(Yicai Global) March 17 -- Tencent Music Entertainment Group, a leading Chinese online media group that is shifting to a paid streaming model, more than doubled its net profit last year thanks to an increase in the number of paying subscribers and their average spend. But it warned of weaker first-quarter revenue growth due to the coronavirus pandemic.

Net profit was CNY4 billion (USD569.6 million) in the year ended Dec. 31, the Shenzhen-based company said in an earnings report released yesterday. Revenue gained 34 percent to CNY25.4 billion (USD3.62 billion).

The social entertainment business, represented by karaoke software WeSing and live music services, remains Tencent Music's main source of revenue, accounting for over 70 percent of fourth-quarter income. But as Chinese users consume ever more digital content, paid users of online music rose 47.8 percent to 39.9 million, driving online music revenue up 40.7 percent to CNY2.1 billion in the final quarter.

Online music service pay-per-view rates were up at 6.2 percent in the fourth quarter, compared with 4.2 percent in the same period of 2018. Tencent Music's average online music revenue per paying user rose 4.5 percent to CNY9.3 (USD1.30), demonstrating the high quality growth of paying subscribers.

"Our strategic transition to pay-for-streaming service has started to pay off," Chief Executive Pang Jiaxin said.

Looking to forward, Tencent Music expects revenue growth to pick up in the second half after a slower-than-expected first six months, Reuters reported, citing comments Pang made on an earnings conference. The company laid the blame for that mainly on a likely decline in income from advertising and licensing, Reuters said, adding that the firm believes income from subscriptions will increase.

Compared with global leading music streaming platform Spotify, Tencent Music's current user payment ratio is still quite low. Spotify had 271 million monthly active users in the fourth quarter, of which 124 million were subscribers, with a payment rate of 45.8 percent and average revenue per paying user of EUR4.72 (USD5.25), nearly four times that of Tencent Music, according to the latest Spotify data.

Tencent Music is strengthening cooperation with content providers via investment. Late last year, the firm announced that it would join a consortium, led by parent company Tencent Holdings, to take a 10 percent stake in Universal Music Group, valued at EUR30 billion. Tencent Music's highest contribution to the consortium is 10 percent and the deal is expected to close in the first half of this year.

Shares of Tencent Music [NYSE:TME] fell over 3 percent to USD11.05 yesterday amid a global financial market plunge. At one point, it hit a historic low of USD10.50. The firm's earnings came out after the market close.

Editors: Dou Shicong, Peter Thomas