Core Viewpoint - Tencent Music's Q1 2025 earnings report reflects a mixed performance amid a challenging competitive landscape, with a focus on long-term growth strategies and user engagement [1][11]. Membership Subscription: More Focused and Specialized - As of Q1, Tencent Music's paid penetration rate reached 22%, continuing to improve from the previous quarter, nearing 90% of its long-term video subscription target set three years ago [1]. - The increase in average revenue per user (ARPU) is attributed to a strategy targeting core heavy users and enhancing SVIP conversion rates, despite a general slowdown in subscription growth [2][4]. - The company is adjusting its volume and pricing strategies dynamically to maintain its leading market position [1]. Advertising and Digital Album Sales - Advertising revenue showed steady growth in Q1, supported by improved inventory management, while digital album sales remain volatile, heavily influenced by the release schedules of popular artists [7]. - The overall revenue from online music, including advertising and digital album sales, is expected to fluctuate based on market conditions and artist releases [7]. Financial Performance Overview - Total revenues for Q1 2025 were CNY 67.68 million, reflecting a year-over-year decline of 3.4%, but slightly beating consensus estimates by 1.15% [9]. - Gross profit for the same period was CNY 27.71 million, with a gross profit margin (GPM) of 40.9%, indicating a slight improvement from previous quarters [9]. - Non-IFRS net income was reported at CNY 18.12 million, exceeding expectations by 7.86% [9]. User Metrics and Trends - The number of paying users for online music reached approximately 11.35 million, with a net addition of 680,000 users in Q1 [9]. - Monthly ARPPU for online music was CNY 10.6, slightly above consensus estimates, indicating a positive trend in user monetization [9].