After initial media reports speculating an acquisition between these two Japan-based giant entertainment companies, Sony has officially confirmed that it is acquiring 10% of shares from Japanese media and entertainment giant Kadokawa.
With this, Sony will become Kadokawa's biggest shareholder and may potentially impact the way Japanese media and entertainment products are made, produced, and distributed globally.
A Mammoth Undertaking For the Entertainment Scene
According to an official media statement from Sony, the company will acquire 12,054,100 new Kadokawa shares for approximately ¥50 billion (£253,000).
The acquired shares will also include the shares Sony acquired in February 2021, previously described as a "capital alliance" between the two companies.
Both Kadokawa and Sony have highlighted that this milestone is built on their history of collaboration.
Both parties aim to enhance their partnership through a capital and business alliance. Moreover, both have expressed a desire to elevate the value of each other's intellectual properties (IPs) globally while fostering broader and deeper cooperation.
A key highlight of this stake acquisition is that moving forward, both companies will collaborate on entertainment-related projects.
These include initiatives to adapt KADOKAWA's IP into live-action films and TV dramas globally, co-produce anime works, expand global distribution of Kadokawa's anime works through the Sony Group, further expand publishing of Kadokawa's games, and develop human resources to promote and broaden virtual production.
"By combining Kadokawa's extensive IP and IP creation ecosystem with the strengths of Sony, which has promoted the global expansion of a wide range of entertainment, including anime and games, we plan to work closely together to realise Kadokawa's 'Global Media Mix' strategy, aimed at maximising the value of its IP, and Sony's long-term vision, 'Creative Entertainment Vision'," Hiroki Totoki, President, COO and CFO at Sony Group Corporation stated.
Meanwhile, Takeshi Natsuno, Chief Executive Officer at Kadokawa, commented, "This alliance is expected not only further to strengthen our IP creation capabilities but also increase our IP media mix options with Sony's support for global expansion, allowing us to deliver our IP to more users around the world. We are confident that this will greatly contribute to maximising the value of our IP and increasing our corporate value in the mid-to-long term. We intend to do our utmost to ensure that our collaborative efforts with Sony produce great results in the global market."
A Closer Look of Both Company's Financials
Sony's acquisition of Kadokawa's shares comes at a time of significant financial results for the second quarter of this financial year.
It recently reported in November that its operating income increased by 73% year-on-year to ¥455.1 billion (£2.299 billion), driven by strong sales in the Game & Network Services (G&NS) and Imaging & Sensing Solutions (I&SS) segments.
Moreover, it also reported that its net income rose by 69% to ¥338.5 billion (£1.170 billion), compared to ¥200 billion (£1.010 billion) in the same quarter of the previous fiscal year. Meanwhile, its revenue experienced a 3% year-on-year increase, reaching ¥2.91 trillion (£14.718 billion).
Sony's Entertainment, Technology & Services (ET&S) segment's sales remained stable at ¥619.8 billion (£3.132 billion). Meanwhile, its operating income rose by 15% to ¥70.2 billion, mainly due to cost reductions and favourable exchange rates.
However, its Pictures segment experienced a profit decline to ¥18.5 billion (£93.4 million) from ¥29.4 billion (£148.56 million) in the same quarter of the previous year, impacted by production delays due to Hollywood strikes.
Meanwhile, Kadokawa has been dealing with the negative impacts of its recent cyberattack, which paralysed its services from June 8 to August 5 this year.
It saw a ¥9 billion (£45.486 million) reduction in sales attributed directly to the cyberattack. Moreover, its operating profit fell by ¥2.75 billion (£13.906 million), marking the most significant quarterly decline for the company.
It is worth noting, however, that their Publication/IP Creation segment experienced a recovery in shipment volumes, returning to normal levels from August onwards.
The growth in e-books and international sales helped mitigate the losses incurred from the cyberattack. Moreover, its Animation/Film and Gaming segments performed strongly, with high sales and operating profit, helping to cushion the overall financial impact.
What's Next for Sony and Kadokawa?
Sony's acquisition of a 10% stake in Kadokawa marks a significant milestone in the convergence of media, entertainment, and gaming industries.
This partnership underscores a shared vision to maximise the global potential of their intellectual properties, leveraging Sony's technological expertise and distribution networks alongside Kadokawa's rich portfolio of creative content.
The collaboration is poised to drive innovation in cross-media storytelling, expand the global reach of Japanese entertainment, and accelerate the development of cutting-edge gaming experiences.
Sony and Kadokawa are set to redefine the boundaries of creative collaboration, delivering compelling experiences to audiences worldwide.
