Kadokawa Corporation Reports Lower Net Sales, But Higher Profit for Fiscal Year 2019 Ending March 2020

After going through an absorption-type company split with DWANGO Co., Ltd., Gzbrain Inc., and Daihyakka NEWS, Inc. in 2019, Kadokawa Corporation (previously known as Kadokawa Dwango Corporation before the split) implemented a structural reform in its Web Service Business. As a result, it saw profit soared the fiscal year ended March 31, 2020 despite the drop in net sales.

Page 9 of the Business Report.

Kadokawa Corp. has reported a stronger book sales for the year due to the publication of new titles (such as Delicious Dungeon Vol. 8) and its digital sales have continued to strengthen, in part thanks to its flexible marketing measures where it is able to respond fast to market trends. It pointed out an example with the release of a book titled, “The Chemical History of a Candle” by Michael Faraday which was cited by Mr. Akira Yoshino who was awarded the Nobel Prize in Chemistry in his award-winning interview as, “starting point of his interest in chemistry”. The book was released in Japan two days after the interview. The speedy response is thanks to the decrease in production lead time allowing them to produce the book faster than the usual.

The Company further elaborated on the publication side of business and admitted that the paper publishing market is indeed shrinking, but saw demand for e-book increasing. The spread of COVID-19 further strengthened the demand for digital products as people are not venturing out as much to prevent the spread of the virus. The creation of high-speed networks and smartphone currently allows the public to access more products digitally rather than having to procure it physically at stores nationwide. In order to take advantage with the growing demand of e-books, Kadokawa Corp. is committed to improve its manufacturing processes and logistics to help expedite its ability to respond to market trends. This includes, working closely with partners overseas to promote more simultaneous publications in both digital and paper-based books in multiple languages across the globe to meet demands.

However, the Publication Business had to acknowledge the costs incurred as a result of the group reorganization. The company spent an estimated 600 million yen (~$5.6 million) to cover expenses brought upon the restructuring in this segment which it said was previously included in the overall company expenses. Due to this, it recorded a higher net sales of 117,303 million yen (~$1.09 billion), an increase of 1.2% year-on-year while the profit was downed 13.9% year-on-year to 6,248 million yen (~$58.3 million).

List of Titles:
1. Delicious in Dungeon, Vol. 8 (ENG)
2. Sword Art Online, Vol. 22 (JPN)
3. The Irregular at Magic High School, Vol. 28 (JPN)
4. Weathering With You (ENG)
5. AX (JPN)
6. Hajimeteno Yase Kintore (JPN)
7. Sekaiichi Oishii Tenuki Gohan Saisoku! Yarukino Iranai 100 Reshipi (JPN)

Kodokawa Corporation publishes as many as 5,000 new titles annually (page 3) including the above titles.

It noted that its Video Business remains strong as revenue brought from the overseas market such as North America and China through licensing collaborations has helped to cut down their losses as a result of the COVID-19 pandemic. Revenues from the movie “Fukushima 50” it mentioned in its report came in lower than expected as movie theaters around Japan were closed to curb the spread of COVID-19. Nevertheless, its Video Game business is doing well. “SEKIRO: SHADOWS DIE TWICE” has been the company’s bread and butter for this segment as it continues to perform well in Japan and abroad, but Kadokawa highlighted that there was an increase in expenses in this segment.

1. Overlord Season 3 (ENG)
2. BOFURI: I Don’t Want to Get Hurt, so I’ll Max Out My Defense (Stream)
3. Cautious Hero: The Hero Is Overpowered but Overly Cautious (Stream)

Anime such as the above are some of the biggest contributor to Kadokawa Corp.’s Video Business segment for the fiscal year ending March 31, 2020.

SEKIRO: SHADOWS DIE TWICE was developed by FromSoftware, Inc. a wholly-owned subsidiary of Kadokawa Corp. (Business Report, page 10).

The closure of cinemas and extra expenses incurred in the Video Game Business segment (perhaps due to the production of Elden Ring) have caused profit in this segment to fall by 13.2% year-on-year to 3,401 million yen (~$31.6 million), however net sales were up 0.04% year-on-year to 48,314 million yen (~$450 million).

After recording a loss of 2,576 million yen (~$24 million) in the previous fiscal year in its Web Service Business, the Company witnessed a massive turn around for the fiscal year ended March 31, 2020. Profit for this segment rose to 2,788 million yen (~$25.98 million), though net sales declined 4.3% year-on-year to 24,739 million yen (~$230 million). The recovery, according to Kadokawa Corp. is thanks to the business structural reforms which allowed the Company to decrease its expenses mainly in outsourcing and communication expenses.

The condition of its Web Service Business in particular, its “Niconico Video” platform has seen the number of monthly dues-paying members falling from 1.8 million at the end of the previous fiscal year to 1.63 million members. However, it saw the number of dues-paying members for “Niconico Channel” jumped to 1.17 million where the figure was recorded to be lower in the previous fiscal year (0.95 million members). The platform allows members to distribute videos, perform live broadcasts and do blogging. The revenue for the segment was also boosted thanks to a couple of events held by the group. For instance, the “Niconico Cho Kaigi 2019” reached a new high with 168,248 participants, at the same time, “Animelo Summer Live 2019 – STORY -” attracted 84,000 visitors in three days, where the number grew more than when it was held the previous fiscal year. In April 2020, the Group had to resort hosting the “Niconico Cho Kaigi” event online due to COVID-19. But, saw the number of website visitors grew more than twice than the previous fiscal year to over 16.38 million people, though it cautioned that the Company is uncertain whether if they are able to hold real-world events for some time. Still, Kadokawa looks to propose new ways to organize events that can be enjoyed by the masses.

Animelo Summer Live, abbreviated as Anisama, is the biggest annual anime songs music festival in Japan hosted by Dwango and Nippon Cultural Broadcasting. Animelo Summer Live has been held every summer since 2005. [Wikipedia]

Niconico Chokaigi, held by Japan’s largest social video website “Niconico”, is an annual festival which concept is to recreate Niconico’s virtual world in real life. [NICONICO CHOKAIGI]

Things did not look so good for its Other business segment. Net sales were down by 12% year-on-year as it took in only 19,497 million yen (~$181 million) and the Group saw another loss for this segment after reporting a 2,613 million yen (~$24.34 million) of operating loss in the previous fiscal year. But, the losses were minimized by a small amount as it recorded an operating loss of 2,583 million yen (~$24.06 million) for the fiscal year ended March 31, 2020.

In this segment, the revenues were lower as a result of sales of idol CDs which were lackluster, though the Company saw its education business performing well. As such, the Group aims to further expand its education business by making the interactive education programs better as education in Japan is changing immensely due to low birth rates, internet accessibility and the spread of COVID-19. The Group seeks to bridge the gap between both the online and real world by providing a variety of education that fits the times.

What's New in Kadokawa Corp.?

Kadokawa Corp. in its report also mentioned a number of new ventures including a production and distribution factory in Tokorozawa City, Saitama Prefecture which has already begun to produce digital printing products. The Group also established a satellite studio called “Haresuta” in Ikebukuro, Tokyo to distribute a wide range of content by utilizing virtual reality.

The Group will also be launching a new mobile service content to differentiate its services with a lineup of popular music programs revolving Chaku-Uta® and Chaku-Uta Full®, and content on the “Niconico” site. In January 2020, the Group opened the “EJ ANiME STORE” to cater demand for merchandise for the overseas market such as premium products that are hard to obtain. The service is available in 79 different countries which are mentioned on page 8 of the report.

Lastly, the Group is scheduled to open the Tokorozawa Sakura Town in fiscal year 2020, however news came in that the grand opening that was initially planned for July is now postponed till after November. The development of the town is an initiative between Kadokawa Corp. and Tokorozawa city where the development includes a library museum, an atypical shrine and anime hotel to name a few (please see below).

The Tokorozawa Sakura Town’s museum that was originally scheduled to open on July 17th, but that has been postponed. (Source: IN SAITAMA; Twitter; Official Website)

The EJ ANiME STORE is a newly established online store by Kadokawa Corp on January 30 which targets customers from abroad.

As it stands, it was a stellar year for Kadokawa Corp. for the fiscal year ended March 31, 2020. In total it brought in net sales of 204,653 million yen (~$1.9 billion) for the fiscal year. Although lower than the previous year, the Group was able to see an increase in operating profit thanks to lower cost of sales (business report, page 25).  The profit stands at 8,041 million yen (~$75.02 million) after tax.

Kadokawa Corp. is the owner of a number of subsidiaries that are known to many including BOOK WALKER Co., Ltd., FromSoftware, Inc. and Spike Chunsoft Co., Ltd. The Company also owns KADOKAWA GAME LINKAGE INC. which operates the well-known Japanese game magazine Famitsu. Yen Press, LLC is another popular entity which distributes the Company publishing products in English, it is owned 51% by Kadokawa Corp.

For more information you may read the followings:
2. Company Research and Analysis Report by FISCO Ltd.
3. Official press release; POSTPONED: Tokorozawa Sakura Town, the Cool Japan Forest Project
4. Official Website of Tokorozawa Sakura Town; EJ ANiME STORE; Kadokawa Corporation Official Site

Featured image: Chiyodaisan (2014)

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