One of Japan’s largest publishers and particuarly well known for its manga and light novel content, the Kadokawa Corporation aims to become a truly global entertainment enterprise with a focus on overseas expansion and the development of content-based platforms, such as its industry-wide e-book distribution platform BookWalker. Kadokawa has also always been at the forefront of highlighting and showcasing niche areas, where there is tremendous interest, and bringing it into mainstream. Shinichiro Inoue, Representative Director & Senior Managing Executive Officer, explains how it is expanding its business with a media-mix strategy to better promote exciting cultural content in Japan and around the globe.
Kadokawa celebrated its 70th anniversary last year, after having experienced the huge reorganization and merges that created the new Kadokawa Corporation in 2013. In this regard, what have been the main successes and milestones Kadokawa has celebrated in its history?
From 1945 to 1975 Kadokawa was very much a traditional print publishing company. In 1976, we became the first traditional publisher to actually be involved in producing movies. Up until then, publishing companies have not been making movies in Japan, but we were the first company to cross that boundary. The main strategy behind this was to use power of the visual media to push up revenue of the publishing business in Japan – we call it the “Media Mix” strategy.
Kadokawa has always been at the forefront of every industry trend and consumer trend. For example in the 1980s, Kadokawa started publishing monthly and weekly TV guide magazines called ”The Television”. In the 80s, magazines gained in popularity, and we were at the forefront of this trend. Our corporate policy was to make sure that our publications were not tabloid-like or gossip-related, scandalous, nor too political. We had a very general audience and we still continue to maintain that policy today. Specifically, for example, our leading magazines are on TV programs, sightseeing information, motion pictures or games; we created publication specialized in different types of media, and that generated our success in the 1980s.
In the 1990s started the age of internet – this was not limited to Japan obviously, but printed magazines and the amount of publications started to go down, and circulation started to decrease. Again, we were at the forefront of this consumer habit change. We launched a magazine called “Tokyo Walker”, which introduces information about the city of Tokyo. It was translated to a web platform in 2000. It wasn’t an instant success, but it gradually gained success later on. Five years ago, we launched an e-book store platform called BookWalker, which is similar to an Amazon site that sells e-books. Once we developed this, we were able to then develop a partnership with NTT DoCoMo in a service called ‘dMagazine’, which is basically an all-you-can-read platform for smart phone, tablets, and PC browsers, on which the users are able to read as many magazines as they want at a fixed fee. You can read more than 160 magazines using this service. This was very successful and is now supporting the growth of our web based business.
After we created this service, all major Japanese publishers joined us to list their magazines on our platform. ‘dMagazine’ has been very instrumental and became basically a central tenant, creating earnings and revenues for these publishers, especially in this environment where the number of magazine publications is going down year by year.
For the past two years we had great success, but we had 15 preceding years of tough times of planning and preparing for the creation of a strong basis for magazines in the web environment before we could proceed. It took us this long to get us where we are.
Throughout its history, Kadokawa has gone through a series of mergers and acquisitions. In 2013 in particular, you became Kadokawa Corporation, merging many of the group companies and reorganizing the structure by core activities. What can you tell us about Kadokawa’s M&A strategy, how has it helped your business development?
Kadokawa is a company that is always evolving to different business based on consumer preferences. For the last 10 years, we have had an aggressive M&A strategy, where we acquired interesting companies such as ASCII Media Works and Media Factory. This is how we leverage being a public listed company and what has allowed our continuous growth. Three years ago we conducted a super merger, basically taking in 10 of our publishing and licensing subsidiaries under the name of Kadokawa, and this is where we are at today. We reorganized all business space based on the actual media each company created, whether it’s a literature section, comic section, media section or an entertainment novel section. All of these companies were rearranged based on the actual media types they create. Former presidents and directors are working together, and are integrating their teamwork to make sure the decisions are made more quickly and that it is reflected to our performance.
Our financial performance was exceedingly well from last year. When you look at the market trend, the volume of publications and the volume of circulation of publications are declining, while for Kadokawa, circulations and profits gone up starting at the end of last year.
In October 2014, we also had business integration with an IT media company called Dwango. Our holding company which was simultaneously formed is called Kadokawa Dwango Corporation. Dwango’s main service is called Nico Nico video, which an online video sharing service that is very popular among Japanese users. With this business integration, we are working towards developing synergies between the two companies.
What are the main benefits and synergies that have appeared between your different subsidiaries? How has this benefited your competitiveness?
I will give you one example: we have a former subsidiary which is now one of our brands called Chukei Publishing. This publisher had its strength in publishing business books and study reference books. They are working closely with another former subsidiary called Media Factory, which has outstanding editing skills on comic essays. Both were doing separate business in the same area. And together, they are coming up with new properties and new ways of presenting information they were already providing. That is one specific example I could give in the publishing business.
Another example is Kadokawa Bunko, which is our paperback label, and a very traditional division. Last year we were able to publish a paperback called ”Biri-Gal” (translated as: ”The Invincible Blonde Gal”) from Kadokawa Bunko. It is based on a true story, and was originally published from ASCII Media Works. Being able to work together beyond the boundaries of the former subsidiaries, we could publish the paperback edition under the name of well acknowledged brand of Kadokawa Bunko and boost its sales.
These are specific examples of the synergies across all of the businesses created by the integration. Another specific example is an animation movie called “Kimi no Na wa.” (translated as: “Your Name.”), which is directed by Makoto Shinkai, a famous director and famous author as well. Because we purchased Media Factory which holds the Da Vinci magazine editorial division that had a very strong relationship with the Kadokawa Bunko division, we were able to do the movie, and were also able to publish the paperback from the Kadokawa Bunko label which became a best seller.
We were able to realize all these things because of our strategy of acquisition. As a group we select the most constant and effective avenues to market our properties, and this so far has been successfull. The revenue is generated not just within one company. It also comes and are distributed between the various subsidiaries in the group, so we keep everyone motivated to work for the group as a whole.
We want to be the number one publishing company that makes bestselling content into various medias, whether it’s anime, manga or live-action movies. Our biggest strength is our ability to make a best-seller content into motion pictures faster and better than anybody else. This is what supports us going forward.
The publishing industry is facing a very difficult time, where sales are not really good. However, we are making sure new interesting properties are turned into different medias like TV dramas, movies or animations. Motion pictures are promoted using various materials in the bookstores nationwide, and it helps to sell the original book it is based on. It’s a very virtuous cycle. Instead of waiting for that to happen, for our books to be made into different medias by others, we are doing it ourselves.
But we are not insisting to do everything only within our group. Instead of limiting the possibilities, we are working with many other companies when there are chances. For example, on “Biri-Gal”, one of our bestsellers, one of our staff pitched it to TBS, if they could be the managing company of the film partnership project. Another similar example, “Sword Art Online” is a very popular novel in Japan, and a Hollywood production studio already acquired the global live action rights to make it into a television drama in the US. It has become a very popular comic and anime both nationally and internationally. Also, it will soon become a featured animated picture.
What are the three best-seller products among your different brands?
Kadokawa is publishing about 5,000 books every year. Every year we have multiple hit products from all the different companies we acquired, which now are all integrated into one. Every year is very different – “Sword Art Online” is good example of a hit series in a long run: we sold over 19 million copies worldwide. Every year we release huge variety of different kinds of contents that is not limited to only books. I think this is the strength behind Kadokawa.
Our business is to have as many titles and hit products out there as possible, and about maximizing revenue of each popular title as well. We have adopted a widely oriented media-mix strategy, rather than just working individually within each property.
What kind of new concepts or business has Kadokawa illustrated itself into lately?
This February we launched a new platform, which is a portal site for writers and users to upload their own novels and short stories. This portal now hosts over 50,000 titles. The idea is that users can write based on their preferences, and the popular works will be picked to become published novels. We will have around 26 publications that will come out from this platform this fiscal year. We are looking at the future potential of this new business. From this portal we’ll be able to create bestselling novels, which will in turn become new products such as games, movies or TV dramas. So we will have increased earning opportunities based on this user generated content.
Just before we launched this platform, there was a well-known well-read opinion from a newspaper, that Japanese traditional publishers wouldn’t be involved in this kind of user generated portal business. But even though Kadokawa is considered as one of the biggest publishers, we were the first to do it soon after this newspaper opinion was published. We are always at the forefront in breaking down barriers and doing things that other publishers won’t do. This is basically the essence of our company.
Also, we are starting up a project called “Anime Tourism 88-Spot Pilgrimage” which is tied to tourism. We are calling out for the readers of our anime information magazine “Newtype” and anime fans all over the world to recommend and vote for the favorite places that are portrayed in animations and comics which actually exists.
Japanese population is diminishing year by year and also getting older. With a shrinking domestic market, what strategies do you have for positioning yourself internationally, and especially on the US market?
We have been involved in the North American market since the 1990s, with the television animes. One of our main items back then were the DVD box sets, and one of the popular titles we have for example is “The Melancholy of Haruhi Suzumiya”. In the late 90’s, the internet age began, and illegal streaming appeared with the beginning of YouTube; many people were watching our contents through it. There was a side that it resulted in increased purchase of related products. Things went bad by 2008 with the Lehman crisis: big box retailers went under. This resulted in a very big blow to our anime business and DVD box business. If the DVD boxes don’t sell, then other related products and publications won’t sell either, so this was a tough time.
For the last few years, our company was fortunate enough to be able to sell our contents at a very high price to international distributors in the US and other countries. The more people see TV animes or movies, the more original or related book sales increase.
In addition to the joint venture with Hachette, you have established other partnership with US companies, as Crunchyroll or HP. What other strategies are you undertaking to building your brand on the US market, taking in account strong competitors like Kodansha, Toei or Toho ?
We entered into a partnership with Hachette Book Group, one of the major companies behind the publications in the US. We have created a new venture, through acquiring majority share of a spin-off of HBG’s Yen Press imprint business, which is a leading player in the US publication of English translated mangas and light novels. Compared to previous year, its revenues in the US market last year have gone over 150%, and I believe our partnership will turn out to be very successful.
Kadokawa has a very broad business portfolio, so we will continue to work with as many partners as possible to make sure our contents are introduced to many countries, reaching many people as possible. We can diversify our sales through a diversified business strategy. We acquired and formed new subsidiaries in Malaysia and other Southeast Asian countries. Also we are planning to expand our market to Arabic speaking population and are gradually proceeding with our expansion. We have established a strategic partnership with Crunchyroll at the same time we have acquired Yen Press, which is the biggest anime streaming service for the US market. Our strategy with Yen Press is not just focused on the North American market, but any English speaking markets.
We have been basically selling the rights for anime and movie streaming in the US. We use a multichannel strategy, to be able to reach as many users as possible inside and outside of Japan.
Kadokawa has a strong history of carving out a niche genre in the market and turning it into a mainstream hit. For example, there is a genre called “light novels” which was very small 20 years ago, but has now grown to such an extent that it became mainstream and internationally accepted. In the light novel genre, the majority of top 10 sales ranking in Japan is occupied by Kadokawa’s publications every year. The same goes with UGC novels - this user generated content is a very niche kind of publication in Japan, but it is going growing much faster in the US.
Kadokawa has always been at the forefront of highlighting and showcasing niche areas, where there is tremendous interest, and bringing it into mainstream. Kadokawa will continue to work with platforms such as Crunchyroll in the US, to introduce our properties overseas.
With all your experience in Kadokawa, what is your vision of the corporation for the next ten years?
Looking at the next 10 to 20 years, we would like to be in a place to lead the artifice to create original contents, such as novels, comics, live actions that will be popular for 20 or 30 years and will continue to generate profit in the market.
In Japan, the copyrights are derived to the author, and you obtain consent from the copyright author when publishing. When you look at it as a company, from a corporate environment, we need to also be able to create contents, which are wholly or partially owned by the corporation. By creating contents this way, we can develop our success. We are currently in the process of working with our partners to create new corporate-owned contents. I’m looking forward to releasing it to the market as soon as possible.
As I am in charge of many of the creative sections in Kadokawa, I am always very much involved with the content production process. I enjoy working with the talented creators of light novels, animes, or live action films, and I would like to play a role in attracting new authors in all different areas whether it is in Japan or internationally. We are working with very talented creators through overseas company partnerships, and there have been successful cases in China already. One of my dreams is to give them opportunities in Japan.
To conclude, what would like to share about Kadokawa as final message?
Awareness towards Japanese contents, especially manga and anime, is pretty limited at this point. When you look at it from the perspective of an American user, there is a lot more content from Japan that is yet to be discovered, and we are very excited to bring it to the American market. We believe that our content can transcend culture and race, and act as a mediator for Japanese culture to be connected with United States culture. The same way we look forward to the latest Hollywood movies in Japan, we hope one day that the audience in North American will look forward to our content to be release, light novels or anime or live action features. Kadokawa is very proud and excited to deliver it to America. Please look forward to what we can offer.