Kadokawa stocks have risen $1.1B in the last 5 days

[lucasthebeast19]

I have no idea about Japan.

In Europe it is common that heads of studios share beers or lunches (last week I was with over half a dozen of them including a few AAA and a few indie publishers), and are friends since many years ago and know who is happy, who is struggling and will shut down soon, and who is struggling and could be saved by selling or merging, or wants to sell to grow.

That people has contacts/friends/former coworkers in important positions of studios from other countries, publishers, platform holders, investing groups/hedge funds etc. that some day get in the position to buy and keep asking about potential opportunities to invest or acquire testing the water everywhere to see what is available and fits their catalog and strategy.

Through common friends -or because they know each other- the potential acquirer knows who is open to sell who isn't. And often only ask for acquisition to those who they already know may be on the position of wanting to sell.

There are a few cases of a handful huge corporations who appear out of nowhere asking for potential opportunities because want to grow in certain region or game type/platform/genre.

Unless there's a common interest, big synergy or need, or it's the only option available, people often to be acquired by the second group and tend to go with the first group even if it's a smaller acquirer/pays less. People prefers people they already know and trust, specially if have a long relationship.

And this is -in most cases- not top tier studios. I assume that obviously those who got huge hits -like Elden Ring in case of Kadokawa- may receive more questions about if they are interested on selling or not.

Pretty likely since they released Sekiro and specially after Elden Ring they said no to minimum a handful people per year. And pretty likely their friend who shares beers and dinners with them and may ask them for an acquisition are the Sony guy who signed with them dozens of exclusives in the last 3 decades, or maybe maximum Harada or whoever is the Bandai Namco CEO. Not MS, the Saudis, Tencent, Embracer, Black Rock or JP Morgan.

I think Sony is the one who has more changes, followed by Bandai Namco. And if it doesn't work with them, then it would be Tencent, Netease or some other big Asian group.

Japan acquisition are more protected than other regulators has to be most a domestic company that's in Japan

 

[Men_in_Boxes]

- Sony showed interest because that is exactly what Sony was claiming to needs in the last financials… they need IP creators to their media business (forget gaming… this acquisition is not about the gaming market… From Software is just a bonus to Sony)… and Kodakawa basically do that.

I've read numerous people write this online ("FromSoftware is just a bonus") but how do we know that? How much is their anime branch worth compared to FromSoft?

 

[anonpuffs]

I've read numerous people write this online ("FromSoftware is just a bonus") but how do we know that? How much is their anime branch worth compared to FromSoft?

From their earnings reports gaming is around 10% of their revenue and 20% of their OI, but From is only a portion of their gaming (probably the biggest portion, but they do have other studios). Headcount wise they are around 8% of Kadokawa's staff.

 

[YeezyDude]

It’s a done deal.

Relax.

Exactly!

 

[Yurinka]

I've read numerous people write this online ("FromSoftware is just a bonus") but how do we know that? How much is their anime branch worth compared to FromSoft?

Now I don't find it because there are multiple threads about it in each forums.

But someone shared the Kadokawa revenue split: the majority of it was anime and specially manga/books/magazines, the gaming part was a minority. And out it, From Soft wasn't a huge part of their gaming revenue.

Regarding entertainment (games + movies + animation + music) Sony is now aiming to get way more IP from start to finish. Meaning, they want to not only to buy existing brands/IPs/content. But also to get the teams who make them to continue working them in the future and produce new one.

In the anime area, Kadokawa is one of the major producers not only of anime, but also of the manga and light novels where many of them come from. Sony already is important in the anime area, but acquiring them they would become the undisputed top 1 even more they are in gaming. And beyond this, it would also turn Sony the main player in Japan regard publishing of books / manga / magazines (Sony would now own things like Enterbrain or Famitsu).

In terms of revenue, that publication side of Kadokawa (manga, books, magazines) is the one that produces more revenue to them. They have way more businesses (anime, gaming, films, tv shows, music, etc) that are smaller parts of Kadokawa, but that would be more than welcomed in different divisions of Sony.

In case of gaming, to own FromSoft and Acquire (Tenchu, Way of the Samurai, No Heroes Allowed!, Octopath Traveller, Mario & Luigi: Brothership...) would be great for SIE. In terms of gaming history, Sony would also acquire ASCII, cocreator of the MSX standard where Sony started to make games and gaming hardware 40 years ago. But well, Sony already is a market leader in gaming and to get the Kadokawa stuff wouldn't almost change the gaming or console market.

TLDR: In terms of revenue the biggest chunk of Kadokawa is their manga and anime area, not gaming. And strategically, even if acquiring Kadokawa helps all Sony entertainment divisions, the most benefited one would be the anime side because would heavily change Sony's market's position and also Kadokawa's impact in the market because Sony's channels would help them reach a global market.

 

[ethomaz]

I've read numerous people write this online ("FromSoftware is just a bonus") but how do we know that? How much is their anime branch worth compared to FromSoft?

Because Sony's CEO were talking what they needed few months ago.

Sony Wants To Produce More Animation Content, But Hampered By Animator Shortage, High Costs

The company is looking at options to increase its output, including digital technologies like AI.

www.cartoonbrew.com

And to be fair what they wanted is exactly how Kadokawa do business.
The "From Software is a bonus" is just that it is not the main driver of that acquisition.

How much their anime branch is worth compared with From Software is the wrong question here.
Kodakawa Group is a content creator and media conglomerate at first... and that they have several branches that works with these IPs in a wide range of media and entertainment: manga, movies, live action, anime, video games, web services, education, virtual reality, etc.

Their base is the content IP creation.... to better describe them:

Kadokawa's strategy is to create intellectual property (IP) globally and deliver it through various media. They use technology to roll out their IP globally, and aim to maximize the value of their IP.

Now talking about how much From Software value in the company.
Two years ago Sony brought 14% of From Software shares at $122m and Tecent 16% at $141m... that means that the whole From at time was valued at around $850 million... Kodakawa was around $3.4b at time... taking in account the price Sony and Tecent paid was over the market value you can say From is around 20% of Kodakawa.

But remember these are just guesses based in how Sony/Tecent paid for From Software in 2022.

Now in terms of sales... these are their Net Revenue by segment.
IP Creation and publication (manga, light novel, etc... light novel is their biggest market in publication surpassing manga) is their biggest value.

 

[Danja]

The share increase means Sony will have to pay even more of what Kadokawa wants.

I smell this deal would be around the 10 billion mark, Kadokawa doesnt seem to be very interested in selling unless buying price is very high

They seem very much interested in selling though? And wouldn't comment on Sony's letter of intent if they weren't having previous discussions. A letter of intent isn't something to joke about.

 

[ethomaz]

Better graphs to everybody.

Profit.. you can even see the Elden Ring effect in 2023
But outside 2023 they main business is IP Creation / Publication.

 

[Yurinka]

Seems that after a small recovery it keeps steady at around 4K. Before the bum was at around 3K:

It's obviously on all time high, looking at their history I assume they made a combo of covid bump + some big success in the manga/books area + Elden Ring + Elden Ring DLC + in recent days Sony acquisition rumors. Their stock valuation is over 4x higher than four years ago, which is pretty crazy:

 

[MrAss]

Better graphs to everybody.

Profit.. you can even see the Elden Ring effect in 2023
But outside 2023 they main business is IP Creation / Publication.

gaming would have been even higher if they didn't share % of profits with Bandai