[This post was published with password protection on Sept 22 but is now reposted without protection] Spotify is a very well known company in Western Europe and the US. Chances are that you use either Spotify’s services or any other service from Apple, Google, Amazon, etc! Spotify’s investing story rides on the huge secular growth trend of music streaming, accelerated through covid-19, resulting in its one year stock price performance of +60%. Spotify’s profitability might be an issue, though. But there might be a more profitable alternative for investors …
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TME got my initial interest when I read a research report, claiming that
- TME monetizes many services around music besides straight forward music streaming subscriptions, is thus
- more profitable than Spotify, and
- has a very long growth run way (market penetration).
In this article, I am going to
- Provide an initial understanding of TME and take a closer look at segment one and two
- Try to verify the three statements above
- To get a glimpse into TME’s potential future I analyse its strategy, the Chinese economy and potential obstacles
- Than I value TME for four potential scenarios
- I write a pre-mortem to get a better feel for risks
- I put a fair value on TME and define a buy price
Tencent Music Entertainment Group or TME describes itself as the leading online music entertainment platform in China, operating the country’s highly popular and innovative music apps: QQ Music, Kugou Music, Kuwo Music and WeSing. TME wants to use technology to enable people to create, enjoy, share and interact with music. Tencent Music’s platform comprises online music, online karaoke and music-centric live streaming services, enabling music fans to discover, listen, sing, watch, perform and socialize around music. (ir.tencentmusic.com) This text describes TME’s business activitites very well and illustrates the differences when compared to Spotify (point 1).
TME does not release any investor presentations (as Tencent does). Thus, initially gaining a better understanding of TME’s business was a bit of a struggle. I got some initial insights from the motley fool (podcast, article) and EqualOcean. Further worthwile reads about TME discussed the VIE structure*, TME’s business model (vs Spotify) in graphics, its market position in China.
*) The VIE topic should be nothing new to you. If it is, I highly recommend you to educate yourself about it, since it affects many ‘sexy Chinese tech investments’ and represents a very special tail risk. You can read about VIEs here, here and here.
The key operating metrics are defined in the introduction section of the company’s 20-F filings. Most important is the definition for paying users (which can be interpreted as subscribers):
There are two main segments for which TME reports its financials and operational metrics. These are called online music services and social entertainment services. TME’s revenues are heavily skewed to the latter segment (driven by much higher ARPPU), which constitutes the stark difference compared to Spotify’s business model (illustrated here).
Online music services generate revenue mainly through music subscriptions, and also through advertising, digital music sales (downloads of singles and albums), sublicensing music to third parties (more on this below) and through music solutions (i.e. services for car manufactureres). Music subscriptions were responsible for half of the segment revenues, and seems to keep growing, driven by paying users (growing) and an monthly ARPPU (increasing). Reported data is scarce for the other activities.
- TME struck exclusive deals with UMG and other music rights holders and sublicensed these music catalogues to rival streaming services.
- In August, NetEase struck a direct deal with UMG* (the biggest music rights holder), according to Bloomberg. Thus, sublicensing revenue will decrease.
*) FYI: I invested indirectly in UMG via Bolloré shares (read here).
Social entertainment services generate revenue mainly through live streaming of music centric events and performances by users and performers as well as online karaoke. Users can buy virtual gifts for other users/performers or buy VIP services. This ecosystem uses and leverages synergies with Tencent’s social networks (as described in more details on p44 here). Let’s take a closer look on the two segments …
Seg #1 – Online Music
Online music services segment revenue is split in sub-segment revenues from (i) music subscriptions and (ii) all other sub-segement activities, as described avobe. TME only reports data and metrics for the former sub-segment. Music subscriptions as the most important sub-segment, accounted for 59% in Q1 2020* of segment revenues up from 52% in Q1 and 44% Q4 (yoy). For full years it was 50% (FY 2019), 45% (‘2018), 58% (’17).
*) This high share was probably driven by a subdued development for all other sub-segments.
Music subscription revenue is driven by (a) paying users and (b) monthly ARPPU. The former can further be determined by (a.i) total users or mobile MAUs times (a.ii) paying ratio.
Total user base or mobile MAUs are rather constant at ~650m since Q2 2018. Over the last four quarters yoy growth was almost zero (between 0% and +1.2% yoy). Total Chinese internet users seem to be about 900m, according to statista, intidacting that long-term growth for mobile MAU is rather limited (domestically). So this driver can probably be viewed as saturated (base case) or slightly increasing as younger more tech savvy people will use services that elder people do not use (positive).
Paying users* for music subscriptions grew very stongly and persistently since 2017. They reached 42.7m paying users in Q1 ’20 growing +50% yoy, probably accelerated through covid-19 and related social distancing measures. Since these are no more than 6.5% of mobile MAU (up from 4.3% in Q1 ’19), there is still ample growth potential ahead by converting users to subscribers. Increasing the paying ratio sevenfold would put TME on equal footing with Spotify which sports a paying ratio of almost 50% as shown here.
- The industry sees a development towards paying subscriptions. In China 300m people pay for online video subscriptions (Q2 earnings call 45:02).
Monthly music subscription ARPPU represents the second significant revenue driver. With its potentially very long runway, it could deliver enormus value for TME. Opposed to the social entertainment ARPPU, music subscription ARPPU (below in blue) does not show (such) a clear growth trend. But is seems that a nice growth trend could be in the making now with ARPPU reaching RMB 9.4 ($1.35) in Q1 ’20, up from 8.3 in Q1 ’19. Music ARPPU in Q2 2020 came in lower at RMB 9.3, probably driven by pupils going back to school (see below). Chinese users have to be ‘educated‘ to be willing to pay for online music. But ultimately, I do not see any reasons, why the longer-term development of user preferences should be meaninfully different to western users in a decade. I believe they are willing to pay (more) for apps/services delivering a superior and smooth user experience for several hours on a daily basis. Additionally, Chinese macro factors should be very favorable longer-term setting the stage for a natural ARPPU uplift (see below).
Regarding Q2 2020: MAU in Q2 increased with people getting back to work (listening to music while commuting) but were more than offset by pupils (mos tech savvy?) going back to school and having less time for listening to music.
Seg #2 – Social Entertainment
Social entertainment represents the core of TME. Revenue is driven by the same reported metrics as is the online music segment: mobile MAU, paying users and monthly ARPPU (diverging definitions, see above). However, social entertainment generates about two thirds of total revenue and is at the core of TME’s strategy to monetize music and services around it. Mark Mulligan provides important insights:
While streaming is giving an old industry new legs in the west, China’s music industry is effectively being built from scratch. As a consequence, it doesn’t have decades of irrelevant baggage. This is seen in China’s music apps. Western streaming is all about monetising consumption; China’s is about monetising fandom. If the Western music industry was born today, it too would be putting social at its core. Many argue that apps like WeSing can only really work in China – but I remember people saying the same about mobile picture messaging when i-mode was getting going in Japan nearly 20 years ago. Just look at TikTok’s global success if you need any further convincing.musicindustryblog
Total user base or mobile MAUs for TME’s social entertainment services were rather constant at ~225m since Q1 2018. They jumped 13.8% yoy to 256m in Q1 2020, probably driven by covid-19 and related government measures as well as changes in consumer behaviour, namely staying at home. Social distancing resulted in higher need for social entertainment. Q2 saw lower MAUs of 236m (-2.5% yoy). This segment could very well profit from long-term MAU growth based on attractive service offers (see strategy). Comparing current numbers vs the first segment’s MAUs and Chinese total internet users a longer-term growth trajectory might be ahead.
Paying users for social entertainment services grew strongly to 12.8m in Q1 2020, up from 12.4 in Q4 and 10.8m in Q1 ’19 (+18.5% yoy), resulting in a pay rate of 5% after 5.6% in Q4 and 4.8% in Q1. Q2 had 12.5m paying users (+11.6% yoy) with a pay rate of 5.3%. Increasing this metric is key to TME’s monetization model and there are many possible ways in which TME could succeed.
Monthly ARPPU for social entertainment is much higher compared to music subscriptions and stood at RMB 111 in Q1 2020 down from 138 in Q4 (-20%) and 127 in Q1 ’19 (-13%). This is a significant deviation from the former trend (see chart above), and is most possibly due to corona. Using Tencent’s social networks and its own ecosystem should enable TME to drive ARPPU higher. ARPPU in Q2 was back to RMB 125.6 and I am expecting that it will get back to the indicated trend above. This trend would imply an ARPPU of RMB ~140 for Q3.
Reviewing three claims
I started this post with three statements (back to top) about TME that got my initial attention and I intend to verify them – just in case any readers are still waiting for that – during the course of this lengthy blog post. Btw. you are halfway through 😉
I can clearly verify the first two statements: TME monetizes many services around music. This business model enables TME to be much more profitable than Spotify today. TME produced an Ebitda margin of 20.5% (Spotify: -1.5%) and a net margin of 15.2% (Spotify: -4.9%) in FY 2019.
TME has a long runway ahead was the third statement, which I am inclined to view as (likely) true, as well. But, this is the critical one assumption that will probably determine the valuation ball park of TME.
There are good arguments to believe in a long growth runway for TME. Its business model and strategy is primed for superior monetization of a bunch of services build around online music with social interaction at its core. The Chinese economic growth story should support TME’s business and act as a general tailwind, enabling higher ARPPUs through higher available income per household. Let’s take a closer look at TME’s strategy and the local economy to derive possible developments for the critical value drivers.
Educating Chinese consumers to pay for online music is a marathon task. And TME seems to be successful. More music content is shifted behind a music subscription paywall, but TME is aware of a delicate balance between keeping a superior user experience and to increase the pay ratio (paying subscribers over MAUs) over time, as you can listen here.
Expanding long-form audio content and services is a key pillar of TME’S strategy, enabling it to earn revenues without big royalty payments to UMG, WMG and Sony. Spotify pursued a similar strategy diversifying away from music into podcasts. This could lead to higher gross margins for TME. Q2 developments seem very positive:
- licenced titles +300% yoy
- long-form audio MAU penetration at 9.4%, up from 4.6% in Q2 ’19
- long-form audio subscription packages launched, exploring monetization opportunities
TME Live is an innovative live-streaming model that integrates offline concerts with online live-streaming experience bringing performances to a much bigger audience. The global pandemic set the stage for a great start through
social physical distancing measures. Q2 developments for TME live indicate a potentially huge monetization option in the long-term since live performances offer a great experience for fans. But a usual location can only handle a very limited number of fans (sometimes adding to the great experience). TME live closes this gap and had a good start in Q2:
- organized nine influential live performances, which
- earned a strong brand name
- VIP packages, virtual gifting as usual monetization options
Developing and introducing new products to drive engagement further and enabling even more monetization potential. Q2 developments seem good:
- Putong Community launched in QQ Music
- community connecting idols and fans, as well as user groups with similar interests.
- many celebrities to joined
- DAU penetration rate increasing steadily since launch
In general, I believe TME’s strategy is right and they are succesful (so far) in driving user engagement and their monetization efforts in the long run. Getting users first and introducing monetization models later seems the right way to go!
Chinese Era Ahead
Let’s imagine China in 2030 and beyond. Currently, the overwhelming majority of people and investors (including me) is 100% sure, that the Chinese economy will overtake the US in a few years time. If everybode is sure about one thing that will happen with certainty, chances are that it will not turn out as expected, but still: Let’s ask some questions.
- Will there be more or less people using the internet?
- Will the average person and household earn a higher or lower monthly income?
- Will big international music rights holders (UMG, WMG, Sony) have a weaker or stronger bargaining position sitting at a table with Asian music distributors (TME, NetEaase, …) when compared to western distributors (Spotify, Apple, Google, Amazon, …)?
I believe there is a good chance that the answers will turn out to be more, higher and weaker, potentially resulting in more users paying higher prices for TME’s higher margin music suibscriptions (rel. to western competitors). Besides the economy being a strong tailwind, other factors are important.
I highly recommend you to read Ray Dalio’s long reads about the changing world order, if you do not follow it yet (also to be found at LinkedIn).
TME’s ecosystem provides the opportunity to monetize various services around music in the most profitable way. Classic music subscriptions, gifting to artists and other users (more common in Asia than in Europe/US), online streaming of live music events, social collaboration, investing in local artists, long-form audio content through partnership with China Literature, and many more …
Synergies from Tencent’s ecosystem are huge (access to massive user base, superior user experience, increased user engagement) and could lead to yet a better competitive position. At least, it could make it very hard for competitors to grab meaningful market share. TikTok shows that the competition for users’ eyes-on-the-screen time is fierce, though. Podcasts and music subscription compete on off-screen time where competition might be less fierce, compared to on-screen time.
Politics could be a tailwind for TME. In theory, Chinese politicians should prefer to deal with a few big local tech companies compared to dealing with many smaller companies. Since TME is the incumbent, this could result in an advantage vs. (future) smaller upstarts.
Chinese economic growth story going south is an obvious potential long-term risk factor, though I believe a minor one. Once users get accustomed to an app/service offering a great user experience, they don’t want to get rid of it again and might choose to save on other expenses deemed less critical.
R&D expenses and acquisitions of other firms should represent decreasing relative costs in the long-run (but I guess this is always the story for technology -driven investments). What if, these costs will always stay high, since the fierce competition forces TME to always reinvent its ecosystem services to stay on top? Well, we should not rule out such a (less positive) low-margin scenario. In an adverse scenario, TME could even loose ground to more nimbler competitors with more appealing apps for tech-savvy consumer groups.
Dis-synergies from Tencent could be a real possibility. Who guarantees that Tencent is not using its control for the disadvantage of minority shareholders (giving Spotify and Tencent more than their fair share of upside) via giving very favorable contracts to Spotify/Tencent, i.e. for technology sharing, promotions and other services. Tencent could threaten to complicate integration in the WeChat/Weixin apps.
Educating Chinese consumers to pay for online music still has a long way to go. It presents a challenge (and opportunity). Only further education paves the way for higher monthly subscription fees in China (and higher pay ratios). But results seem promising. I guess, chances are high (like >70%) that Chinese consumers will be much more willing to pay for a high quality online music streaming experience than today.
Chinese politics is always a potential risk for businesses (remember online games issues for Tencent some quarters ago) and is impossible to forecast. But, I believe chances are that politics will more likely result in an overall advantage for TME vs a disadvantage. American politics bring some more uncertainty. But so far, it seems that only the app is the target of measures, not the owners (entities).
High competition for users‘ on- and off screen time could negatively affect TME’s key metrics. Currently TikTok is very popular. In general Chinese are obsessed with streaming.
a. What’s priced in?
A first valuation scenario I built, believing the few key assumptions used are certainly within plausible and realistically reachable means and could even be on the conservative side, resulted in a slight overvaluation. Then I adjusted some operating margins upwards, giving TME the benefit of the doubt to see what a possible scenario is currently ‘priced in’. This was before Donald’s executive order and before TME released its Q2 results.
The Donald became even more serious regarding a Sino-American ‘cold tech war’ basically ordering TikTok to sell its US business to an American company via executive action. This development could have adverse effects on Tencent’s businesses’ operations in the US. Many TikTok-loving teens did not like Trump’s action and retaliated in a funny way 😀 (watch this!). But Tencent’s and TME’s customers are in China. Most investments in the US should not be critical. UMG could be the strategically most important investment (you can view tencent’s assets here).
Second quarter results were released on Aug 10th. Overall, the Q2 results confirmed positive trends for important key metrics.
|Metrics (ARRPU in RMB)||Q2 ’20||Q2 ’19||YoY|
|Mobile MAU – online music||651 m||652 m||(0.2%)|
|Mobile MAU – social entert.||236 m||242 m||(2.5%)|
|Paying users – online music||47.1 m||31.0 m||51.9%|
|Paying users – social entert.||12.5 m||11.2 m||11.6%|
|Monthly ARPPU – online music||9.3||8.6||8.1%|
|Monthly ARPPU – social entert.||125.6||129.0||(2.6%)|
My initial valuation scenario looks like this:
Total revenue would quintuple until 2030, reaching RMB 127 bn, up from RMB 25 bn ($ 3.7 bn) in 2019, representing a CAGR of 15.8% (down from 52% between 2017 to 2019). This seems quite high, but plausible to me when considering that yoy total revenue growth was 17.5% in Q2, 10.0% in Q1 and 35.1% in Q4.
Online music revenue would quintuple as well, driven by music subscription revenue growing stronger than other music revenues. Users would grow at about 1% p.a., but the paying ratio would increase to 22% in 2030, up from 5% in 2019 accompanied by low ARPPU growth of about 4% p.a.
Social entertainment quintuples as well, mostly driven by more paying users.
Profitability would improve slightly from current levels but not dramatically. Based on some gross margin expansion (market power) and operational leverage. Ebit margin and net margin might come in at 25% and 19%, respectively.
A fair value per ADR of $16.81 results from this scenario, using a discount rate of 10%, terminal growth of 5% and USD/CNY=6.95. This valuation is only PnL based and does not take into account any (negative) cashflow effects (capex, wc, acquisitions).
I feel these assumptions are not too aggressive and TME could do a lot better indeed. The interesting question is of course, is it likely to do much better (and what might be the potential downside)?
b. Catching up to Spotify?
I think it is likely that TME will perform much better than the outlined scenario above. TME has a massive user base and is introducing new features. TME live could turn out as a very powerful new driver for paying users in the long run. Regarding online music, more content will be shifted behind the pay wall (after users got used to the comfotable streaming service). In the long run TME could achieve a higher pay rate for online music services in the range of 40%, double the rate from the above initial scenario and in line with Spotify’s numbers. If this development is accompanied by higher ARPPU, enabled through higher wages, succesful user education and a superior product, streaming revenue would explode. Furthermore, the TME ecosystem could turn out as a powerful tool to drive monetization, cross selling and minimizing churn.
Spotify sports a pay rate of 46%, resulting from reported numbers as of June 2020:
Spotify is the world’s most popular audio streaming subscription service with 299m users, including 138m subscribers, across 92 markets.spotify.com
If a few things go well for TME’s online music streaming, TME could generate music subscription revenue of RMB 71,761m in 2030 up 20x from 3,563 in 2019, vs 26,062 up 7x above. This would result in a fair value per ADR of $ 20.97 up +25% vs 16.80. Applied key assumption (vs above scenario) for music streaming are:
- Paying ratio is 40% in 2030 (instead of 22%)
- ARRPU is RMB 20 in 2030 (instead of 13) up 2.3x from RMB 8.8 ($ 1.30) in 2019
- This input could deliver much more upside potential, I believe.
- Margins unchanged (probably too conservative within this scenario, due to operational leverage)
c. The go-to ecosystem
Let’s imagine a not so distant future (in time as well as in product features) where in 2023 tens of millions of Chinese people will watch the most famous musicians live performances online via TME live. On the same time, they can discuss and interact with fans and freinds. Monetization could happen through either fees for watching or fans buying virtual gifts for their stars, or both, with some VIP services on offer.
Because Tencent Music simply offers the best user experience it is the go-to ecosystem for experiencing any audio content (live or streamed), often enriched with visuals if preferred. Furthermore, TME users interact with other users and performers (amateurs and professionals). They sing toghether, they use virtual gifting, they share their thoughts, buy merchandise, etc …
In this scenario, TME dominates its industry and competes very succesfully for users’ daily ‘online time’. TME offers the ‘go-to ecosystem’, resulting in the above scenario (b) …
- with a higher music subscription ARPPU of RMB 25 in 2030, growing 10% p.a. from 8.8 in 2019
- much more users pay for social entertainment with a pay rate in 2030 of 25% instead of 10% (up from 5% in 2019), on average paying
- RMB 210 (same as in b.), up 1.6 times from 130 in 2019
- I can imagine even more upside here
- earning higher net margins of 22.5% in 2030 instead of 18.8%
This going-well scenario c. of TME operating an industry dominating ecosystem results in a fair value estimate of $ 37.99 for the ADRs. More upside could materialize with higher margins and even higher ARPPUs.
d. Depressed margins
A more negative scenario (d) might be defined through fierce competition and more nimbler players entering the market, encouraged through political support for more competition. Neither paying users nor ARPPU does grow substantially and high investments in the most up to date technology, app design and artists are constantly needed to merely stay in the game. This scenario (d) implies a fair value of $ 8.01 for the ADRs, based on the following assumptions
- music in 2030: 700m users, paying ratio of 8%, monthly ARPPU of RMB 11.4
- social: 287m users, thereof 20m paying users (7%), ARPPU of RMB 189
- earning a net margin of 13.5%
My TME pre-mortem
I read about a method, called ‘pre mortem’ (here), which helps you to better think about potential investment risks. Basically, I imagine in a fast-forward mode that I lost half my investment in a certain position (here TME of course) and then I simply ask ‘What happend?‘.
In the year 2025 I look at my TME investment made in 2020 and realize I have lost half my investment — What happend?
Users did flock to the next TikTok en masse. Teens are especially eager to spend all their time (outside of school) creating, watching and sharing the next viral short-vidoe clip. They barely open any other app. TME’s services are still used by millions of Chinese, but they barely pay for the services. Online music is not perceived as a service worth paying for, thus online music ARPPU remains low. The social entertainment growth story never materialized. Music fans wanted to watch live performances during social distancing measures five years ago, but during ‘normal times they prefer actually attending live performances of their admired idols. Such tickets, are sold by third party platforms.
TME did invest a lot in new services. Many of these investments will never pay off and operational cost levels are high. Since music streaming in China never reached the envisioned levels of western markets, TME now has a worse bargaining position with UMG, Warner Music and Sony, depressing gross margins. Cash conversion is below one.
A fair value for TME
From the above scenarios, I got fair value estimates for the ADR of $ 16.81, $ 20.97, $ 37.99 and $ 8.01. This is a wide range of outcomes, depending very much on several long-term trends. I believe, returns are rather skewed to the upside from the first base scenario and that the downside is rather limited, but nonetheless very real (pre mortem).
A fair value of $ 18.41 equals the weighted average of the four scenario based fair values, applying the following probabilites, which I think are not too aggressive: 40%, 30%, 10%, 20%. The simple average is $ 20.94 (+14% higher). A margin of safety of 30%* results in a buy price of $ 12.89 (€ 10.95). The ADR currently trades at $ 15 (€ 12.70) about 16% above my buy price, and thus I will currently not buy TME.
*) My quality assessment, which is still an early work in progress (and you read about here) gives me an overall score of 82%. TME currently scores relatively low on profitability and low on management quality. The former is likely depressed due to high invesmtents, currently. I did not research the latter in more detail. But, because it is a Chinese company with higher political risk (i.e. interference and the VIE structure), TME would hardly score higher. The current model asks for a margin of safety of 20%. I go with 30%.
Some negative effects are not explicitly accounted for in the above valuation. It neglects
- other claims on equity (i.e. employee options) and
- the under-representation of voting power of ADR holders (see appendix below)
Summary and Decision
TME is a much better investment when compared to Spotify (the appendix provides a quick comparison). It is already profitable, has a massive user base as of today and a huge run way ahead in terms of penetration (pay rate). TME dominates the Chinese market, and the Chinese economy should experience a long run way on its own, providing higher incomes.
Tencent Music could be a ten bagger in 2030 if execution, reaction to consumer preferences and navigating competition as well as politics is handled well.
I would like to buy TME at lower prices and I will watch TME’s share price. I incorporated it with the above values in my watch list. Because of associated risks factors (China, Tech, VIE), I will not build a material position in TME.
I will watch for TME’s key operational and financial metrics during the next quarters.
I hope you enjoyed my Tencent Music analysis. Do you (dis)agree with my key assumptions or estimates? – Let me know below or just give me a like 🙂
TME adopted a dual-class ordinary share structure (p108): 3,355m outstanding ordinary shares, consisting of 1,341m class A ordinary shares and 2,014m class B ordinary shares as of March 25, 2020. Holders of our class B ordinary shares beneficially own 95.7% of the aggregate voting power (p39).
American depositary shares or ADS represents two class A ordinary shares. According to the above, ADS do not represent meaningful aggregate voting power. ADS are clearly worth less than the equivalent economic ownership in B shares or the ‘average share‘. The Sino-American trade/technology war could result in a delisting of the ADS with whatever consequences.
Major shareholders are Tencent (16.7% of A shares, 81.5% of B shares, resulting in aggregate voting power of 78.7%), PAG Capital (4.5%, 10.6%, 10.4%) and Spotify (21.1%, -, -). Many directors and executives hold shares as well (p108).
Other claims on equity are neglected in the above analysis. Under three programs (see ‘6.B. Compensation’ in 20-F, p. 100ff), a total of 71.8m shares or options were given to various employees, representing 2.1% of outstanding shares (3,355m).
TME vs Spotify
|Metric, (m $)||TME||Spotify|
|EV, in Sept 2020||23,489||36,698|
|P/E (last/fwd)||86x / 38x||na / na|
|Ebitda margin, adj||20.5%||0.6%|
|Subscribers of total users||47 of 651 (7.2%) in Q2||138 of 299 (46%) in Q2|