Excluding one-off items, Tencent Music Entertainment Group earned 0.57 yuan per American depositary share in the quarter, in line with analysts’ average estimate, according to IBES data from Refinitiv.

In a significant development, China’s hugely successful content streaming firm Tencent Music Entertainment Group delivered its first earnings report as a public company. Although its result largely met market expectations, however more significantly, it exposed surging license and content production costs.

With the news reaching the market, its shares were down by 6%.

Since its debut as a public company in December 2018, Tencent’s U.S.-listed shares have risen by 43%. Its results underscore the need for its Chinese users to adapt to the pay-to-listen model.

Tencent Music generates only a small amount of revenues from music subscription packages, and instead relies heavily on services popular in China such as online karaoke and live streaming.

“To fuel our growth for the years to come, we are firmly committed to continue investing in premium content offering, innovative products and proprietary technology,” said Kar Shun Pang, Tencent’s Chief Executive Cussion in an earnings call on Wednesday.

Tencent Music has reported that its quarterly revenues have jumped by 50.5% $805 million (5.4 billion yuan); this is against an analysts’ average estimate of 5.3 billion yuan.

This performance should be viewed in the context of surging fees for content, revenue sharing and rising cost of in-house production, which incidentally has jumped by 63%, which in turn has crimping its gross margin to 34%, down from 38.9% a year earlier.

“It’s a long-term revolution rather than a short-term switch,” said Chief Strategy Officer Cheuk Tung Yip in the earnings call.

He went on to add, there is a lot of growth potential given the paying ratio is still very low in comparison with international peers. Paying users of its online music service reached 27 million in the fourth quarter, an increase of 39.2% over the same quarter of 2017, said Tencent Music.

Tencent Music, which owns the copyright for more than 90% of copyrighted music in China, reported a net loss of 875 million yuan for the fourth quarter due to a one-off share-based accounting charge.

Excluding one-off items, it earned 0.57 yuan per American depositary share in the quarter, in line with analysts’ average estimate, according to IBES data from Refinitiv.

Full-year net profit reached 1.83 billion yuan.