Tencent’s (TCEHY) Q2 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Martin Lau – President

What we need for a healthier industry

“From an industry perspective we believe three major forces are contributing to the evolution of a healthy ecosystem overtime. Firstly, regulators and industry players have been working closely to improve IP protection and anti-piracy enforcement in the past two years. Secondly, mobile internet connectivity and smartphone adoption are making content consumption ubiquitous. Thirdly, revenue models are evolving from advertising-only to hybrid premium models with subscriptions, transactions, as low as advertising. This in turn incentivized content creators and publishers to provide more embedded content to users. ”

A healthier industry benefits everyone

“…the philosophy that would take in content business is a bit like what we have taken in the gaming business, which is we try to create a model in which every party benefits from a healthier industry condition, so that a one-handed user actually benefit from better content. At the same time, our partners, the records company or with the creative artists, they will benefit from having a multitude of different business models.”

From buying CDs to streaming

“…in China, music is among the top five internet activities by users but the market is very small from a revenue perspective leading music streaming platforms in gust serving large user base but generating small revenues due to piracy which is not good for artists and creative people.”

Pokemon Go has been intriguing

“…we’re really focused on the mobile game portfolio and that help can be measured by a revenue, it could be measured by engagement, it could be measured by reach and we’d like to deliver all three revenue, reach and engagement. We’re also intrigued — I mean, as some of you may be aware, there has been a successful mobile game in some parts of the world called Pokémon Go, that utilizes location-based services technology, and we’ve been intrigued for some time by the opportunities around injecting LBS into smartphone games and whether the China audience is as receptive as that as other audiences have been, it remains to be seen.”

James Mitchell

Decelerating video advertising revenue growth

“In terms of our video advertising revenue growth, I think that both, for the industry as a whole and for Tencent video, there has been a deceleration in growth and I think that’s for a couple of fairly structural reasons. One is the large base effects and naturally percentage growth rates in center as the base gets bigger. And the second is the growth of our subscription video.”