Tencent Music Entertainment Group

Ladies and gentlemen, good evening and good morning, and thank you for standing by. Welcome to the Tencent Music Entertainment Group 2021 Second Quarter Earnings Conference Call. Today you will hear discussions from the management team of Tencent Music Entertainment Group, followed by a question and answer session. Please be advised that this conference is being recorded today. Now I will turn the conference over to your speaker host today, Ms. Millicent T. Please go ahead, ma'am.

Thank you, Operator. Hello everyone, and thank you all for joining us on today's call. Tencent Music announced its quarterly financial results today after the market closed. An earnest release is now available on our IR website at ir.tencentmusic.com, as well as via newswire services. Today you'll hear from Mr. Kushan Pang, our Executive Chairman, who will start the call with an overview of our recent updates. He'll be followed by Mr. Ross Liang, our CEO, and Mr. Tony Yip, our CSO, who will offer additional thoughts on our product strategy, operations, and business development. Finally, Ms. Shirley Hu, our CSO, will speak before we open the call for questions. Please note that this call may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Security Litigation Reform Act of 1995. These forelooking statements are based on management's current expectations and observations that involve known and unknown risk uncertainties and other factors not under the company's control, which may cause actual results, performance, or achievements of the company to be materially different from the results, performance, or expectations implied by these forelooking statements. All forelooking statements are expressly qualified in their entirety by the cautionary statements risk factors, and details of the company's filings for the SEC. The company does not assume any obligation to revise or update any following statements as a result of new information, future events, changes in market conditions, or otherwise, except as required by law. Please also note that the company would discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under the International Financial Reporting Standards, and the company's earnings release and the filings for the SEC. You are reminded that such non-IFRS measures should not be viewed in isolation or as an alternative to the equivalent IFRS measure, and other non-IFRS measures are not uniformly defined by all companies, including those in the same industry. With that, I'm very pleased to turn over the call to questions. Executive Chairman of Tencent Music. Question, please.

Thank you, Melissa. Hello, everyone, and thank you for joining our call today. As we announced on July 26th, Tencent recently received an administrative penalty decision issued by the State Administration for Market Regulation of the People's Republic of China, the SAMR. We sincerely accept the decision and will continue to strengthen our operations in accordance with all regulatory requirements, drive innovation, and fulfill our social responsibilities. In compliance with the requirements of copyright license exclusivity, we will operationally focus on the dual five views of content and platform to deliver high-quality products and services to users and foster innovation. We have taken several important steps in this regard. Specifically, as Executive Chairman, I am responsible for enriching our content ecosystem, whether licensed or self-produced, as well as expanding our capability within the music industry to offer additional value services and solutions to artists and users. Our CEO, Ross, oversees our platform and product strategies and is responsible for further deepening TME's partnerships with Tencent's ecosystem. Ross will elaborate on this in a moment. We will continue to deepen our partnerships with hundreds of music labels to expand our licensing content coverage in alignment with the new requirements and work to provide more and better content offering to over 600 million music users through our multi-financed product portfolio. We are pleased to report that we have been consistently making breakthroughs in diverse music verticals, including new hits, Chinese ancient style, hip-hop, and music for gaming, movies, television programs, and variety shows, demonstrated by a comprehensive coverage of songs and particularly full coverage of hip-hop variety shows. We are also rising our profile among the younger generation by expanding cooperation with leading content IPs whose programs, such as the collection of Chinese ancient style, and the rapper's alliance. This has resulted in a sequentially increase in user engagement from young users. While bottling our offering of copyrighted music, we have also been working closely with our upstream value chain, artists, and other partners to create and produce more differentiated content. For example, we began to work extensively with Tencent across multiple businesses. Over the past few quarters, we partnered with prominent artists such as Jam, Deng Jiqi, Jackson Yi, and Yang Qianxi. and Angela Zhang, Zhang Shaohan, and co-produced over 2,000 chart-topping songs across gaming, film, literature, and comic categories. We also recently played a role in co-producing the theme song of the popular movie, Cliff Walker's , directed by a highly regarded Chinese film director. From creating the theme song itself to leveraging our talent pool, to bring a famous artist on board to perform the song, we are pleased to be able to contribute to this award-winning project. I'm also pleased to share our progress in cultivating and promoting indie musicians. During the second quarter of 2021, through the Tencent Musician Program, our roster of indie artists achieved a triple-digit year-over-year growth, with their song streams showing consistent increase both year-over-year and quarter-over-quarter. Musicians view us as a reliable partner, given our well-structured financial incentives, which for the first time included a revenue-sharing mechanism for the narrators and songwriters. They are also attracted by our efforts to pioneer enhanced copyright protection based on blockchain technology. helping indie musicians to uphold copyright without imposing financial burdens on them. On top of that, our attitude for cultivating Blockbuster on the Tencent Musician Program platform has grown significantly. For example, within three months of its release, we've collaborated cross-platform efforts from QQ Music, Google Music, and Google Music. The song, Coming in Late, 來時, by Da Yutong, accumulated more than 1 billion streams, and inspired numerous cover versions. In the future, we will start to build a closed-loop system for musicians' discovery and management through multidimensional support, including more financial reward, copyright protection, and education and training for musicians, all of which reflect our desire and determination to help musicians grow, and succeed. We have also upgraded our platform's promotional capability and further developed our artist and repertoire A&R capability. For example, we connected narrators and musicians with entertainment program producers and helped our musicians such as Sun Li Lai, Lai Mei Yun, Deng Song Jun, Lambert, and Mira Meng Ran enlisted and performed on top variety shows such as The Treasured Voice 2, Tianshi de Shengyin Di'erji, and Young Forever Season 2, Women de Ge Di'erji, providing them a new stage on which to shine. Finally, TME Live, our online-merged offline performance brand, continues to bring new opportunities to the company with a strategic focus on online channel promotion and monetization. On the online side, we host monthly concerts for top artists to include new interactive monetization features such as ticketing, VIP privileges, and merchandise to create a holistic and more immersive user experience for online live performances. On the offline side, TME Live is expanding its footprint with a plan to launch offline initiatives, including daily live performances in key cities, such as Beijing and Shanghai, in collaboration with the Tencent Musician platform and the local tourism industry. We are also working with Playhouse to organize weekly indoor music festivals, merging the offline party experience with rich online features. With our progress updated in content, I would like to pass the call to Ross, who will share more about our platform strategies. Ross, please go ahead.