Ladies and gentlemen, good evening, and good morning, and thank you for standing by. Welcome to the Tencent Music Entertainment Group 2020 Fourth Quarter and Full-Year Earnings Conference Call. Today, you will hear discussions from the management team of Tencent Music Entertainment Group, followed by a question-and-answer session.

Please be advised that this conference is being recorded today. Now I will turn the conference over to your speaker host today, Ms. Millicent T. Please go ahead, ma'am..

Thank you, operator. Hello, everyone, and thank you all for joining us on today's call. Tencent Music announced its quarterly financial results today after the market close. An earnings release is now available on our IR website at ir.tencentmusic.com as well as via Newswire services. Today, you'll hear from Mr.

Cussion Pang, our CEO, who will start the call with an overview of our recent achievements. He will be followed by Mr. Tony Yip, our CSO, who will offer more details on our operations and business developments. Lastly, Ms. Shirley Hu, our CFO, will address our financial results before we open the call for questions.

Please note that this call may contain forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are based on management's current expectations and observations that involve known and unknown risks, uncertainties and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or expectations implied by these forward-looking statements.

All forward-looking statements are expressly qualified in their entirety by the cautionary statements, risk factors and details of the company's filings with the SEC.

The company does not assume any obligation to revise or update any forward-looking statements as a result of new information, future events, changes in market conditions or otherwise, except as required by law.

Please also note that the company will discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under the international financial reporting standard in the company's earnings release and filings with the SEC.

You are reminded that such non-IFRS measures should not be viewed in isolation or as an alternative to the equivalent IFRS measure, and other non-IFRS measures are uniformly defined by all companies, including those in the same industry. Now with that, I'm very pleased to turn over the call to Cussion, CEO of Tencent Music.

Cussion?.

Thank you, Millicent. Hello, everyone, and thank you for joining our call today. 2020 was an extraordinary year, with the pandemic impacting all walks of life and the macro economy. Yet, it also brought opportunities, expediting Internet penetration, causing a paradigm shift in online content consumption, and presenting potentials for online concepts..

Thank you Cussion. Hello, everyone. Apart from the key developments discussed by Cussion just now, I will provide additional highlights for our online music services before I move on to the discussion of our social entertainment services. During the fourth quarter, core users are increasingly engaged with our platform.

Despite the sequential decline in music MAUs, average daily time spent for users has increased. This is a result of our concerted efforts to enrich both music and audio content offering as well as the launch of innovative products, features and services for Putong Community and TME Live..

Thank you, Tony. Hello, everyone. Let's now discuss our financial perspective. In the fourth quarter of 2020, our online music services continued its outstanding growth trajectory, particularly in musical subscriptions and advertising.

While social entertainment services continues its sales growth, despite the economic uncertainty and the changing competitive environment. Our total revenues for Q4 2020 reached RMB 8.3 billion at 4.3% year-over-year.

In Q4 2020, our music subscription business continued to grow rapidly, with revenues of RMB1.6 billion and the year-over-year growth of 42%.

As a result of user retention improvement and effective the paywall strategy execution, paywall users grew 40% where monthly art remained relatively stable year-over-year, as we are dedicated to high quality user growth and the protected value of music industry. Advertising is our key strategy.

During the quarter, we continued to increase the Ad availability on our platform, enhance the product quality for our advisors, improve interfaces, as improve and expand our Salesforce. As a result, our advertising revenues were more than doubled year-over-year for the second consecutive quarter.

Consequently, our online music revenues reached RMB2.8 billion this quarter, up to 29% year-over-year. Social entertainment services and ad revenues were RMB5.6 billion up 8.2% year-over-year, primarily due to growth from online karaoke. Total entertainment monthly ARPPU increased 26%. The ARPPU users dropped 14.3% on a year-over-year basis.

Significant the growth of our -- an annual gala give us both contribute to increase this quarter. As we discussed last quarter, we have always been focused on monetization improvement.

In Q4 2020, our advertising revenues have continued to grow, while number of paying users increases sequentially, leading to our own monetization payment on the platform. Gross margin was 32.4% in Q4 2020, which was unchanged sequentially, and about 1.7% compared to last year.

The year-over-year decrease was primarily due to increased investments in new products, and the content offerings, such as long-form audio, less rental apps in terms of brand new generation, and increased revenue sharing space to strengthen our platforms to competiveness. Online revenue services continue to positively impact our overall module.

Now moving on to operating expenses. Total operating expenses for Q4 2020 were RMB1.7 billion and was 20% as a percentage of total revenue, as compared to 90% in the same period last year. Selling and marketing expenses were RMB773 million, up 50% year-over-year.

The increase was due to higher promotional spending, and the use of acquisition defenses to strengthen our products, competed lists and solidified our advantage in musical centric live streaming. Higher costs associated with annual gala events, such as community event, racing gala, also contributed to the increase.

General and administrative expenses were RMB906 million, up to 21% year-over-year. The increase was driven by increased investment in RMB for product enhancement and the technological innovation, such as long-form audio racing international versions, brand new car okay room net all leading to higher employee rated costs.

Our effective tax rate for Q4, 2020 was 5.5% decrease from 9.3% last quarter. As some of our operating entities in China became qualified for certain tax benefits in the quarter ended the community impact was recorded in Q4 2020. Our effective tax rate for the year 2020 was 9.8%.

Our net profit attributed to equity holders of the company was RMB1.2 billion. Non-IFRS net profit attributed to equity holders of the company was RMB1.3 billion and the non-IFRS net profit margin was 16.4%. For full year 2020, our total revenues were RMB29.2 billion, up 14.6% year-over-year.

Net profit attributed to equity holders of the company of IFRS and non-IFRS were RMB4.2 billion and RMB 5 billion respectively. At December 31, 2020 our combined balances of cash, cash equivalents and term deposit were RMB28.9 billion, reresenting an increase of RMB1.2 billion from Q3 which was primarily driven by cash flow generation operations.

Looking forward, we continue to be optimistic about the future of the broad music and audio industry. We are confident in overall ecosystem and the product pipeline that we are building in the long run.

We will keep focusing on new products and the future as well as monetization improvements on our platforms while mentioning core company investments but hyping is always our key strategy snd we will keep improving as the product quality effectively and additionally, we are investing for activity on long-form audio and are excited that Lazy Audio joined which will further accelerate our long-form audio business development.

This concludes our prepared remarks. Operator, we are ready to open the floor for questions..

Thank you Your first question comes from Eddie Leung from Bank of America. Please go ahead..

Hey, good morning, guys. Thank you for taking my questions. Two fairly quick questions.

The first one is about just the proportion of songs you guys have moved across the paywall? Do you feel we are reaching first-half like a high level, which means going forward is increasingly less easy to move an incremental number of songs to the paywall? If not, why not? And then secondly, it's very interesting that you guys, I think, first time mentioned about a user base on so-called Internet of Things devices, right, in-car audio speakers, et cetera.

So could you give us an idea whether these users are basically the same users on your mobile app? Or are we addressing a different set of user base? Thank you..

Thank you for your question, Eddie. In terms of paywall, to – at the end of 2020, we are just over 20% in terms of our streaming share of content that's sitting behind the paywall. And we actually don't see there to be a ceiling in the near-term, and we continue to expect that by the end of this year 2021.

We continue to increase our paywall in a similar pace as the previous years, which would take us to just over 30% by the end of the year. We wanted to note that, in the fourth quarter, our net ads deliver a very solid performance of over 4 million, 4.3 million net ads.

And when we continue to expect our net adds to be strong, in particular, in Q1, we expect the net adds in Q1 to be even stronger than Q4, driven by a very successful paywall strategy and our various marketing campaigns. In terms of your second question on IoT, there's actually a different user group.

We see that majority of them are non-overlapping because it's a different use case. People who listen to music on smart speakers or in-car, a slightly different MAUs and DAUs compared to the music platform. So effectively, our IoT strategy is helping us broaden our user base.

We note that while the MAU - online MAU saw a slight decline, which is mainly attributable to a higher churn of non-core users. But on the other hand, our core users actually increased the level of engagement on our platform.

And by that, I mean, if we look at the average daily time spent for our DAU, which is more representative of our core users, it actually increased year-over-year. And that's a result of all the product enhancements that we've been investing over the past year such as long audio, embedded MVs on streaming page, Putong Community, TME Live et cetera.

And it's important to note that our reported music MAU figures do not include the IoT devices, such as smart speakers in car and Smart TV, and the IoT devices MAU actually record a strong double-digit growth year-over-year in the fourth quarter. And that presents additional opportunities for us, which we'll share more in the future..

Great. Next question, please..

Thank you. Your next question comes from Alicia Yap from Citigroup. Please go ahead..

Hi, good morning, management. Thanks for taking my questions. My question is related to your long-form audio, even the 15% penetration rate.

Could you share more detail regarding the user profile and any overlap of the existing music subscriber and also their content of interest? In relation to that, can you also elaborate the various monetization model that you plan to push more aggressive this year? Would that be more on the suspicion or would that be more on the online app to drive the growth in 2021? Thank you..

Okay, thank you so much for your questions. Actually, the long-form audio is a very important strategy. Therefore, TME, we are fully committed to invest in this area. I think this is a very natural way for TME to doing it, because we have a very strong competitive advantages that compared to the other vertical player in the industry right now.

First of all, we’re seeing that this is a very natural extension of music consumption because a lot of our music users nowadays, besides listening to music, they will be more easily to be extended their time and then listening to more audio programs. So this is very easy for us to convert our existing users into the long-form audio users.

So we will save the user acquisition costs in this aspect. Besides this, we are seeing that we have already set up a lot of content partnerships, especially with the very renowned company like the China Literature that we have already set up the strategic partnership last year.

We are also starting to team up with other content providers in the industry as well, not just the professional content, but we are also extending our footprint into the podcasting, and also other UGC and PGCs area.

The third point that I would like to mention is, for the TME long-form audio strategies, we are taking the two-pronged approach, which is unique in the industry, which means that on one side, we are going to leverage our music application to have a long-form audio section on our apps.

But on this other side, we are also launching out our standalone long-form audio application as well. And with the acquisition of the Lazy Audio team, the news that we announced by the end of last year, we actually further strengthen our strength on the standalone long-form audio side.

So I think that this is a very unique strategy and make us to stand out from the competitions in the industry. Beside this, we’re also continuing to pull in more financial resources and also we have set up a core team to working on the long-form audio businesses. And I'm sure the year 2021 is going to be another a huge step for us.

And by doing this, we strongly believe in that the long-form audio will create long-term value to the entire group. First of all, it will increase – as Tony mentioned, it will increase the user engagement because the time spent on a platform will be improving and also to be increasing because they will enjoy more and more content from our platform.

Secondly, because of the different monetization model that we have, for example, we have the premium content, monthly subscription model, we also have the advertising model as well. So we will further bring in other monetization’s opportunity for us and create strong revenue growth in the future..

Next please..

Thank you. Your next question comes from John Egbert from Stifel. Please go ahead..

Great, thanks for taking my question. Advertising clearly has a ton of momentum. I think you each highlighted a few of the key drivers of recent strength there.

But wondering if you could dig deeper into the runway for future advertising growth by maybe looking at the current state of your business there versus what you might think is possible in the next few years in terms of like ad coverage on your various services, ad load within the screens that you're actively monetizing today, potential for new ad formats to kind of change your capabilities, anything worth calling out there?.

Yes, sure. Advertising grew at a very rapid pace of over 100% year-over-year for two consecutive quarters. In the fourth quarter, advertising now accounts for the majority of the non-subscription revenue with an online music accounted for just over 50%.

And this is all in the result of the investments in the advertising technology and solutions that we've made in the last year. As well as leveraging Tencent’s group's overall strong ad sales capabilities, which enable us to penetrate into an increasing number of advertisers. We also continue to see room for us to increase our ad load.

There is more real estate on our various multiple platforms. That provides us with ample inventory, and so far our ad format have been rather homogenous to the traditional banner, I saw a splash screen.

But as Cussion question mentioned in his earlier remarks, we do intend to broaden our ad format into other ads such as audio ads, reward ads, as well as other. And as a result, we expect such strong growth in advertising to continue, for the near to midterm..

Okay, question please..

Okay, thank you. Your next question comes from Alex Poon from Morgan Stanley. Please go ahead..

Good morning. Thanks for taking my question. I want to go back to the music subscription business. So I want to understand about the effectiveness of the paywall, you mentioned about just over 20% by the end of last year, and last year, on average, roughly we have added about 4 million per quarter. I want to understand about if we go from 20% to 30%.

The fifth organic conversion would increase from 4 million to something say 5 million would be faster than before. And actually on top of payroll, you have better user engagement long form audio, premium model promotions, content, a lot of new tools that you can drive conversion.

So try to understand that's just the first part is the organic effectiveness of the payroll going from 20% to 30%, compared with the 10% or 20%. And then this new drivers, how they can how much additional growth that can come from these new tools that can convert subscribers? Thank you..

Yes, sure. Music subscription. Revenues obviously continue to deliver pretty strong growth at around 42% year-over-year.

In particular, the paying users record a strong growth at over 40% year-over-year, and the solid net additions of 4.3 million, which brings the total pay users to 56 million, or 9% paying ratio, which is a substantial increase compared to just about 6% last year.

In addition to the paywall strategy that we've mentioned, there are actually many other products and best investments as well as marketing campaigns that we've embarked on, which are starting to pay benefits. We continue to observe the retention rate of our paying users continue to improve.

They've basically been improving every quarter since the first quarter of 2019. So for eight quarters now, which means that once we've converted a user from free to paying, they are actually remaining as paying for a longer period of time compared to before. And that's also helping us to improve the pay user.

And we are able to achieve all this throughout 2020, while seeing an increasing trend in ARPPU. Right. So we are very optimistic. In terms of our subscription growth, we expect, like I said, the net app in Q1 to be stronger than in Q4. And I guess for the year 2021. We expected average net ads to be approximately between 45 million per quarter.

And which would be a strong growth driver to our overall business..

Next question please..

Thank you. Your next question comes from Alvin Neo from JPMorgan, please go ahead..

Good morning management. Thank you for taking my question. I have a follow up question regarding your payroll strategy. Can you share with us how do you strike a balance between the size of the paying ratio and the platform users? Theoretically you can achieve 100% of the paying ratio if you adopt a tap for Music type of monetization model i.e.

content is only available to paying subscribers. But that will probably come at a big cost in terms of the platform usage or platform MAU. While your current strategy is pushing the size of the table gradually well, driving up the paying ratio.

Can you share with us philosophically how do you strike the balance and what are the key considerations to make you more aggressive or less aggressive increasing the size of the payroll and over longer term what could be the equilibrium level of the paying ratio? Thank you.

Thank you. Oh, sure, we there is a good balance that we do need to strike between pay well strategy as well as the free user experience. At this point in time, we continue to see the payroll strategy to be very effective, without substantially hurting the free user experience.

However, we are investing in new monetization capabilities, such as various forms of advertising, to help us monetize the free segments of users that, for whatever reason may be very difficult to convert to premium.

And for that those particular user, the monetization strategy isn't paywall, the monetization strategy for those user would be advertising. And perhaps, we would provide them with advertising as a way for them to unlock certain benefits, which allow them to access a limited volume of songs behind the paywall.

I think that's an example of how we can strike a good balance, between free and pay users. Again, I think we continue to see the paywall strategy to be very effective. We expect the pace of that of that strategy will out to be in line with previous two years.

And because of the various factors that we mentioned, we expect the net ads of this year to continue to perform well, of approximately 45 million per quarter this year, which is an increase compared to last year..

And one more point I would like to add this, as we mentioned before, educating the user saying that the music to have a value greater times. That we are super excited, because in the last two or three years, we have done a great job and our users really treasure the music and also they are willing to pay for it.

But nowadays, when we are educating our users to buying a monthly subscription, they will be happy to produce experience, what I mean is they can enjoy all these songs. And they only need to worry about which kind of songs that they can listen on, we found that -- that they cannot. But at the same time we are also providing other privileges to them.

So besides listening to song, as we mentioned, there'll be also has a PME live events that we offered. So for our monthly subscribers, they will have some privileges. For example, in different special user experience is enjoying the TME Live event. So this is all the things that we keep evolving and keep innovating.

And we are targeting to bring a new type of experience for the TME Live in this year. And also it will help our VIP which is a monthly subscriber to have more privileges. Deciding this we are also focusing on the test based economy. So which means that if you are a monthly subscriber, you will also enjoy some of the privileges on as well.

So all of this will be worked together as a total package. And let our users really think that being a Monday subscribing, VIP, this is the right way to enjoy music, and also all other people experience on our platform.

We have been getting a really encouraging result by moving to the retention rate of our monthly subscription has already been keep continue improving. So I think this is a really good signal to us.

And we strongly believe that with the combination of putting the songs behind the paywall in a steady pace, together with the premium that I just mentioned, it we really make our subscription model and together with advertising model as well. It we work out together and bring a good, healthy development of our revenue in the future..

Great. Next question please..

Thank you. Your next question comes from Zhijing Liu from UBS. Please go ahead..

…management for taking my question. I have two questions..

Sorry, Zhijing, we can’t hear you.

Do you mind speaking up a a little bit?.

Yes, sorry. My first question is how do you think about the timing for us to promote a premium model of music apps? Do we see any potential risk of balancing user experience and competition on premium models? Second, can you also show us some colors on how long-form audio contributes to overall timespan of our music apps? Thank you..

Sure, in terms of the timing, we continue to make investments in the various ad formats that leverage to monetize the fleet user base, in particular, the segments that may be difficult to convert to, to premium. And that's ongoing.

You see us talking about this in the last one to two quarters, we will start to implement some of that as beta test during this year. But in terms of the exact timing of when we will scale up, in a larger sense, obviously, we need to observe and how the adoption level and how the, the effectiveness level of that.

And then in terms of long-form audio, I think it's important to understand that there's a lot of natural synergies between music and audio. And just like, in the radio era, users are very used to listening to both music and audio content together. And similarly, we actually see that dynamic playing out in online platforms.

And so when we provide audio content, to our music users, they don't switch off and listen less to music, in order to listen more to audio, they actually end up increasing the total time spent.

And therefore, it's actually very, it puts us in a very advantageous position, in being the leading music platform going into audio, and with the addressable market expected to reach to a similar size of music users, the large, several hundreds of millions in the next few years. We're very optimistic, about the audio market as Cussion mentioned.

And that's why we actually think, together with our content strategy within audio that Cussion talked about, our monetization strategy, as well as our two pronged integrated music and audio app, as well as standalone audio app strategy. I think all this would play very well to provide us with ample growth opportunity in the next few years..

Great, we're ready to take the next question please.

Thank. Your next question comes from Vincent Yu from Needham and Company. Please go ahead..

Hello. Thank you management for taking my question. So the first question is also on long-form audio. Just follow up on that question. Can management share some light on how these users paying habits are compared to the music only users? And I hear other NS ask about our target penetration rates for the near term for long-form audio.

So do we have some number that we can share? And my second question is on the podcast. So does company have a plan to sign creators for exclusive content in the podcast space? Thank you..

Yes, in terms of target users for long-form audio, I think Cussion mentioned that we've reached about 10 million DAU. And you can see that our MAU reached about 90 million by the end of last year. And we expect our user base to double by 2020 and 2021. Right. So that's the near term target.

And by no means we're done, we actually think the total addressable market, as I just mentioned, is very, very large for audio market, similar size to the music market, in the high several 100 million in terms of scale, and that will play out over the next few years. And we also see there to be ample monetization opportunity.

The end is different depending on the types of audio content. For example, audio books, which we'll talk about in the past being the biggest content category within the audio consumption. That's obviously primarily driven a lot by subscription, right chapter by chapter.

And that plays very well in terms of synergies with our music subscription, because we could bundle our music subscription plan with the audio subscription plan. And, and on the other hand, there are other forms of audio content, which are much more suitable for audio advertising.

And so we're also seeing that play out and as our MAU and DAU grow we see ample opportunity in both of these two categories. For the podcast, content that you mentioned actually we are also closely in talks with different content providers, I think there's different tiers of content that we try to bring into our platform.

First of all, which is similar to what the strategy that Spotify is doing, they're also talking to some of the top tier artists or maybe podcasters. We are also in talks to some of them. Some of them may be informed in industries, and some of them is providing other content for more than -- area.

So, the top here is, we are in talks, and we are also working on the long tail as well, because our platform is really big. And I think that one of the competitive advantage that we have is, we have given us a platform like the QQ Music, Kugou and Kuwo and and all of the target audience will be a little bit different in terms of their positioning.

So they can tailor make different kind of supportive professional content or the user generated content according to the needs of their own audience. So I think that we are really open right now, and having a lot of talks and especially heavily investing in the content side for not just long-form audio, but also podcasts as well..

Right. So we're take our next question please.

Thank. Your next question comes from Vinny Wong from CICC. Please go ahead..

Sorry, this Binnie from HSBC. So, I have two questions here very quick one. I just want to follow up with Shirley here in terms of the investment, because I think in the previous two years, we talk about that, we are very interesting, a lot ambiguous acquisition and also a new form of business.

So, I just want to understand that how much of this initiative should we expect to see more meaningful revenue contribution into 2021? That’s one question. And just one really quick follow up is in terms of live streaming.

So, we see some of your short video players have also been seeing that like live streaming growth has also been softening from last year for certain reasons, right.

But then if you look at into 2021, how do we provision in life streaming? Because I think they also, if you look at like ARPPU also paying ratio, there is something like how can we maintain at a more competitive level in the live streaming business? And how can you see in 2021, this will change given that this is a one of our most meaningful earning strides? Thank you..

Sure, in terms of live streaming, I mean, associate entertainment broadly, revenue grew by 8% year-over-year, as a result of obviously, more difficult based effect comparison, comparing to the pre-COVID Q4 last year, but also impacted by the lingering weakness in the macro economic situation, which affected the paying users willingness to spend.

However, on the other hand, we are encouraged to see a continue recovery in our traditional Kugou and Kuwo life in inorganic sense. And in addition, we also broadening the content category to include ACG China ancient style, but also around music.

And that's the key point because, even though you may be benchmarking us against other peers, but it's important to stress that our live streaming is differentiated, it is a meal most music centric compared to other peers. And that continues to provide us with differentiation in terms of attracting performance as well as users.

In addition to that, we obviously have we're very pleased to see the continued scale up in QQ Music live streaming, which will continue to see an increasing contribution to social entertainment revenue into 21.

As well as we also encourage to see that we things DAU and MAU decline clearly bought bottom in Q4 and beginning to see a sequential growth in December, January compared to September October, for example. So, as a result, we as we look into the full year 2021.

Well, I mean, in terms of total revenue growth, we actually expect our total revenue growth to be growing at a faster pace at close to 20%, compared to 2020 14%. And that's a result of faster growth rate in both online music, as well as social entertainment..

And also for the social entertainment side besides the live streaming I would like to spend a little bit of time talking about the leasing platform. Actually it’s a very unique platform that he and we have, and especially make us stand out in the industry.

Last year, I think that we are doing actually is the evolution and trying to make it to be more up to the current needs of the users. So what we are doing is actually, I think that singing is still a very strong demand from a user.

So we are focusing on making the singing experience even better than before, we lower the content productions entry barrier. And we create a lot of tools and helping our users to make their content better, and lead them to share on the social platform.

So I think that what we're doing is not just doing this engagement, but we are doing user interaction, this is very important. And besides, we are also bringing in the short form recommendation feed on the – the leasing platform, which really allowing us to increase the people to consume more audio and video based content.

So I think this is some of the evolutions that we have made, and really make the overall the user base is really bottom out. And we are seeing a positive trend in earnest. One is one one.

So I think that for the user comp, speciality for the social entertainment side, besides all the saw the live streaming environment, and also the revenue, Outlook, I think that -- is also another platform that we will be strongly focusing on. And this is also the unique, very special platform that we have when compared to our competitors..

Okay, so in the interest of time, we’ll take our last question operator..

Thank you. Your next question comes from Thomas Chong from Jefferies. Please go ahead..

Good morning. Thanks management for taking my questions, and congratulations on a solid set of results. Just wanted to talk about the 2021 revenue growth, also asked about how we should think about the margin side, or how we should think about the trend in terms of the expenses. Given that we also have our lumber hall areas for investment.

On that one, can you also comment about our M&A strategies, as well as the regulatory environments in China, as we further expand our scale. Thank you..

Sure, well, first touch upon the regulation and M&A and then let Shirley take the marketing question. In terms of regulation, we continue to maintain a very constructive relationship, and a close working dialogue and relationship with the relevant authorities.

Even when the relevant authorities issued any new rules, we’re permitted to work closely with them to comply with the applicable laws and regulations. Because our overall goal is to work towards promoting healthy growth and development of the China music industry.

And, TME has been in operation for 16 years, over 16 years, and we face multiple revenue regulations throughout our corporate life. And we are experienced in dealing with new regulation and we fully committed to comply, with relevant authorities.

And then in terms of M&A, as you can see, we recently announced the acquisition of Lazy Audio, which is an integral part of our long-form audio strategy, which is very highly strategic and long term, which we're very committed to.

You see us continuously set up increasing amount of joint venture to venture into content development with our partner legal partners. We set up, we announced that, we will set up a joint venture with universal and then just today we're announcing that we're setting up a joint venture with Warner.

And that's following a very successful JV that we've already had with Sony, and all these will lead us to continuously improving our content development and promotional capabilities, which is also very synergistic to our music platform and music distribution business.

So we'll continue to explore M&A opportunities around our core music and audio platforms. And we'll deploy capital, in a in a, in a disciplined manner..

Yes, in terms of the M&A I really think that is a really exciting journey for us because our feeling is not doing financial investment but instead, we really want to have a very strong business co-operations with our partners. As Tony mentioned of the joint venture of music labels, we really worked out.

I remember that around three years ago, where we talked about the first major label JV with Sony Music, we just bring it out. And then I'm so glad that we have the support of the three majors, and it's only really joint has with us.

And nowadays, if you guys are recognizing that we are just rolling out a number of really good songs in this two days, especially we have a very close partnership with the Tencent games in rolling out the theme song for the Top Chief, the first anniversary.

And we actually roll out a project together with some really renowned worldwide artists like the DJ we have, and also with Jody Insight, which is also another very popular female artists in Asia. So I think this is some of the – we started to bear the fruit.

And so I think that this is something that really made us excited, because we are not just doing some financial investment. But instead, we are creating wonderful piece of content that was widely accepted and being praised by the industry and also especially by our users.

As we mentioned, during the last call, so the announcement, we are also going to have analysts JV with a Universal Music set up is now in really good progress. The management is on board already. And we have a different positioning for this music label. And I'm looking forward to have creating more quick songs for the industry in the future.

And today, we announced that we announced another joint venture, which is with Warner music, I think we will pull up on that and really made us to, to show that TME is really opened. And we would like to team up with of the industry player in order to make this going to be a winning situation and create better content for our users.

So this is very exciting for us. So maybe Shirley maybe you can talk about the margin side.

Okay, about the gross margin. In Q4, 2020, our gross margin is 32.4% that is relatively stable compared to that of Q3 and meet our expectations. In Q4, the rapid growth of subscriber revenue and advertising revenue have positively impacted our gross margins.

And in Q4, we will ride to the next gen gala or, we will provide more for promotion, actives, and those for the performers. So the revenue sharing of the ratio, the revenue sharing of social entertainment is increased. And it includes the Q4 gross is stable.

Looking forward to 2021, we expect the first growth of subscription revenue and advertising revenue will be a continual high will positively impact our gross margin. And second, we will keep an eye on the industry, we will control our revenue sharing fees or for social entertainment.

So exceptions these two points, we will invest more on our new products and new futures such as long form audio and passive ecosystem. In conclusion, in 2020, we will we will invest more on new products and pave way for our long term growth..

And so just to close out, I think we're very pleased with this quarter's results, with online music subscription revenue continuing its rapid growth. And we believe China's online music industry continue to be in a long term secular growth trend that will provide us ample opportunities in the future.

And outlook in 2021 remains very positive, we expect total revenue growth to accelerate compared to 2020, close to 20% driven by faster growth rates in both online music and social entertainment services..

Okay, so thank you, everyone, for joining us today. And this concludes today's call and we look forward to speaking to you again. Thank you and goodbye..

Thank you so much..

Thank you..