Chinese social media, gaming and video giant Tencent saw 2023 revenue increase 10% to $84.6 billion (RMB 609 billion). But its net profits fell to $16.3 billion (118 billion Chinese yuan), down from $26.3 billion the previous year.
The group is directly affected by weakness in the mainland Chinese economy, which has only slowly recovered since the end of the Covid pandemic, and by ongoing regulatory concerns. However, online advertising has grown to $14 billion (RMB 101 billion), 22% faster than the economy.
The Games, usually a mainstay, were weak both at home and abroad. Over the past year, China’s gaming industry regulators have appeared to hesitate, first seeking to restrict gaming spending, then backing down and issuing more approvals. After the fiscal year ended, in January, Tencent got the green light to launch a mobile game with the National Basketball Association.
In 2023, Tencent’s international gaming revenue rose 14% to $7.47 billion (RMB 53.2 billion), or 8% excluding the impact of currency fluctuations, benefiting from the strong performance of “Valorant” and contributions from recently launched games “Goddess of Victory: NIKKE” and “Triple Match 3D”, and a rebound in “PUBG Mobile” in the second half of the year.
China’s domestic gaming revenue rose 2% to CNY127 billion (US$17.6 billion), thanks to contributions from the recently released “Valorant” and “Lost Ark” games, and growth in emerging games such as “Arena Breakout” and “Fight of “The Golden Spatula”. Partially offset by a weak contribution from the “peacekeeping elite.”
In the fourth quarter, international gaming revenue rose 5% q-o-q to RMB13.9 billion, but Chinese domestic gaming revenue fell 18% q-o-q.
The company’s two major online content businesses remained large and important. At the end of the year, it had 248 million music and video subscriptions, an increase of 6%. (Separately, its powerhouse WeChat added an additional 30 million users, bringing its year-end total to 1.34 billion.)
Profits for its Tencent Music Entertainment business rose, while revenue fell, reflecting a shift to fewer free users and growth in paid music subscriptions.
On the video side, Tencent reported a barely-changed subscriber count of 117 million. This appears to make Tencent Video the largest video streaming company in China, with 117 million at the end of the year, but the group does not disclose unit profit or loss figures separately.
“In 2023, we achieved breakthroughs across a number of products and services, with total user time spent for video accounts more than doubling, improvements to our advertising AI model significantly improving our targeting performance, and the international contribution to our games revenue reaching a record high.” “These developments have generated a high-quality revenue stream that has grown our gross earnings by 23% and supports our plan to increase capital returns to shareholders,” management said in a regulatory filing.