By Josh Ye and Samrhitha A
(Reuters) -China's Tencent Music Entertainment Group (NYSE:TME) reported a 5.5% increase in quarterly revenue thanks to a rise in user subscriptions but warned that future revenue will shrink because of tighter live-streaming controls.
The Spotify-like music streaming company controlled by Chinese tech giant Tencent Holdings (OTC:TCEHY) is making adjustments to its live-streaming business in order to "better control potential risks the platform may face in the future," Tony Yip, its chief strategy officer, told analysts on a call.
He did not elaborate on the type of risks and said the company is adjusting live streaming functions and adopting more stringent compliant procedures, describing them as necessary for its platform's "healthy development in the long run".
The move comes after China launched an anti-gambling crackdown in June that has forced many internet platforms to disable lucrative features such as virtual item trades.
Industry experts said many livestreaming platforms offer lottery-like features in which a small amount of money grants a chance of winning high-value virtual items.
Although such features do not strictly qualify as gambling, numerous third-party platforms have since emerged to let users trade virtual items, a phenomenon that led to the recent crackdown, Charlie Chai, an analyst at 86Research, said.
Tencent Music said its total revenues will experience "a low to mid-teens percent decrease" in the coming quarter compared with the same period last year as a result of its risk-control measures.
But it said profit will continue to grow this year.
Tencent Music's shares gained about 1.68% in Hong Kong on Wednesday.
Total revenue rose to 7.29 billion yuan ($1.00 billion) in the quarter to June 30, in line with Wall Street estimates, as the number of paying users of its online music streaming service rose more than 20% to 100 million, a milestone for the company.
Net profit attributable to equity holders rose to 1.30 billion yuan from 856 million yuan a year earlier.
($1 = 7.2850 Chinese yuan)