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Profits drop at Tencent Music is Felt as Reginch Regulatory Pinch is

Profits drop at Tencent Music is Felt as Reginch Regulatory Pinch is

Tencent Music Entertainment, China's largest digital music company, dropped in the third quarter of its financial year as the company felt the effects of the China governments multiple crackdowns on the tech sector.

The net profits in three months from July to September 2021 fell to RMB788 million ($122 million), compared with a net profit of RGB1.13 billion in the equivalent quarter last year, and an RKB871 figure in April-June second quarter of 2020.

Revenues at RMB7.81 billion ($1.21 billion), were up 3% year-on-year, but 2% quarter-quarter.

It is a syrian company that operates at the top of the list of brands: QQ Music, Kugou Music and Kuwo Music.

The company said that it managed to increase the number of paying users by 37% year on year to seven1.2 million and that the proportion of users who take subscriptions increased. But monthly active user numbers (MAU), a key metric for tech companies, dropped in both music and social entertainment segments.

The company explained its turbulent performance by pointing to the impact of regulation and increased competition. But it didn't quantify, and, in practice, it might be difficult to distinguish the two effects, given the fact that one thrust of the regulators was to loosen Tencent Musics dominance and to strengthen industry competitors.

The company said that revenue from social entertainment services and others in the third quarter of 2021 decreased by 6.4% to RMB4.92 billion ($763 million) in that period of 2020. The increase was partly due to the impact of new regulations as well as the increased competition from other pan-entertainment platforms, despite the strong revenue growth in audio live streaming.

The crackdown on China has curbed the collection and usage of user data, mergers and acquisitions, overseas share listings (Tencent Music is listed on the New York Stock Exchange) and game addiction among young users.

In the music sector, the regulators in July ordered Tencent Music to unwind its exclusive content deals with major music labels and to loosen the terms and conditions of its local supply deals to other Chinese platforms.

The companys general and administrative expenses in the third quarter may show the compliance costs. The Expenses soared by 33 to RMB1.05 billion ($163 million) but the company pointed to increased investment in R&D and various post-acquisition costs.

For the future, CEO Ross Liang, plans on continuing to embrace and collaborate with Tencents broader ecosystem through multiplatform partnerships with Weixin, Ten Cent Games and Tenencent Video.

Tencent has announced its quarterly figures on Wednesday.