quarter, Tencent Music used AI-generated content to enhance the user experience, and also launched a virtual DJ feature.

Editor: Tom Litting