Tencent Music Entertainment Group

Good evening and good morning, and welcome to Tencent Music Entertainment Group's fourth quarter and full year 2024 earnings conference call. I'm Nelson Tu, head of IR. We announced our quarterly financial results earlier today before the U.S. market opened. The earnings release is now available on our IR website and via newswire services. During today's call, you'll hear from Mr. Tashin Pang, our executive chairman, and Mr. Ross Liang, our CEO, who will share an overview of our operations and business strategy updates. Then Ms. Shirley Hu, our CFO, will discuss our financial results before we open the call for questions. Before we continue, I refer you to the Safe Harbor Statement in our earnings release, which applies to this call, as we are made for looking forward. Please note that we'll discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under IFRS in our earnings release and filings with the SEC. All participants are muted at this time. After management's remarks, there will be a Q&A session. And please be advised that today's call is being recorded. With that, I'm very pleased to turn the call over to Prashant, Executive Chairman of TME. Prashant?

Thank you, Madison. Hello, everyone, and thank you for joining our call today. 2024 marked a year of significant progress for TME, characterized by a return to top-line growth and impressive profit margin expansion, fueled by robust performance in online music services, Our pioneering initiatives to grow and diversify our services across the music value chain have successfully reshaped the industry landscape and enriched our ecosystem. This, in turn, has effectively boosted our subscriber conversion efficiencies and lifetime value. We close the fourth quarter with advancements across key areas of online music business. As an example, in addition to continued strength in music subscriptions, our advertising and artist-related services will deliver strong growth, laying a stronger foundation for future development As we enter 2025, we are building on this momentum to unlock further value for both creators and users alike. Our dual engine strategy, combining rich content and platform innovation, positions us to capture emerging opportunities and efficiency gains across our platform. We are optimistic in the company's future growth prospects, which is reflected in our announcement of an annual dividend of $273 million, and a new and expanded share repurchase program of up to $1 billion. At the heart of our mission is empowering musicians and delighted users with exceptional content. Our vast library of content covers all music genres and almost every aspect of the music industry, providing a seamless and holistic user experience on our platform. By the end of 2024, our music and audio library exceeded 260 million licensed and co-created tracks from domestic and international labels, up from 200 million at the end of the prior year. To enhance our users' music listening experience, here are a few highlights worth sharing, which help contribute to a new record highs of users' average daily time spent. First, we recently renewed our strategic contract with international labels, including SM Entertainment and Kakao Entertainment, expanding our coverage of high quality music content libraries. These collaborations have also fostered a deeper cooperation in areas such as premium sound effects, live concerts, and artist merchandise. Additionally, we have established the partnerships with renowned Chinese artists such as Tao Lang and Luo Dayou, enriching our music library with hundreds of Chinese classics and providing TME users headstart access to new songs releases. Our industry insights and extensive resources continue to support artists in their creative journey. For example, in the fourth quarter, we collaborated with our strategic partner, artist Angela Zhang, Zhang Shaohan, to produce, release, and promote her album, Conflict. With our platform elevated influence, we expanded her reach to a broader audience of music lovers. earning widespread acclaim. Additionally, we produced theme song and original soundtracks for Tencent Video blockbusters, including Bloomsom , and Guardians of the Dafeng , as well as for movies such as A Tapestry of a Legendary Land , and Tiger, Wolf, Rabbit . These songs quickly garnered praise from music lovers and movie viewers alike. Second, we remain at the forefront in music consumption when it comes to innovation. As an example, we transform the fan engagement through unique digital and physical experiences such as artist merchandise and live experiences. In the fourth quarter, while we produce physical albums for Shao Zhan and Lei Zhang, we also provide the options for users to purchase as they use Yu Suxin merchandise along with her digital albums and create immersive experience. Such an approach not only boosted album sales, but also opened new avenues for artists to connect with fans. We also partnered with Mayday, WuYueTian, to host a groundbreaking online New Year's Eve concert, which was promoted across multiple short video platforms and social media channels. The concert's success and popularity earned us broad recognition and reinforced our commitment to delivering innovative music experiences. Third, our SVIP membership remains a cornerstone of our strategy. Catering to the unique needs of our most dedicated users by adding comprehensive privileges to our SVIP experience, we saw a strong sequential growth in membership and ARPPU. For example, JJ Lin, Lin Junjie's latest album, Turn of a Page, Guangying Fuban, is now available to SVIP members. We have also introduced new SVIP pearls, including high-definition viewing of May Day Wu Yutian's and Jackson Yi Yang Qianxi's online concerts. delivering an unparalleled experience for our most loyal members. We will roll out more VIP access, meet and greet opportunities, limited additions merchandise, personalized experiences and more, while empowering artists and record label to explore new ways to interact with targeted audience. Last but not least, we recognize that our success is deeply tied to the wellbeing of our planet, people and communities. As such, our commitment to ESG excellence is ingrained in our culture and business practice. In 2024, we make significant strides in supporting female musicians to foster a more diverse and inclusive music community. The number of female artists we supported reached 192,000. Additionally, in the fourth quarter, we partnered with the Ministry of Education and multiple NGOs to launch the Writing Songs for Pandas initiative. designed to promote the public biodiversity awareness through the influence of music. Overall, we are pleased with solid performance that we have achieved in 2024. We are looking forward to delivering more high-quality growth in 2025 and will continue to collaborate with industry partners to nurture a vibrant music ecosystem that brings people together. Now, I would like to turn the call over to Ross for more details on your overall platform development. Ross, please go ahead. Thank you.

Thank you, Kashen. Hello, everyone. In addition to our enriched content offering, our unvarying focus on exceptional user experiences and the music consumption scenarios innovation has been a key driver of our growth. These efforts have prepared us to the forefront of China music streaming industry and will remain central to our future growth strategy, further enhancing the value of music. Benefiting from our ever-expanding content ecosystem and a stronger user engagement, our online music services must again deliver robust growth in the fourth quarter. Our subscriber base continued to expand and ARPPU showed solid growth year-over-year and quarter-over-quarter. Our SVIP membership has also made good progress with user stickiness notable higher and ARPPU steadily expanding. To foster user loyalty, we have optimized the efficiency of our accommodation algorithm. harnessed AI to buster novel user experiences, and enriched music consumption scenarios to expand our reach. These efforts led to a substantial increase in user time spent on our platform in the first quarter. Let me give you some key examples. First, we empowered users to curate and accumulate personal music assets. which help enhancing their sense of belonging and stickiness. By optimizing algorithms and improving the user interface, we made the music discovery more fun and efficient. This led to the steady growth of recommendation-driven streams year-over-year and quarter-over-quarter, alongside a 10% year-over-year increase in user song collections. The latest revives to QQ music and Kugoo music also provide private users a more intuitive and personalized way for navigation. Second, we further elevated the sound quality with our AI pod audio effects and voice extraction technology, which are resonating very well with users. These features have become an important draw for our SYP membership program. Our sound effect LIM analyzes the audio to match its song with the most suitable audio setting. Ensure optimal audio streaming performance. Our AI voice extraction features allows users to separate original vocals and the instrumental tracks with a single click. Users can either sing alongside their favorite artists or enjoy instrumental-only mode for karaoke sessions. Third, we continue to expand music consumption scenarios, allowing users to enjoy music wherever they are, however they listen, and whatever moment they are in. During the fourth quarter, We broaden the partnership with mapping service, AMAP and Baidu Maps to roll out a music navigation feature, providing users with a smooth and uninterrupted music streaming experience on their road. Through our in-depth collaborations with electric automakers, such as Biadi and Xiaopeng, we enrich the user's in-car entertainment experience by introducing AI voice attraction and the Meknes karaoke features. We are pleased to see that our IoT user base recorded steady growth with year-over-year and quarter-over-quarter increases in the first quarter. To better serve users on multiple terminals on TME, we also refined the PC streaming user interface and introduced an innovative Lyricus display function in the Windows task text bar, all of which helped enhance users' music companionship. Moving on to some novel features and the fresh experiences we brought to users through constant innovations. First, we integrated the advanced capability of DeepSeq RM to enjoy a more tailored and inclusive music creation experience. For instance, leveraging DeepSeq's lyrical generation capabilities along our AI song writing feature, users can quickly create songs tailored to specific context or modes. We also integrated DeepSeq into our AI assistance, comment sections, recommendation page, and other user touch points. This allow users to easily access interesting music information, receive song comments in diverse styles, and enjoy a more personalized music experience. Second, We launch a virtual fan community that imposes users to express their feelings for artists and music. This immersive platform, co-created by fans and artists, enables users to personalize profiles, design communities, and engage in multi-user synchronized screen sharing and voice chat. It has cemented the bond between artists and their followers, while driving user engagement and ecosystem vitality. Notable example in the fourth quarter include the virtual communities of GCT and the teams in Times with their fan base growing significantly since lunch. Sir. Our interactive and incentivized advertising has been effective in enabling advertisers to reach a broad music audience, increasing adoption strengths over users and the brand's connections. It in turn contributed strongly to our advertising revenue growth in the first quarter. Altogether, We have progressively redefined the music experience for our users and grew our ecosystem into a striving hub for music creation, promotion, and consumption. As we look ahead to 2025, we will continue to embrace AI technologies to empower innovation. Always the goal of creating the most beloved music platform for our users and the creators. With that, I would like to turn the call over to Shirley, our CFO for a deep dive into our financials.

Thank you, Lars. And greetings to everyone. Let me now turn to our financial results. In the fourth quarter of 2024, our effective monetization of online music services and operational efficiency management continued to drive robust financial results. With strong performance in our music subscription and advertising business, revenues continued its growth trajectory and achieved an 8% year-over-year growth. Advised net profit increased by 47% year-over-year to RMB 2.0 billion, and non-advised net profit rose by 43% year-over-year to RMB 2.4 billion, marking the highest quarterly profit in our history. Total revenues in the fourth quarter of 2024 were RMB 7.5 billion, up by 8% year-over-year, Online music revenues increased by 16% year-over-year to RMB 5.8 billion. The increase was mainly driven by strong growth of our music subscription revenues, supplemented by growth in advertising revenues. Music subscription revenues in the fourth quarter of 2024 reached RMB 4 billion, representing an 18% increase year over year and a 5% rise sequentially. Monthly up was RMB 11.1 compared with RMB 10.7 in the same period of last year. The number of online music paying users were 121 million, representing a 13% increase year-over-year, with quarterly net ads of 2 million users. We have made good progress in our SYIP membership program, driven by the further expansion of comprehensive user privileges, including enhanced audio quality and effects, an expanded digital album library, and inclusive benefits for online concerts. Advertising revenues also achieved strong year-over-year growth, primarily due to the growth in AD support model revenues. We continued to optimize our product offerings and advertising formats The introduction of attractive interactive features and enriched benefits boosted the entrance rate for our ADA-supported advertising, enhanced user engagement and eCPM, and attracted a great number of advertisers this quarter. Social entertainment services and other revenues will be 1.6 billion, down by 13% year over year. We continue to innovate and develop new products and interactive filters for social entertainment services. Our gross margin for Q4 reached 43.6%, representing an increase of 5.3 percentage points year over year. driven by several factors. First, the robust growth of our subscription revenue, including SVIP memberships, advertising revenues in both online music and social entertainment, and racing memberships have positively impacted our growth margin. Second, the scaling of our own content further improved our growth margin. Third, IRC continues to be a key metric in managing our content royalties costs. Finally, for social and terminal services, the decline in revenue should increase, outpace the decrease in revenues. Moving on to operating expenses, in the fourth quarter of 2024, they amounted to RMB 1.2 billion, representing 15.7% of our total revenues, compared with 18.4% in the same period of last year. Selling and marketing expenses were RMB 248 million, down by 3% year over year. We will maintain our ROI-focused approach for promotion expenses while directing investments toward areas with long-term growth perspectives, such as online music and content promotion. General and administrative expenses will be RMB 926 million, down by 8% year-over-year, primarily driven by low employee-related expenses. The finance cluster in the fourth quarter of 2024 reflected an unrealized foreign exchange gain arising from trade rule management activities, which was largely affected by the fluctuation of the exchange rate between RMB and the USD as of September 30 and December 31, 2024. Our effective tax rate for Q4 2024 was 16.9% compared to 17.3% in the same period of 2023. We accrued with cutting tax of RMB 110 million in the fourth quarter of 2024. In Q4, 2024, our net profit increased by 47% to RMB 2.1 billion. And the net profit attributable to equity holders of the company increased by 50% to RMB 2 billion. Non-RFIS net profit increased by 43% to RMB 2.4 billion, and the non-RFIS net profit attributable to equity holders of the company increased by 45% to RMB 2.3 billion respectively. Our diluted earnings per ABI this quarter was RMB 1.26, up 52% year over year. Non-RFS diluted earnings per ADS increased to RMB 1.47, up 47% year-over-year. These results underscored our effective monetization, enhanced operating deficits, and benefited from our share repurchase program. As of December 31st, 2024, our combined balances of cash, cash equivalents, term deposit and short-term investment were RMB 37.6 billion as compared with RMB 36 billion as of September 30th, 2024. This combined balance was also affected by changes in the exchange rate of the RMB to USD if when the balance sheet dates. In general 2025, we completed the 500 million share repurchase program announced in March 2023, of which approximately US 100 million were repurchased in the fourth quarter of 2024. Today, we are announcing another share repurchase program to repurchase up to US $1 billion during a 24-month period commencing from March 2025. Next, I'll briefly discuss our performance for the full year of 2024. Total revenues will unbeat 28.4 billion, up by 2% year-over-year. Revenues from online milk services will unbeat 21.7 billion, up by 25% year-over-year. The increase was driven by strong growth in milk subscription revenues and revenues from advertising services. supplemented by growth in revenues from offline performances. Our multi-subscription revenues were unbeaten, 15.2 billion, up by 26% year-over-year, driven by growth in both paid users and monthly RFGPU. Revenues from social entertainment service declined by 36% year-over-year. Gross margin in 2024 was 42.3%, up by 7 percentage points year-over-year, due to the reasons discussed earlier. Total operating expenses for 2024 were RMB 4.7 billion, down by 7% year-over-year. Selling and marketing expenses in 2024 were RMB 0.9 billion, down by 4% year-over-year. General and administrative expenses were under 3.8 billion, down by 8% year-over-year, primarily due to lower employee-related expenses. In 2024, we achieved a record high annual net profit of RMB 7.1 billion, up by 36% year-over-year. Net profit attributable to equity holders of the company was RMB 6.6 billion. Non-RFS net profit and non-RFS net profit attributable to equity holders of the company was RMB 8.1 billion and RMB 7.7 billion respectively. Finally, I'll conclude with some remarks on our outlook for 2025. Looking ahead, we will focus on driving high-quality growth in our milk business through expanding SYIP memberships and growing our advertising business. We will also continue to diversify our offerings across the milk value chain. We will continue to invest in areas such as original content production, high-quality content, and innovative technologies globally to further boost user engagement, elevate user experience, and enrich our ecosystem. We remain confident in the health growth prospects of both the music industry that we are part of, and we remain committed to delivering strong returns for our shareholders. This concludes our prepared remarks. We are now open for your questions.

Thank you, Shirley. If you are dialing in by phone, please press five to ask a question and then six to unmute yourself. If you're accessing the call from the SME or all meeting applications, please press the raise hand button on the bottom left. For the benefit of all participants on today's call, please can you limit yourself to one question, and if you have additional one, please re-enter the queue. If you ask your questions in Chinese, Please repeat in English. And the first question comes from Alicia. Yep. From Alicia Peaks.

Thank you, Melissa. 管理层网上好,感谢接受我的提问。 我想管理层能否就分享一下 我们如何看待2025年增长的一些前景跟指引。 比如说音乐订阅收入的增长, 会员的竞争长的一些预期, 然后还有非订阅音乐的收入增长, 尤其是在广告这边的收入增长。 good evening management thanks for taking my questions um i wonder if management can share some guidance and direction of how we should be thinking about the 2025 growth outlook, especially in terms of the music subscription revenue growth, the net ad expectation and the non-subscription music revenue, especially on the online advertising growth, as well as the gross margin and also the net margins trends that we should be expecting for 2025. Thank you.

Thank you, Alicia. Thank you so much for your questions. And before we are going to dive into the 2025 outlook, I think it would be good for us to have a quick recap on the key strategy and achievement that we have done in 2024. As I mentioned earlier during today's call, I think that 2024 was a very standout year for us. The strong performance of the online music services, which drove the high quality growth of the company. And we saw the high fee revenue growth and notable margin expansion, which highlights the potential of our rich service offerings as well. Our focus on user experience and continuous product and service innovation have been crucial for our success. So this has been evidenced by a balanced expansion in both the subscribers base and also the ARPPU over the past few quarters. So both of the subscription and other music related businesses record a very strong performance. In particular, our robust content ecosystem continue to be the cornerstone of our subscription service and has fueled the growth of emerging businesses like the artist merchandise and also concerts and both of which saw strong top line growth in 2024. Secondly, we are also seeing that our innovative reward-based advertising enhance the user engagement and enable advertisers to efficiently reach their target audience and optimizing the ROI. Last but not least, I think that our SVIP services has gained a very significant recognition from both users and the music industry, driving a higher user stickiness in the RPPU, further demonstrating our strong execution capabilities. So all of this has really laid a very solid foundation for the future development of our business. So therefore, I think in a nutshell, in the year of 2025, we will continue to focus on strengthening our business presence across the music value chain to offer the users more diverse and engaging music entertainment experiences. And we are optimistic about our growth trajectory for the year and continue to expand, accelerate the top line growth and better margins for the 2025 as well. And also the online music is expected to achieve a healthy growth and driven by steady increase in paying users and ARPPU. And we will continue to explore new business opportunities like the content ecosystem, IoT, long form audios and international markets as well. Thank you.

And gross margin is 43.6% in Q4 2024, increased by 5.3% year over year, and increased 1% quarter over quarter. Our gross margin has been expanding over the past several quarters due to a few key factors. First, the rapid growth of our subscription revenue, including SVIP memberships, advertising revenues in both online music and social entertainment, and racing memberships has contributed to gross margin expansion. Second, the scoring of our own content further improved our gross margin. Third, we have continued to optimize our content cost structure and remain focused on improving our scene on all cost items. First, the optimized live streaming revenue sharing cost strategy. The live streaming revenue sharing ratio decreased. The decline in revenue sharing fees outpaced the decrease in live streaming revenues. Looking forward to 2025, we believe the above factors will continue to play an important role in further expanding our gross margin. and about the just net profit margin. We will continue to manage our S&M expenses rationally. Using an ROI-based approach, we are increasing investments in online music and content promotions. We will continue to focus on technology empowerment and explore industrial innovations and new opportunities brought by emerging technologies. Operating expenses are expected to increase slightly, with operating expense ratio remain flat in 2025. Looking forward to 2025, assume a stable external environment. We expect our revenue growth to accelerate with room for improvement in both just net profit and margin.

广告方面,因为我们目前的广告形态 主要是应该有三种主要的形态 一个是闪屏 一个是免费的听歌模式 以及我们现在的新的网站模式

I also would like to comment on the advertising business. For our existing advertising business, we have three forms. The first one is a splash screen. The second one is a free listening mode by watching the ads. But at the same time, we also have the website mode.

So in the future, we should be in 2025, we expect that under the online mode and the new mode, our advertising can still achieve very healthy growth.

Well, I believe that in the future, especially in 2025, with our website model and online earning model, our model will help to driven the bidding advertising to achieve a healthy growth.

So we will also pay attention to the operation of advertisers, including in the consumer goods market and the luxury goods market, including in the online clothing and game part, to promote our advertisers, so that they can get higher users on our entire platform, and at the same time, we can achieve a very good cooperation model.

So at the same time, we will also pay much attention to the operation of the advertisers, especially in the consumable market and the luxury product market, and also serving the online service and the game industry. We will continue to engage advertisers from different industries, help them to further enrich their reach to the target audience so that we can work with them to help to establish a good cooperation model.

So we expect that in 2025, our website model will make better progress. So even if our non-member DAO falls, we will still be able to make a better growth through our advertising system.

So we believe that in the 2025, our website model will continue to make good progress. Even if the non-subscriber DAU is dropping, but still by diversifying the format of the business of advertising, we will continue to improve the stream of the revenue in advertising for healthy growth.

Thank you. And the next question comes from Lincoln Kong from Goldman Sachs. Lincoln, your line's open.

Thank you, Guan Yicheng, for accepting my question. Congratulations to the company for achieving a very strong performance in 2024. My question is about our members and APU. I want to ask, in 2025, how should we think about the balance and priority between the two? First, we see that the number of members may increase by 2 million in the fourth quarter. Is this speed a situation that we can continue to expect in 2025? Thank you very much for taking my question. Congrats on a very strong 2024 result. My question is about the balance between subscriber and Apple growth and our priority here. So first of all, we have seen 2 million ads in the fourth quarter. Should we expect a similar pace of growth into 2025 upper quarter? And for Apple, how's the sort of the user retention rate for the Super VIP at the moment? How should we think about the potential Apple continued growth into this year? Thank you.

Thank you.

Thank you very much. Thanks for your question. As we mentioned earlier, we still remain confident on the revenue and profit growth in 2025. But at the same time, in my presentation, we also mentioned about the subscription model and the subscriber. We believe that the subscriber number and ARPPU will continue to grow.

Well, at the same time, we also keep an eye on the potential competitors in the market.

We will keep an eye on their dynamics, therefore to balance our operational metrics to make sure we have a solid growth on revenue and profit.

Regarding the NetEase, we still would like to maintain our existing growth pace because no matter for the team or for us, we do have great advantage on content.

This is also a target we hope we could achieve.

But we also need to note that there is a balance in between. That is to say, there is a link between our size and ARP, including that users are actually more sensitive to low prices. In our strategy, we will not follow the trend to get a short-term growth through this kind of short-term low-price method.

But it is worse for our attention that there is indeed a violence, especially the violence between the subscriber base and the ARPPU. So at the same time, we notice that subscriber is quite price sensitive. But for our strategy, we will not sacrifice our interest by ruling out aggressive low price to gain for the short-term growth.

So it's like we're currently at the top of the Chinese industry in terms of app. We still hope to continue to promote the growth of apps. Based on the growth of apps, we also hope that through the difference in our own content, as well as the growth of products, as well as our innovative sound quality, sound effect, this kind of authority and service can become our own competitive advantage compared to others, and then bring our new users in a healthy way.

So at the same time, we also have the industry-leading ARPPU. But at the same time, we still hope that we can continue the ARPPU growth. And based upon the ARPPU growth, we hope we could be differentiated on the self-produced content and the product portfolio. And we also innovatively introduced some features, including the sound quality and sound effect. to be the privileged features as our competitive edge to continue to leverage the healthy growth and engage more subscribers.

So from the ARPBU point of view, we are still... Because our content itself has its own unique advantages, at the same time, our user experience and authority are continuously rich. So we are still on two sides. The first side is that we... We hope that we can continue to increase our price on the part of the base package, that is, we can continue to increase our price on the part of ordinary members such as 15 yuan and 18 yuan, so that we can continue to increase our price so that we can continue to increase our price so that we can continue to increase our price.

So regarding the ARPPU, as you may notice, we do have our unique advantage on content itself. But at the same time, we also continue to optimize the user experience and enrich the privilege to our users. So for us, we have two measures. First of all, we hope for the basic subscription model, especially those users who pay 15 to 80 RMB per month per account. We hope that we can continue to improve our surveys by improving the price, and by so doing, we will be able to consolidate this user base by improving the ARPPU for sustainable growth.

So the second part is what you just asked about the SYP part. So we also saw in Q4 that our SYP, whether it's in terms of size or price, the whole app has been improved. It also drives the growth of our entire ARPPU.

Well, secondly, just now you also asked about SVIP. In Q4 2024, we also see that for SVIP, no matter for the size or for the price, we also see the upward trending, which will help us to register a growth exceeding our expectation.

So from the experience point of view, the SVIP itself is very recognized by users for the long audio part, then the sound and sound effect part, and for these special features such as tree trunks. We also achieved a better opening effect because of these rights.

From the user experience perspective, SVIP does provide the long-form body as well as sound quality and sound effect features. The user really liked it. Because of the privilege, we will continue to advance our SVIP business.

The last thing I would like to mention is that our member's current human-to-human listening market has also created a new high, and the saving power is also at a high level. So we also believe that our member and ordinary members and SVIP operations can also help our platform to keep more healthy users.

It is also worth mentioning that the time spent on our platform per subscriber is always kept at a historical high level. So no matter for the general subscriber or our SVIP, we will be able to continue to optimize our operations to retain more healthy subscribers with us.

Thank you. And then this question comes from Mizuho Fanwei. Your line is open. Please go ahead.

Thank you for accepting my question. I would like to ask if the management has recently seen 就是看看你们的这个观察。 Thank you, management, for taking the question. I'm curious if management can call out any consumer sentiment changes towards discretionary spending, such as music and concerts. And by the way, is the average concert ticketing price recently, is it trending up or trending down? And also, how is the reception based on your observations so far? Thank you.

Thank you so much for your questions. And we have observed that simply listening to songs online no longer satisfies all of the demand of music lovers on music-related entertainment. They basically will increasingly seek the live atmosphere and enjoyment that comes from experiencing the live concerts and music festivals. In addition, we are also seeing that fans also want to show their support to their idols through purchasing official merchandise as well. So by attending all of the live shows, fans gain a more diverse and in-depth understanding of the artists, which in turn strengthens their for the artists and encourage more songs listening on our platform as well. So it's going to create a positive cycle for music content consumption, which benefits all parties. So over the last two years, I think the music performance industry in China has experienced a robust growth, and the willingness of users to spend on such events has surged dramatically, with tickets for many top-tier artist concerts and music festivals selling out in seconds. We believe that the music live shows business in China will continue to have a strong performance and the overall market size and ticket price will remain relatively stable in 2025. But however, I think as more and more live shows are being held, users' expectations for the quality of these shows have also increased. So the industry has now entered a phase where only the strongest survive and the weaker are left behind. So TME is committed to team up with the industry leading partners to organize high quality live performance shows for our users. Thank you for your questions.

Okay. And then the next question from UBS, your line is open.

Okay, thank you for accepting my question. I would like to ask about our AI strategy, because the company has just mentioned that we have been actively trying to use AI in different business scenarios, and it has also brought better user experience. I would like to ask about our AI strategy and planning in 2025, for example, what new products or functional plans will be launched? 那另外我也想请教一下咱们应该怎么考虑AI对于财务的影响,比如说一方面是不是能看到AI对于收入和利润端带来一些帮助,那另外这个我们会不会对AI也加强一些投入,我自己翻一下。 Thank you very much for taking my question. My question is regarding our strategy around AI in 2025. Are there any new products or features that we plan to launch for the new year to drive better user experience? And also, how should we think about the financial implication of our AI strategy? On one hand, could we see some help from AI in terms of revenue or margins? And on the other hand, how should we think about maybe the increasing investment around AI for this year? Thank you.

. . . . .

Thank you very much. Thanks for the question. As I have already mentioned, we won't invest too much on the large language model, and we're going to use Huan Yuan from Tencent and continue to work with Huan Yuan large language model. But it is worth mentioning that we are a tech-driven company, so we do hope that large language model capacity could be a part of our product portfolio.

Of course, the latest change is that we have become the first group to integrate DeepSeq into our product series in the Tencent department. From our actual use, DeepSeq provides users with more... From our actual data, users have completed more rounds of this kind of interaction.

Well, a recent notable change we see is that we're probably among the Tencent ecosystem to first adopt DeepSeq into our product. And from the actual practice, we can see that in QQMusic, we do have the AI-empowered assistant who can offer the users more interactions.

We've also been able to learn about the user's listening history through DeepSeq, and let DeepSeq do a summary and provide users with a very interesting way of interacting.

And recently, we also leveraged DeepSeq to understanding the music listening history of the users and then to summarize those history and providing a very interesting interactions with the user.

除了DeepSeq以外,我们其实现在来说,我们上次应该也提到我们自己首创的这样一个AI翻唱的功能, 能够让用户用自己的音色去翻唱我们现在目前各种歌曲, 其实我们已经得到了非常好的商业的效果。

Besides DeepSync, I think for the last meeting, we already mentioned about our AI Sound Cover feature, which allow the users to use their own voice to sing the popular sounds, which also be commercialized with very good feedback.

. . . . . . . . . .

Well, in the near future, I think we're going to continue to leverage the capacity and the strengths from the large language model, especially on the sound quality and sound effect. For example, regarding the sound quality, our audio 3D has already been approved with great popularity in the industry.

In addition, the text-to-speech technology improved by our own large model should also be at the leading level in the industry. We are currently using our latest technology to produce music broadcasts, which also achieve very good results in the flow and playback of users.

At the same time, we also leverage large language model to further improve our text-to-audio technology. It's already the leading technology in our industry. And recently, we also have cutting-edge technology to help to build the music blogger, which is also performing very well regarding the user retention.

So because we are fully using our Tencent's investment in this kind of big model card, at the same time, we have also done a lot of reasoning on our own. Because in terms of big model reasoning, it is very cost-efficient. We have also invested a lot of development power in this kind of reasoning acceleration. So we are basically currently in this part of the innovation field, the cost part is still very controllable.

So we make full use of Tencent investment in the large language model. But at the same time, you know that for large language model inference, it actually be quite consuming the computing power. So we actually made many manpower investment in accelerating the inference of the large language model. But still, we have a controllable cost in this regard.

. . . .

But if we identify some new applications, we'll still continue to invest in this. For the manpower, for the large language model, the facilities, or the R&D, we will continue to improve our investment.

Okay. And then this question comes from J.B. Morgan Ellis now.

Okay, thank you for accepting my question. I would like to ask, let's look at it from another angle. We have seen a long-term increase in income from social entertainment. It's been a long time. In fact, this line is relatively weak. I would like to ask the management to help us interpret it. We think. The trend of income will be reflected more in this field of social entertainment. In general, WeChat plus live broadcasts have reached a relatively stable state, which reflects some of the factors of the end of the year. uh thank you management for taking my question uh i have a question with regard to the sequential revenue growth for social entertainment. This line item has been on sequential declining trend for many, many years. And this is actually the first time, I think, since the past two or three years that we actually see a sequential improvement. Could you elaborate the reason behind the sequential growth for social entertainment revenue? Is it because WeSing now accounts for majority of the segment revenue, so WeSing will increasingly represent the social entertainment revenue growth outlook? Or is it because everything has stabilized such that it's showing a bit of seasonality trend, i.e. the year-end event leads to a stronger monetization? Any color would be helpful. Thank you.

确认你还是挺了解我们这个社语业务的。 Thank you very much. Thanks for the question.

It seems you know our business pretty well. Yes, indeed. By the end of this year, we do have some celebration. But besides this factor, and you can see that we actually benefited more from WeSing rather than Kugel.

But at the moment, this part of the factor is very small, compared to the other few years. And then, in fact, one of the main reasons for the growth is that the first one is because we started to make stricter harmonies in July and August, so at that time there may be a low point.

But I have to say that those factors is actually fading away compared with the past few years. A key growth driver is because starting from July and August, we have a more stringent compliance. By then, we are at a low point.

但是在Q4的时候,其实我们看到一个比较好的现象, 就是首先库口直播上面我们增加了一个新的互动玩法。 这个互动玩法其实取得了我们超出预期的结果。

But starting from Q4 last year, we do notice something. That is, on Google streaming, we have a new interactive feature. That interactive feature actually showcases the performance exceeding our expectations.

This kind of nine-storied tower, the nine-storied tower game, we are practicing it later. Because we caught the hot spot of Wukong and Nezha, we believe that there will be a lot of space in the live broadcast based on this kind of collection game. There can't be a lot, there must be a certain space.

It's a feature of the collection, just like the 9-story Diamond Tower. And we also take the social trending regarding Wukong as well as Nezha. So we do believe such collection feature in the near future will continue to drive the live streaming business growth.

But this is indeed very important. The previous K-gear has played a very important role in the current scene. First of all, its scale, we can see from now on, has a steady trend.

But I have to declare that for Wisin, indeed, it plays a very important role now, especially as the size continues to be stabilized.

So in terms of the overall K-ge, because of the increase in the number of online games, the online game has also achieved a relatively good result. At the same time, the size of its VIP members has also shown a relatively good health growth. At the same time, its singing room and video live broadcasts have maintained stability. So this is basically our current Q4, a relatively good trend of growth, a core driving force.

But at the same time, for Wisin, and we also have new features such as the net earnings, it also registered a very good result. And the VIP membership size continued to see a very healthy growth. At the same time, we also have the sound room and the video live streaming, and the business continued to be stabilized. So that's the key reason why we have a good growth momentum in Q4 last year.

But for the past 25 years, our overall judgment is that the entire social media business should still be in a steady state, or even in a downward trend, because there are still many challenges in this field. Of course, we will continue to fight for and make up for some of the gaps by continuing to innovate on Kge and Kuo.

Looking into 2025, according to our overall judgment regarding the social entertainment business, it's going to be stabilized, but it's still likely to have some downward trending because we do face many challenges for this business. As I have already mentioned, what we're trying to do is to roll out new innovations on WeSee and on Google to complement the possible downward trending.

Okay, in the interest of time, we'll take the last question from CICC from Xueqin. Xueqin, your line is open.

Thanks management for taking my question, my question about digital allocation. The company has announced the cash dividend and a new round of share purchase this quarter. So what's your plan for capital allocation, both on dividends and shareholder returns? How should we expect to repay our ratio in the future? Thank you.

With the health development of the company's business, we are actually a company with a lot of cash flow, so we have accumulated a lot of cash.

Thank you very much. Thanks for the question. Our company business continues to progress healthily, and we are also a company with NP cash flow. So indeed, how we're going to use the cash flow would be one of our work priorities.

On the other hand, we will invest in future opportunities when the opportunity is right, including the content of ecology, technical technology, and international business, which will benefit our long-term development.

So on one side, we're going to find good opportunities at the best timing to invest in the future-driven opportunities. For example, the content and our technologies and international business, those elements are delivering sustainable growth for our overall business.

另一方面,我们也会高度重视股东的回报, 那么会持续评估如何为股东创造更多的价值, 包括我们回购和分红的计划。

Where on the other side, we are going to greatly value the return to the shareholders. We're going to evaluate how can we create more value to the shareholders, including our share repurchase plan and the dividend plan.

回顾过去,其实我们在回购上已经进行了两期。 其实我们都已经按照我们的回购计划,如期去完成了我们的回购。

So look into our track record. We have already completed two share repurchase programs and we have already honored our commitment as been promised to the market.

鉴于我们对于未来我们公司运营的信心, 那我们也会持续的在这个回购这方面进行做一些回购计划。 所以这次也宣布了一个为期两年的十亿美元的一个回购计划。

So based upon our confidence into the company's future operation, we are also going to continue to have the share repurchase plan. So that's the reason we also announced a new share repurchase plan with a term of two years and a total value of 1 billion USD.

关于分红这一块,我们是从去年开始, 去年5月份开始进行首次的分红, 是为了回馈股东对我们的帮助吧。

Regarding the dividend or the payout, and we actually started last year in May the initial or the first inaugural dividend to our shareholders to pay back to the support and care from the shareholders to us.

随着我们的这个经营率的增长, 大家其实也看到这次我们也宣布了一个新的这个年度的持续的一个分红的规划, 那其实跟去年来讲, 其实在绝对值上还是有比较明显的一个提升。

As we continue to grow our operating profit, as you may notice from our announcement, we're also going to have a new dividend payout plan for the new year. From the absolute value perspective, compared with the previous year, there's a significant improvement.

对,所以我们会根据我们的运营的情况,对未来运营的信心,我们相信我们会持续来回报股东对我们的帮助和关注。

So according to our appreciation and our confidence for our future business, we will continue to pay back to the shareholders and thank you for your long-term support and care.

Okay. Thank you, Shirley. And thank you, everyone, for joining us today. If you have any further questions, please feel free to contact our team. And this concludes today's call. And thank you so much. And I look forward to speaking next quarter. Thank you and bye.

Thank you so much. Bye-bye. Bye-bye.