Tencent Music Entertainment Group

Good evening and good morning. Welcome to Tencent Music Entertainment Group's first quarter 2023 earnings webinar. TME announced quarterly financial results today after market close. An earnings release is now available on our IR website at ir.tensormusic.com, as well as via Newswire services. Today, you'll hear from Mr. Kashin Pang, our executive chairman, who will start the call with an overview of our recent updates. Next, Mr. Ross Liang, our CEO, and I, Tony Yip, a CSO, will offer additional thoughts on our product strategies, operations, and business developments. Finally, Ms. Shirley Hu, our CFO, will address our financial results before we open the call for questions. Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call, as we will make forelooking statements. Please also note that the company will discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under IFRS in the company's earnings release and filings with the SEC. At this time, all participants are muted. After management's presentation, there will be a Q&A session. For participants who have dialed in by phone, please press 5 to ask a question. If you're accessing the call from Tencent Meeting or VOOF Meeting application, please click the raise hand button at the bottom left. And please be advised that today's webinar is being recorded. With that, I'm pleased to turn the call over to Kashin, Executive Chairman of TME. Kashin.

Thank you, Tony. Hello everyone, and thank you for joining our call today. We are off to a great start in 2023. Our strategic emphasis on quality growth propels strong growth of our online music revenues in the first quarter. As the revenue size of our online music services has now catch up with social entertainment services for the first time, it signifies that our long-term commitment to developing a sustainable online music business model is bearing fruits. In addition to a healthy increase in our total revenues, our focus on efficiencies optimization also drove robust net product growth. Content is the bread and butter of our businesses. We continue to deepen partnerships with top music labels and artists, so as to enrich our iconic music catalog and vertical content offerings, as well as to expand our users' benefits. we established a strategic collaboration with Rock Records, Guanxi Changpian, providing musicians with iconic Chinese songs and original soundtracks of popular TV dramas, such as the works of Zhang Zhengyue, Li Miuqiao, Zhou Huajian, Jonathan Lee, Li Zhongsheng, Wu Bai, and Mayday Wu Yutian. We also strengthened our strategic partnership with Li Yonghao and Fenghua Qiu Shi, whose master artists including Luhan and Black Panthers, K-pop band, as well as with Hype from South Korea, who has artists such as BTS and Seventeen on his roster. Additionally, with the feature of a seven-day head-start period, our partnership with JJ Lin for his new digital album was well-received among users. The new album also broke his previous sales record in terms of GMV on our platform. On top of that, we also reached a collaboration with well-known artists including Kun, Caixi Kun, and All In, leading me. for head-start benefits on their new songs releases on other areas, such as merchandise saving sales, online and offline performances, and artist-band interaction events. As for music verticals, to satisfy the increasing demand for rap music among younger audiences, we enriched our rap offerings by adding a number of new songs from heavyweight rappers, such as Mark Siwei. Meanwhile, we reinforced our competitiveness in different genre verticals, such as electronic music, gaming, and classical music, among others. In parallel with our efforts to expand our content library, we have facilitated the production of high-quality original content, unlocking more opportunities in the growing music industry. We have taken it upon ourselves to foster creativity and nurture artists for a rich variety of support programs, stage performances, and modernization opportunities. With dedication to amplifying the influence of musicians and their works, with this goal in mind, we participated in and promote the artist's growth through our Tencent Musician platform, which offers abundant resources and diverse monetization avenues. As a result, the number of active musicians and singers who release new songs kept growing sequentially on our platform during the quarter, adding to the vibrance of our ecosystem. For example, we unveiled a new initiative, the Emerging Force Programme to discover musicians with high potential and encourage the production of high class music. The programme offers a wide range of IT services, including travel support, weaponry sharing, and on and offline performance opportunities. By increasing the exposure and popularity of quality songs, along with amplifying artists' influence, we enhanced the virtuality of the musicians' ecosystem on our platform. As of the first quarter, we had assisted 260 up-and-coming musicians in reaching their first million streams and helped multiple artists make their debut performance on stage. Notably, after joining our Amazing Force program, the singing songwriter, Zhang Yuxian, and slow-mo, Ouyang Mingyang, both saw a stretch in their followers and streams. Going forward, we will continue to discover musicians with great potentials by bringing together top artists, producers, and music programs, particularly in bands, rap, and pop music letters. Recently, QQ Music also launched a customized homepage for musicians. Through this page, musicians can access data and insights in terms of streaming, followers, and comments. This can empower better management of song distribution and promotion. In addition, this page also provides up-to-date support resources and policies of our platform. Jackson Musician's Christie, Niu Jingwei, was one of the many success cases that demonstrate our powerful ability to cultivate and promote artists. In the first quarter, we signed her to our Tencent Musician platform, elevating her profile and promoting new songs through a variety of internal and external resources. As a result, the number of her followers more than doubled, growing from 50,000 to over 100,000 within just two weeks of her onboarding. With our diverse performance stage and all-round support in music production, we have been dedicated to elevating the influence of Christie and other aspiring indie musicians alike. Furthermore, we teamed up with Billboard China to hold our first original music contest, The One. Our collaborative contest is designed to discover emerging artists with the ability to produce quality original Chinese music. as well as to help expanding their global reach. To that end, we invited excellent singer-songwriters and renowned singers in China and abroad, including Grayson Chance, Lenka, Mika, and Tiawei Yuanyaowei. Among others, to inspire contestants to produce original music and assess their performances, through this cooperation, we will leverage Billboard's global resources, influence, and high international standards to provide talented musicians with end-to-end services, ranging from family evaluation, song release, worldwide promotions, and all the way to customized performances. Upon the solid foundation of our Tencent Musician platform, we are well positioned to effectively facilitate the production and promotion of original content. We are also excited to see that we produce a number of rock buster songs, creating many mega hits in the first quarter. For instance, Rose of No Man's Land by Xunlanxin has accumulated streams over 100 million, with its melody and lyrics paired with Twitter on our 5SYN platform. Not only did this song make its way onto several music charts, but also it garnered additional market exposure. We are writing a relay of friction stories inspired by its lyrics on short video platforms. Articles in the first quarter included OK Go, Yong Ji Da Ba Ba, Regret in the Wind, Feng Zhong De Yi Han, The Wind We Can't Hold, Liu Bu Zhu De Feng, Baby I Love You, Love on Fire, Ai Ru Huo, Sea and Sky, Hai Yu Tian, and The Wanderer. Excelling in producing prime original content, we have created an integral role in expanding IP values across the entertainment industry. As a case in point, we have created quite a few musical works for iconic films, games, animations, and other media. In the first quarter, we co-produced Josen's Chinese cover of the film song of Makoto Sinkai's Sinkai-chan movie, Susume Rinya-ji. This song ranked in over 100 million streams within only three weeks of its release. It also ranked first on the CMG Global Chinese Music Popularity Chart and topped the 12 other music charts. As you may notice, this song is also the whole music for today's earning call. Meanwhile, we continue to cooperate with the broader Tencent ecosystem, producing singles for 11 well-known games and four animations in the first quarter. Notable examples including Praying for the Mountain and the Sea, Qi Yuan San Hai, For Honor of Kings, Wang Jiu Rong Yao, and Light of Dawn, Li Ming de Guang, for Undone, Li Ming, Jue Xing, Sheng Ji, which are meticulously enhanced users' gaming and listening experience. Before I conclude, I would also like to highlight the progress of TME Live, our comprehensive online-merged offline performance brand. Amid the performance market recovery, we are exploring innovative ways to monetize and interact with users. TME Live is well positioned to capture this market opportunities via our online-merge-offline capabilities, allowing us to provide users with superior audio-visual experience anytime and anywhere. In the first quarter, we host a total of 29 online and offline concerts, including online concerts for Justin Huang, Huang Minghao, Cai Qi Kun, Meng Meiqi, Ren Xianqi, and Ju Zhengting. Notably, funds and rich sales in concerts received well-spread user acclaim, generating a total of 1.4 billion social media views and attracting almost 70 million unique visitors in the Tencent ecosystem. We also provided fans with the option to purchase custom merchandise while enjoying the shows. TME Live's unique performances format coupled with its high profile in the industry and with users, appeal to many well-known advertisers for sponsoring, such as PepsiCo, Yang Yuanqing, and JD.com. We also continuously increase our presence in the offline performance, particularly as the public shows a growing interest for offline activities. In the first quarter, we organized tours in cities such as Shenzhen, Changsha, and Hangzhou for musicians including Kola, Xiao Ku, Kafei Hu, Fa Lao, Liu Xijian, and the rock and roll band White Paper, Bai Pi Shu Yue Dui. To foster closer and more encouraging and more engaging connections between musicians and their followers, We encourage online audience to share their thoughts and feelings through online bullet charts during performances. Going forward, we will continue to explore the on and offline integrated performance formats, offering integral artist lineups and exciting music experience, evaluating our 10 ecosystem and user engagement, and first capture incremental monetization opportunities. That concludes the update on our growing content capabilities. Now I would like to turn the call over to Ross. He will share more about our platform strategies. Ross, please go ahead.

Thank you, Kashen. Hello, everyone. Moving on to our platform innovations. In the first quarter, we further refined users' music consumption experience. We are advancing our audio live streaming services. In addition, by further exploring large language models, we energize our platform ecosystem with a broader range of AIGC applications. and at meeting users' diverse and nuanced music tastes in new and exciting ways. On the front of users' music consumption experience, our efforts to enhance sound quality and effects, combined with our optimized operations in different listening scenarios, have been well recognized by users. This further bolsters users' stickiness and over-monetization capabilities. As a result, higher users' engagement brought us a year-over-year growth of average daily time spent per daily active user who listened to the music on our platform. We have extended our premium sound quality and effects to cover a wider range of scenarios during the quarter. In addition to rolling out the auto-mix sound effect, we also introduced a customized sound effect for Teens in Time's Shidai Shao Nian Tuan's album Wu Tou Bang Shao Nian. This sound effect highlights vocal details and instrumental layers, creating an air of live performance. A total of 2.3 million users have used these sound effects in 170 million streams. Moreover, we extended our premium sound quality to in-car use cases. For example, our QQ Music's Galaxy sound effect, 银河音效, maximized the performance of in-car audio systems, as it can fine-tune its sound effect to match many in-car audio systems of mainstream car models. This has further enhanced our users' listening experience. In addition, we also offer a highly personalized and engaging music experience that caters to users' unique preferences and tastes. For instance, we launched a 3D music player interface and customized playlists with various design templates, where users may choose their favorite styles. Beyond that, we tailored playlists to specific holidays and festivals, such as the Chinese New Year and World Sleep Day, to offer a listening experience for this special occasion and users' current state of mind. Thanks to our ongoing algorithm upgrades and product optimizations, we are able to constantly advance our recommendation efficiency. This brings us deeper insights into content and users' behavior, allowing us to create a more personalized listening experience. In the first quarter, QQ Music and Google Music's recommendation stream volume, together with its time spent per user, increased both year-over-year and quarter-over-quarter, taking the proportion of recommended streaming to a new high on our platform. On the front of audio live streaming, It has become an important growth driver for us, as we offer a unique engagement venue for our users and performers. With our differentiated content and interactive features that drive its growth, we keep enhancing user experience and attracting more vibrant audio anchors. In terms of content, we differentiated our audio live streaming content offering with focus on audio categories of music, emotional hearing and talk shows, highlighting our performance exception talent. Meanwhile, our vibrant audio anchor ecosystem also benefits our musician community, as it provides them with a platform to showcase their skills and reach a wider audience. We have natural rising musicians on our OQQ music live streaming platform. For example, Chi Kou Xiao Ye, Du Yao, Su Mo and Zhang Qing, these four musicians contributed a total of 110 million song streams. Notable, upon the promotion in one of our audio live streaming programs, Xu Changqing's arranging single, Girl, quickly made it to QQ Music's new song recommendation chart. In the first quarter, the number of performers in audio live streaming continued to rise year over year and quarter over quarter. In terms of user interactions, we added new social interactive features to our platform. This has created additional user traffic and scenarios, and will better serve users' entertainment needs. As important as breaking tools between performers and users, these interactive features also draw year-over-year and quarter-over-quarter increases in its daily time spent per user. Going forward, we will keep upgrading and expanding our social interactive offerings to higher user retention and additional commercialization opportunities. Turning to AIGC, LMS has empowered us to produce content more efficiently, as well as to create an increasingly engaging user experience. In the first quarter, we launched TME Studio, an AI-enabled smart tool for music production. We also introduced the Vocal Producer 音音色制作人 feature, pulled by our 林音音琴. With these tools, musicians can be more efficient in lyric writing, composing, music content analysis, and editing. Such tools also help generate outstanding content by seamlessly blending users' original voices into different songs. On top of that, our first AI music company, Xiaoqin, hosted a live streaming show. Her singing and dancing provided an immersive entertainment experience. Users were also able to interact with Xiaoqin through AI-generated virtual gifts and personalized gameplays. Furthermore, in fostering a more customized listening experience, QQ Music pioneered an AIGC-improved music player. With various AI-generated virtual styles, users can enjoy different themes of music players. With that, I'd like to give the floor to Tony to reveal our business operations. Tony, please go ahead.