Tencent reports increased revenues and profits, warns on virus impact

Competitors play mobile game during the E-Sports and Music Festival Hong Kong 2019 on July 28, 2019 in Hong Kong, China. (Photo by Ivan Abreu/Getty Images for Hong Kong Tourism Board)

Chinese digital media company Tencent reported large increases in revenues and profits in 2019, but warned of the impact on its business of the coronavirus epidemic.

Revenue was up 25 per cent year-on-year to RMB105.8bn (€14bn/$15bn), and net income was up 52 per cent to RMB21.6bn. The company said the coronavirus had led users to spend more time on its games and video streaming products, but had a negative impact on advertising and mobile payments.

The company has other products that are expected to benefit at least in the short-term from the coronavirus, including cloud computing and collaborative office software such as Tencent Meeting and WeChat Work, and online education and healthcare services.

Nevertheless, the company warned on the ongoing impact of the outbreak.

The South China Morning Post reported that James Mitchell, the company’s chief strategy officer, said during an earnings call: “Payment activities dropped sharply during the Lunar New Year holiday followed by a rebound in the following week. We have seen a recovery in March…supply is coming back although there is still some suppression of demand.”

The company’s president Martin Lau, said during an earnings call on Wednesday: “Our users spent more time on online entertainment, including video and games, during the coronavirus outbreak. But we shifted more resources and people…to public service sectors, such as online health care and online education during the pandemic.”

The company reported 106m subscription video customers at end-2019. Its video content includes sport, drama, anime and other entertainment programming. Among its sports content is exclusive digital rights for the NBA in China – the market’s most valuable sports media rights property. The subscription video division is loss-making. In its Q4 report, the company said “we remained the clear industry leader in terms of content, users, and financial metrics, reducing our 2019 operating loss to below RMB3 billion, substantially lower than the loss rates of industry peers”. It said it had “aggressively stepped up” investment in short-form video in 2019, and that it was in the early stages of what would be a multi-year investment in it. The company has a short video app, Weishi.

Tencent also generates revenue from advertising around video. The Q4 report said the media advertising business in 2019 was “hurt by delays in broadcasting certain drama series and less advertising activities around NBA basketball games”.

Tencent’s ‘VAS’ businesses, which cover its communication and social applications, and subscription video and online games services, generated RMB200bn in 2019, up 13 per cent from RMB177bn in 2018. Its online advertising business generated RMB68bn, up from RMB58bn. Its ‘fintech and business services’ businesses generated RMB101bn, up from RMB73bn.