Shulou(Shulou.com)11/24 Report--

With the macro-economic recovery, household consumption has improved steadily. Recently released economic data for the first three quarters show that the per capita consumption expenditure of residents across the country is 19530 yuan, an increase of 9.2% over the same period last year; and the per capita expenditure on education, culture and entertainment of residents increased by 16.4% compared with the same period last year, showing a faster growth trend compared with consumption as a whole.

As an important part of the entertainment industry, the online music market maintains a good development prospect. On November 14, Tencent Music Entertainment Group Group (NYSE:TME;HKEX: 1698) released unaudited financial results for the third quarter ended September 30, 2023. The company's core financial indicators continued to exceed market expectations, the online music business became the core pillar, and a number of core data such as online music subscription revenue, the number of paying households and the average monthly income of a single paying user continued to grow with high quality. The revenue performance of online music services focused by the market continues to be strong, accounting for nearly 70% of total revenue, increasing resilience of business structure, profits and other key performance indicators also continue to grow steadily.

The strong growth of online music has become the core pillar of the group.

The revenue structure of Tencent Music has changed significantly since the beginning of this year. In the second quarter, online music service revenue surpassed that of social entertainment for the first time. In the third quarter, the online music business continued to show high-quality growth, with online music accounting for nearly 70% of total revenue. Specifically, TME online music subscription revenue grew by 42.0% in the third quarter compared with the same period last year, and the number of online music-paying households continued to grow by 103 million to a new record, and the average monthly income of a single paying user increased for six consecutive quarters, reaching 10.3 yuan.

As the proportion of online music business in the overall revenue market continues to expand, Tencent music fundamentals are shifting from social-centered to music-centered. Under the general trend of the overall improvement of the digital music market, its long-term growth ability is more resilient.

With the optimization and adjustment of the business structure, Tencent Music's platform value based on music creation has been highly recognized by the capital market. Citic Securities believes that the social entertainment business initiative adjustment brings short-term performance downward pressure, but the range has been fully expected, the follow-up impact will gradually weaken. Be optimistic about the long-term steady rising trend of online music payment rates and the deep coordination between the company and Tencent ecology to maintain the "overweight" rating. Bank of America, China International Capital Corporation and other authoritative institutions have also recently given "buy" and "outperform industry" ratings to Tencent Music.

Jiang Han, a senior researcher at Pangu think tank, looks forward to the commercial transformation of Tencent music and the science and technology of the music industry, and believes that the success of TME is not only reflected in the growth of its financial data, but also in its sustainable business transformation model for the industry. Through cooperation with major music companies and artists, TME has successfully commercialized music content and services, bringing new profit models to the industry. At the same time, through technological innovation and ecological construction, TME continues to enhance user experience and increase user stickiness, thus realizing the dual growth of users and revenue. The forward-looking business strategy makes TME have a broad space for future value growth in the music industry.

Technology upgrading experience Big language Model (LLMs) promotes the ecological development of the industry

More and more users are more and more willing to pay for their favorite music content, which not only reflects the changes in the music industry environment such as respect for copyright, but also the result of the continuous improvement of the music experience by online music platforms.

From the point of view of user needs, Tencent Music is empowered by the Big language Model (LLMs) to bring users a more interesting music entertainment experience. In the recent third TechME Technology week, Tencent Music focused on displaying 10 popular AI music cool techs functions. Quality, avant-garde and personalized tags constitute a new standard for audio and entertainment experience in the AI era.

For music lovers, Tencent Music redefines the music creation model through the Big language Model (LLMs). Tencent Music Qixing Star has newly launched a zero-sample learning AI song creation tool to help users record music inspirations that occasionally burst out in their lives. Users can turn a melody into a complete work with the help of AI tools such as lyrics, intelligent mixing, and even cross-language synthesis. AI tools can also intelligently design covers and complete the whole process from content creation to packaging, so that every ordinary person can become a musician.

For music fans, Tencent Music can read users more accurately with the blessing of AI technology. QQ Music recently launched a quick-listening function to support song search for the most exciting parts of the song. KuGou music online "more singer version" function, users can quickly find and appreciate different versions of a song, experience the different situational expression of a song "past life and this life". Through these new functions, the personalized service ability of Tencent music platform has been further improved.

At the ecological level of the entire music industry, Tencent Music relies on AI technology to promote the voice. Jointly with Hongsheng Culture Co., Ltd. (Wang Leehom Studio) to create the first "all-AI" singer-AI Leehom's first single "Letting Go", set a record for the first complete "AI singer" in Chinese music, and inject new vitality into the industry ecology with leading technology.

Looking to the future, with the continuous reconstruction of the connection mode between music and people, the online music industry will continue to maintain the momentum of healthy growth, while the Big language Model (LLMs) will play a key role in the development, precipitation and transformation of users of the online music platform. Tencent Music will also keenly grasp technological innovation nodes, provide more intelligent and personalized music services, and consolidate long-term high-quality development capabilities.

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