Tencent Music, bound for US IPO, profits from socially savvy and tipping model

Tencent Music, which owns China’s most popular music streaming apps, is often compared to Sweden’s Spotify Technology but it offers more in the way of socially interactive services that is helping it hit bigger notes in money making.

The company, majority owned by Chinese tech powerhouse Tencent Holdings and slated for a US IPO next month, made almost $400 million in earnings before interest and taxes in 2017, according to an investor document circulated in August that was seen by Reuters.

Those profits are expected to nearly double to $764 million this year while revenue is seen climbing 72 per cent to $3.1 billion, the document said.

By comparison, Spotify, with which it has a cross shareholding deal, lost 90 million euros ($105 million) in the second quarter of this year on revenue of 1.3 billion euros.

Tencent declined to comment on the earnings numbers for Tencent Music or the IPO plans. Reuters could not independently verify the figures.

In a market that until a few years ago was dominated by pirated music, Tencent Music’s strong financials are due to a business model that does not rely primarily on the monthly subscription payments that sustain Spotify and other Western music streaming companies.