Media Do 3678
メディアドゥ
Recent Updates
Get in touch
Palace Side Bldg. 5F, 1-1-1 Hitotsubashi, Chiyoda-ku, Tokyo 100-0003, Japan
Summary
Media Do is Japan’s leading wholesaler of e-books by market share.With e-books, “wholesaling” refers to the process of obtaining content-use permission from publishers, storing e-book data on company servers, and delivering e-book data to e-bookstores.
Internet & Direct Marketing Retail
Key dates
2020-03-02
Coverage initiation
Executive summary
Business overview
Top share of e-books wholesaling: Media Do Co., Ltd. (hereinafter, the company) is Japan’s leading wholesaler of e-books by market share, according to the company’s own research. With e-books, “wholesaling” refers to the process of obtaining content-use permission from publishers, storing e-book data on company servers, and delivering e-book data to e-bookstores. The company simplifies operations and reduces headaches for publishers and e-bookstores by mediating contracts, providing systems, managing campaigns, and summarizing data as an e-book wholesaler. The e-book wholesaling framework is unique to Japan and in high demand as the nation has a large number of relatively small publishers and less oligopoly by foreign e-bookstores such as Kindle in the Japanese e-book market. This situation creates a strong need for the wholesaling of e-books. In FY02/22, almost all of the company’s sales and operating profit came from the eBook Distribution business. Its earnings structure as of FY02/22 is close to that of a wholesaler, and its main cost, royalties (cost of sales), is a variable cost. However, the company’s contribution margin is high at about 9% thanks to its high market share and the fact that it sells e-book data, which offers substantial economies of scale. Cost other than royalties and advertising expenses amounted to JPY9.0bn, which were mostly fixed costs.
Value chain: The top three suppliers of e-book content are estimated to be Kodansha Ltd., Shogakukan Inc., and Shueisha Inc. (each of which is a major manga publisher and a major shareholder of Media Do; the three companies accounted for 45.4% of the company’s total purchases in FY02/19; FY02/21 data has not been disclosed, but the percentage of purchases from these top suppliers continues to remain high). For FY02/22, LINE Corporation (unlisted) accounted for 18.2% of total sales (20.4% in FY02/21), the group of Amazon (NASDAQ, AMZN) 12.7% (12.8% in FY02/21), NTT Solmare Corporation (TSE Prime 9432) 14.8% (12.7% FY02/21), and Digital Commerce Inc. (a subsidiary of DMM.com LLC (unlisted)) 11.6% (undisclosed because it accounted for less than 10% of sales in FY02/21). The top four accounted for 57% of total sales. The company's share of total e-book distribution in Japan (including cases in which publishers and e-bookstores transact business with each other directly) is estimated to be around 35% in FY2020.
Expanding Japanese market for e-books: Media Do’s growth has benefited from a market shift from paper to e-books and from people spending more time on their smartphones. In addition, in FY02/21, the company benefited from people staying at home due to the COVID-19 pandemic. In FY2020, the market for e-books was worth JPY482.1bn (+28.6% YoY), with manga accounting for approximately 83% of the total (2021 survey on the e-book business, by Impress Corporation). The FY2020 e-books market turned out to be larger than the previous estimate of JPY444.2bn. Impress Corporation believes this sharp expansion of the e-books market is owing to the trend of "stay-at-home" consumption amid the COVID-19 pandemic and the impact from bestsellers. The estimate for the value of the e-books market in FY2021 has been raised considerably from JPY481.2bn to JPY537.8bn.
Changes in business structure the company expects going forward: As the No. 1 e-book wholesaler by market share, the company has contributed to the distribution of authorized editions and market expansion. Building on the trust of publishers and e-bookstores, the company's new medium-term management plan, which runs through FY02/27, aims to establish several new earnings drivers outside of the eBook Distribution business. The company expects that the business will account for a declining percentage of the company's consolidated total. The eBook Distribution business and the Strategic Investment business are forecast to account for 75% and 25% of the company's total sales, respectively, in FY02/27. This means that the percentage of the eBook Distribution business in the sales mix will decline from about 92% in FY02/22. While the market growth rate will slow down as the eBook Distribution business expands its market size, the Strategic Investment business is seen growing. The two business segments are each seen accounting for 50% of EBITDA. EBITDA margins are forecast to increase in line with the change in the sales mix.
Earnings trends
FY02/22 performance: For full-year FY02/22, the company reported consolidated sales of JPY104.7bn (+25.4% YoY), operating profit of JPY2.8bn (+5.5% YoY), recurring profit of JPY2.8bn (+2.3% YoY), EBITDA of JPY3.9bn (+14.7% YoY), and net income attributable to owners of the parent of JPY1.6bn (+3.8% YoY). Full-year results left the company with 104.7% of its full-year target for consolidated sales, 93.7% for operating profit, 98.7% for recurring profit, 98.1% for EBITDA, and 98.5% for net income. In the company’s mainstay eBook Distribution business, sales were up 20.6% YoY. Sales growth in Q1 was at 39.9% YoY (including the effect of a major campaign by DMM Books), Q2 at 17.3% YoY, Q3 at 10.5% YoY (the final volume of the influential Kimetsu no Yaiba [Demon Slayer] was released in Q3 FY02/21), and Q4 at 15.0% YoY.
FY02/23 company forecast: For FY02/23, the company announced that it forecasts consolidated sales of JPY100.0bn (-4.5% YoY), operating profit of JPY2.0bn (-28.9% YoY), recurring profit of JPY1.9bn (-32.8% YoY), net income attributable to owners of the parent of JPY850mn (-46.1% YoY), and EPS of JPY53.56. The forecast is based on the assumption that transactions with LINE Digital Frontier Corp. will be reduced by approximately 50% (maximum realistically possible value) of FY02/22 results. The company does not plan to pay a dividend in FY02/23 as it expects its total shareholder return ratio to reach 117.6%, well above its target of 30%, following the acquisition of treasury stock announced on April 14, 2022.
Medium-term management plan: On April 14, 2022, the company announced its medium-term management plan for the five-year period spanning FY02/23–FY02/27, targeting consolidated sales of JPY150.0bn (average annual growth rate of 7.5% in FY02/22), operating profit of JPY8.5bn (24.8%), EBITDA of JPY10.0bn (20.6%), net income of JPY6.0bn (30.7%), and an ROE of 23.0%. The medium-term management plan assumes that transactions with LINE Digital Frontier Corp. will be reduced by approximately 90% in FY02/24 compared to FY02/22 results. The company's shareholder return policy is to maintain a total shareholder return ratio of at least 30% (previously 20%) through dividends and share repurchases based on share prices.
Strengths and weaknesses
Media Do’s strengths are:
Its having the top share of the Japanese market for wholesaling e-books, a proof that its services provide high levels of convenience in transactions with publishers and e-bookstores;
Its major business partners including large publishers, which have long business relationships with and capital investments in the company; and Complex functions and know-how are demanded of eBook wholesalers, creating a barrier for entry.
Shared Research thinks the company’s weaknesses include:
While some logistics functions are non-essential for e-books, reliance on wholesaling is lower, and publishers and e-bookstores conduct around 50% of transactions directly;
The company relies on the eBook Distribution business for most of its sales and profit, so is vulnerable to pirate websites and other external factors.; and
Having a top share of the market for e-book wholesaling introduces limitations due to conflicts of interests with large publishers and large e-bookstores.
Key financial data
Recent updates
Results of share buyback
On April 15, 2022, Media Do Co., Ltd. announced the results of a share buyback.
Results of share buyback
On April 15, 2022, the company bought back its own shares as announced on April 14, 2022.
Overview of share buyback
Transaction status with main client, medium-term management plan, share buyback, and purchase of treasury stock
On April 14, 2022, Media Do Co., Ltd. made announcements regarding the status of transactions with a main business partner, its medium-term management plan, share buybacks, and the purchase of treasury stock.
Status of transactions with main business partner (LINE Digital Frontier Corp.)
On April 14, 2022, the company disclosed the status of its transactions with LINE Digital Frontier Corp. (LDF), which operates LINE Manga and has been the company’s main client accounting for approximately 20% of total sales. Specifically, the company disclosed that it had received a request from LDF to discuss transferring the back-end operations it had been entrusted by LDF to its wholly owned subsidiary, eBOOK Initiative Japan Co., Ltd. as soon as eBOOK Initiative Japan is ready to undertake the work, and that there may be a change in distribution channels in the future. However, the company stated that as of April 14, 2022, no specific details, conditions, or planned transfer date for future transactions between the company and LDF had been finalized, and that discussions are ongoing.
Medium-term management plan (FY02/23 to FY02/27)
On the same day, the company announced its medium-term management plan for the five-year period spanning FY02/23–FY02/27, targeting consolidated sales of JPY150.0bn, operating profit of JPY8.5bn, EBITDA of JPY10.0bn, net income of JPY6.0bn, and an ROE of 23.0%. The medium-term management plan assumes that transactions with LINE Digital Frontier Corp. will be reduced by approximately 90% in FY02/24 compared to FY02/22 results. The company's shareholder return policy is to maintain a total shareholder return ratio of at least 30% (previously 20%) through dividends and share repurchases based on share prices.
Share buyback
On the same day, the company decided on share buybacks. The company seeks to implement share buybacks to enable a flexible capital policy and as part of its shareholder return policy. It intends to cancel all repurchased shares.
Details of matters relating to the share buybacks
Purchase of treasury stock
On the same day, the company decided to purchase treasury stock through an off-auction own share repurchase (ToSTNeT-3) transaction.
Method of purchase
The purchase will be made through the Tokyo Stock Exchange's off-auction own share repurchase trading (ToSTNeT-3) system at 8:45 a.m. on April 15, 2022, at the April 14, 2022 closing price of JPY2,162. No changes to other trading system or trading hours will be made. This purchase will only be executed during the above-mentioned transaction time.
Details of purchase
Acquisition of additional shares in Everystar, making it a wholly owned subsidiary
On March 24, 2022, Media Do Co., Ltd. announced that it would acquire additional shares in consolidated subsidiary Everystar Co., Ltd. held by NTT DoCoMo (30% stake) to make Everystar a wholly owned subsidiary.
The acquisition price is JPY431mn, the contract date is March 24, 2022, and the effective date of share transfer is March 31, 2022 (planned). The company commented that it is currently analyzing the impact of the share acquisition on its FY02/23 consolidated earnings performance.
Trends and outlook
Quarterly trends and results
Note: Figures may differ from company materials due to differences in rounding methods.
Seasonality of sales
Sales growth tends to be higher during Q2 (which includes August summer vacations) and Q4 (winter vacations in December and January). This increase is because young students and office workers read more manga during these times, and because e-bookstores tend to run more sales.
Segment breakdowns for FY02/19 have been retroactively adjusted to the post-revision segments, effective from FY02/20.
Full-year FY02/22 results
Summary
For full-year FY02/22, the company reported consolidated sales of JPY104.7bn (+25.4% YoY), operating profit of JPY2.8bn (+5.5% YoY), recurring profit of JPY2.8bn (+2.3% YoY), EBITDA of JPY3.9bn (+14.7% YoY), and net income attributable to owners of the parent of JPY1.6bn (+3.8% YoY). Full-year results left the company with 104.7% of its full-year target for consolidated sales, 93.7% for operating profit, 98.7% for recurring profit, 98.1% for EBITDA, and 98.5% for net income. While sales met the company's forecast, all profits and EBITDA fell short due to a more significant proportion of transactions with major bookstores and publishers—where gross profit margins are relatively low—and higher-than-expected labor costs at the company's US subsidiary.
In the company’s mainstay eBook Distribution business, sales were up 20.6% YoY. Sales growth in Q1 was at 39.9% YoY (including the effects of a major campaign by DMM Books), Q2 at 17.3% YoY, Q3 at 10.5% YoY (the final volume of Kimetsu no Yaiba [Demon Slayer] was released in Q3 FY02/21), and Q4 at 15.0% YoY.
In the Other business, FY02/22 sales were up 354.5% YoY. An increase in the number of consolidated subsidiaries due to M&A activity served to boost sales by 355.0% YoY in the three months of Q4.
On April 14, 2022, the company disclosed the status of its transactions with LINE Digital Frontier Corp. (LDF), which operates LINE Manga and has been the company’s main client accounting for approximately 20% of total sales. Specifically, the company disclosed that it had received a request from LDF to discuss transferring the back-end operations it had been entrusted by LDF to its wholly owned subsidiary, eBOOK Initiative Japan Co., Ltd. as soon as eBOOK Initiative Japan is ready to undertake the work, and that there may be a change in distribution channels in the future. However, the company stated that as of April 14, 2022, no specific details, conditions, or planned transfer date for future transactions between the company and LDF had been finalized, and that discussions are ongoing.
For FY02/23, the company announced that it forecasts consolidated sales of JPY100.0bn (-4.5% YoY), operating profit of JPY2.0bn (-28.9% YoY), recurring profit of JPY1.9bn (-32.8% YoY), net income attributable to owners of the parent of JPY850mn (-46.1% YoY), and EPS of JPY53.56. The forecast is based on the assumption that transactions with LINE Digital Frontier Corp. will be reduced by approximately 50% (maximum realistically possible value) of FY02/22 results. The company does not plan to pay a dividend in FY02/23 as it expects its total shareholder return ratio to reach 117.6%, well above its target of 30%, following the acquisition of treasury stock announced on April 14, 2022.
On April 14, 2022, the company announced its medium-term management plan for the five-year period spanning FY02/23–FY02/27, targeting consolidated sales of JPY150.0bn (average annual growth rate of 7.5% in FY02/22), operating profit of JPY8.5bn (24.8%), EBITDA of JPY10.0bn (20.6%), net income of JPY6.0bn (30.7%), and an ROE of 23.0%. The medium-term management plan assumes that transactions with LINE Digital Frontier Corp. will be reduced by approximately 90% in FY02/24 compared to FY02/22 results. The company's shareholder return policy is to maintain a total shareholder return ratio of at least 30% (previously 20%) through dividends and share repurchases based on share prices.
Overview of results by business segment
eBook Distribution business
For FY02/22, the company reported segment sales of JPY99.3bn (+20.6% YoY) and segment profit of JPY2.7bn (+2.2% YoY).
In FY02/22, Media Do was unable to negotiate rate improvements with publishers and e-bookstores due to the increasingly competitive environment faced by publishers (the company's suppliers) and e-bookstores (the company's sales partners), as well as the rates offered by competitors.
Major customers (those that account for 10% or more of the company's total sales)
In FY02/22, sales generated from major customers were as follows: JPY19.1bn (+12.3% YoY) to LINE Digital Frontier Corp.; JPY15.5bn (+47.0% YoY) from NTT Solmare Corporation (subsidiary of NTT [TSE PRM: 9432]); JPY13.3bn (+16.1% YoY) from Amazon Services International Inc., and JPY12.1bn from Digital Commerce Inc. (undisclosed since it accounted for less than 10% of total sales in FY02/21). BookLive Co., Ltd. was excluded from the disclosure because it accounted for less than 10% of the company's sales (JPY8.5bn in FY02/21).
Sales generated from NTT Solmare increased 47.0% YoY due to aggressive campaigns and commercials by NTT Solmare (Comic CMOA). Sales generated from Digital Commerce included special demand generated by a large campaign conducted by DMM Books in Q1 FY02/22. As for sales generated from BookLive, the relative decline in its share of the e-book market has resulted in it accounting for less than 10% of the company's total sales.
Other business
In FY02/22, the company reported segment sales of JPY5.4bn (+354.5% YoY) and segment loss of JPY179mn (versus a loss of JPY248mn in FY02/21).
The company's consolidated income statements from Q2 FY02/22 reflect the inclusion of earnings at Firebrand group (Quality Solutions, Inc., Net Galley, LLC. and related subsidiaries) and Nihonbungeisha Co., Ltd.
Other topics
FanTop (NFT platform)
One of the challenges in the early stages of FanTop was that the supply-demand balance was skewed toward oversupply. While the number of users is limited, there is a large inventory of content, resulting in some remaining unsold. Media Do believes that this situation is temporary, resulting from the lack of accumulated knowledge about the supply-demand balance in the early stages, and that it can be resolved by managing the content supply as the user base grows. The company could also reach an agreement with the content holders to write off content that remains unsold for an agreed-upon period of time.
Company forecast for FY02/23
Initial full-year company forecast (April 14, 2022)
For FY02/23, the company announced that it forecasts consolidated sales of JPY100.0bn (-4.5% YoY), operating profit of JPY2.0bn (-28.9% YoY), recurring profit of JPY1.9bn (-32.8% YoY), EBITDA of JPY3.6bn (-8.5%), net income attributable to owners of the parent of JPY850mn (-46.1% YoY), and EPS of JPY53.56. The forecast is based on the assumption that transactions with LINE Digital Frontier Corp. will be reduced by approximately 50% (maximum realistically possible value) of FY02/22 results. The company does not plan to pay a dividend in FY02/23 as it expects its total shareholder return ratio to reach 117.6%, well above its target of 30%, following the acquisition of treasury stock announced on April 14, 2022.
Assumptions for initial forecast
Sales
Sales are expected to decline. The company forecasts growth in the e-book market in the low 10% range for FY02/23. On the other hand, the company's assumptions reflect a reactionary decline from the sales growth achieved by the large campaign implemented by DMM Books in Q1 FY02/22, along with fewer transactions with LINE Digital Frontier Corp. ("LDF"), its main customer.
The company expects the e-book market as a whole to grow at a rate in the low 10% range for FY02/23 (excluding the impact of the reactionary decline from the large campaign conducted by DMM Books in FY02/22). The market growth rate in 1H FY02/22 excluding the special factor in FY02/21, was 14–16%. However, the company expects that as the market grows in size, the growth rate will slow down. It is not concerned about a sharp drop in sales due to a decline in at-home consumption demand.
The company's full-year FY02/23 forecasts are based on the assumption that transactions with LDF will be approximately 50% less than FY02/22 results (JPY19.0bn in sales). This is based on the assumption that the transfer of operations from the company to eBOOK Initiative Japan Co., Ltd. will begin in Q2 FY02/23, and that all content other than that from Nihonbungeisha Co., Ltd. and publishers with which the company has exclusive contracts (about 10% of FY02/22 sales) will be transferred by Q4 FY02/23. This assumption is founded on the maximum realistic value possible, and the actual transfer schedule will be determined through future negotiations.
EBITDA
Sales and profits will be lower in the eBook Distribution business, while the Strategic Investment business will see advance investments. Specifically, the eBook Distribution business is expected to see a YoY decline of JPY160mn, the Strategic Investment business a decline of JPY60mn, and a decline of JPY110mn will be attributable to other factors.
eBook Distribution business: Sales are expected to rise by JPY340mn YoY due to growth in e-book sales, but there will be a decrease of JPY500mn YoY due to a decrease in transactions with LDF and a rebound from sales growth from a major campaign at DMM Books in FY02/22. Operating profit from transactions with LDF was JPY400mn in FY02/22, but the company expects this to decline by approximately 50% as with the sales. The company will reallocate personnel who have been involved in the LDF transaction to other projects. The employment of a certain number of contract employees will be terminated.
Strategic Investment business: The company expects an increase of JPY30mn YoY in the imprint business, a decrease of JPY130mn YoY in the publishing solutions business, a decline of JPY60mn YoY in the international business, and an increase of JPY100mn YoY in the fan marketing business.
Other factors: JPY210mn increase YoY due to the acquisitions of Everystar Co., Ltd. in December 2021 and Supadü Limited in February 2022, a JPY220mn decrease YoY attributable to office renovation and relocation, and a JPY100mn decrease YoY caused by higher personnel-related expenses. Of the costs related to office renovation and relocation, JPY120mn is a one-time expense encompassing moving and other costs. The office remodeling is intended to revitalize employee communication—which has been negatively impacted by the pandemic—by relocating group company offices to the same building as the company itself and remodeling the head office into an environment where people want to go to work.
Medium-term outlook
On April 14, 2022, the company announced its medium-term management plan for the five-year period spanning FY02/23–FY02/27, targeting consolidated sales of JPY150.0bn (average annual growth rate of 7.5% in FY02/22), operating profit of JPY8.5bn (24.8%), EBITDA of JPY10.0bn (20.6%), net income of JPY6.0bn (30.7%), and an ROE of 23.0%. The medium-term management plan assumes that transactions with LINE Digital Frontier Corp. will be reduced by approximately 90% in FY02/24 compared to FY02/22 results. The company's shareholder return policy is to maintain a total shareholder return ratio of at least 30% (previously 20%) through dividends and share repurchases based on share prices.
Review of the previous medium-term management plan
During the previous medium-term management plan (scheduled to cover the five-year period from FY02/19 to FY02/23), the company promoted organizational integration with the acquired Digital Publishing Initiatives Japan and established the No. 1 market share position as an e-book wholesaler. In addition, the company promoted new business development and alliances to secure future growth potential. However, during the previous medium-term management plan period, the eBook Distribution business grew faster than initially planned, while the growth rate of other businesses did not meet expectations.
Specifically, the company expects overall sales of JPY10.0bn in FY02/23, far exceeding its original plan of JPY8.0bn and revised plan of JPY9.0bn. The eBook Distribution business grew more than the company had expected, partly due to special at-home demand brought about by the COVID-19 pandemic.
On the other hand, Other business is expected to miss its initial FY02/23 targets for both sales and EBITDA (JPY700mn vs. JPY1.9bn in the initial plan for sales and minus JPY310mn vs. JPY2.0bn in the initial plan for EBITDA). The growth of the eBook Distribution business exceeded the company's expectations, resulting in an increase in internal resources required for the business and, as a result, delays in the creation of new businesses. In addition, the labor-intensive PMI of Digital Publishing Initiatives Japan Co., Ltd. (DPIJ) was also a factor, limiting the company's capacity to conduct PMI for new businesses. As a result, the second half of the previous medium-term management plan period had become an investment period, and the company's overall EBITDA for FY02/23 is expected to be only JPY3.6bn versus the initial plan of JPY6.0bn.
Therefore, building a business other than the eBook Distribution business to serve as a pillar of revenue is an issue that has remained unresolved since the previous medium-term management plan.
New medium-term management plan (five-year period through FY02/27)
Policy
As the e-book wholesaler with the largest market share, Media Do has contributed to the distribution of authorized editions and expansion of the market. Building on the trust of publishers and e-bookstores, the company's new medium-term management plan, which runs through FY02/27, aims to establish new earnings drivers outside of the e-book distribution business.
Assumptions for new medium-term management plan figures
Business environment
For FY02/23, the company expects lower sales and profits due to the assumed reduction in transactions with its main customer, LINE Digital Frontier Corp. (LDF), a reactionary decline from the large campaign conducted by DMM Books in FY02/22, and prior investments in the Strategic Investment business. After that, however, the company sees continued growth in the eBook Distribution business and profitability for the Strategic Investment business.
Change in sales composition and EBITDA composition
The company expects the percentage of sales from eBook Distribution business in its consolidated sales to decline from about 92% in FY02/22, and to account for 75% of FY02/27, while Strategic Investment business is expected to account for 25%. As the eBook Distribution business market grows in size, the rate of growth is expected to slow, while growth is anticipated for the Strategic Investment business. The two business segments are each seen accounting for 50% of EBITDA. EBITDA margins are expected to increase in line with changes in the sales mix (details are described in "Supplemental information on each business" below).
ROE
The company has indicated that its ROE—5.2% in FY02/22—will increase to 15.0% in FY02/25 and 23.0% in FY02/27. The increase is primarily attributable to a higher profit margin after deducting taxes from sales. The medium-term management plan does not assume any large-scale equity financing.
M&A
During the new medium-term management plan, the company intends to actively pursue M&A. The numerical targets of the new medium-term management plan do not, however, factor in the potential impact of M&A. The company has stated that it does not include M&A in the numerical targets of its new medium-term management plan, as it considers M&A to be an additional element.
The company has also clarified its business portfolio review criteria. If ROIC is expected to fall below 7% after the third year following acquisition, the company will pivot, change management, sell, or withdraw from the target company.
Supplemental information on each business
Media Do announced plans to change its business segments starting in FY02/23. Under the new segmentation, the core eBook Distribution business segment (e-book wholesaling business and e-book platform business) will be managed independently. The Strategic Investment segment will consist of four strategic businesses: the imprint, publishing solutions, international, and fan marketing businesses.
Although prior investment is expected to result in the Strategic Investment business being in the red in FY02/23, EBITDA is forecast to be positive in all four of the segment's businesses from FY02/25 onward.
eBook Distribution business
Portion of sales other than those generated from LINE Digital Frontier Corp. (LDF)
Excluding sales generated from LDF, the company expects the eBook Distribution business to grow at an average annual rate of around 7% during the medium-term plan period. As the e-book market grows in scale, the market growth rate is seen gradually slowing from the mid-10% range.
Sales to LDF
On April 14, 2022, the company disclosed the status of its transactions with LINE Digital Frontier Corp. (LDF), which operates LINE Manga and has been the company’s main client accounting for approximately 20% of total sales. Specifically, the company disclosed that it had received a request from LDF to discuss transferring the back-end operations it had been entrusted by LDF to its wholly owned subsidiary, eBOOK Initiative Japan Co., Ltd. as soon as eBOOK Initiative Japan is ready to undertake the work, and that there may be a change in distribution channels in the future. However, the company stated that as of April 14, 2022, no specific details, conditions, or planned transfer date for future transactions between the company and LDF had been finalized, and that discussions are ongoing.
The company's full-year FY02/23 forecasts are based on the assumption that transactions with LDF will be approximately 50% less than FY02/22 results (JPY19.0bn in sales). This is based on the assumption that the transfer of operations from the company to eBOOK Initiative Japan Co., Ltd. will begin in Q2 FY02/23, and that all content other than that from Nihonbungeisha Co., Ltd. and publishers with which the company has exclusive contracts (about 10% of FY02/22 sales) will be transferred by Q4 FY02/23. This assumption is founded on the maximum realistic value possible, and the actual transfer schedule will be determined through future negotiations.
The medium-term management plan assumes that transactions with LINE Digital Frontier Corp. will fall by approximately 90% in FY02/24 compared to FY02/22.
Strategic Investment business
Publishing solutions business
The growth driver for the publishing solutions business is vertical scrolling comics, or "webtoons." The company expects this business to begin contributing to earnings in FY02/26, and projects an EBITDA margin of around 30% in FY02/27. The company expects high EBITDA margins because, unlike the e-book distribution business—which is closer to wholesaling—the publishing solutions business is involved in the creation of high-value-added content, production support, and original works.
Fan marketing business
The growth driver for the fan marketing business is FanTop, a non-fungible token (NFT) platform. The company expects FanTop to begin making a substantial contribution to earnings around FY02/26, and has based the figures in its FY02/27 medium-term management plan on estimated total NFT circulation of JPY9.0bn. It forecasts an EBITDA margin of around 10% in FY02/27.
Imprint and international businesses
Compared to the publishing solutions and fan marketing businesses, the growth rate for these businesses is expected to be moderate.
Business
Business description
Media Do is Japan’s leading wholesaler of e-books by market share. According to the company’s own research, it has a share of around 80% of the market for e-book distribution through wholesalers on a gross merchandise value basis. With e-books, “wholesaling” refers to the process of obtaining content-use permission from publishers, storing e-book data on company servers, and delivering e-book data to e-bookstores. The company simplifies operations and reduces headaches for publishers and e-bookstores by mediating contracts, providing systems, managing campaigns, and summarizing data as an e-book wholesaler. The e-book wholesaling framework is unique to Japan and in high demand as the nation has a large number of relatively small publishers and less oligopoly by foreign e-bookstores such as Kindle in the Japanese e-book market. This situation creates a strong need for the wholesaling of e-books. In FY02/22, almost all of the company’s sales and operating profit came from the eBook Distribution business. Its earnings structure as of FY02/22 is close to that of a wholesaler, and its main cost, royalties (cost of sales), is a variable cost. However, the company’s contribution margin is high at about 9% thanks to its high market share and the fact that it sells e-book data, which offers substantial economies of scale. Cost other than royalties and advertising expenses amounted to JPY9.0bn, which were mostly fixed costs.
Planned segment changes (FY02/23)
On April 14, 2022, the company announced plans to change its business segments beginning in FY02/23. The new segmentation will consist of the eBook Distribution business segment (FY02/22 sales: JPY96.3bn; 91.5% of total sales) and the Strategic Investment business (JPY8.9bn; 8.5% of total sales). Under the new segment classification, the core eBook Distribution business (e-book wholesale business and e-book platform business) will be managed independently. The Strategic Investment segment will consist of four strategic businesses: imprint, publishing solutions, international, and fan marketing.
Positioning of each segment
The eBook Distribution segment is expected to generate stable earnings as the company's core business. In the Strategic Investment business, the company aims to establish a new earnings pillar by executing upfront investments using earnings from the eBook Distribution business as a revenue source.
Differences from segments prior to FY02/22
Prior to FY02/22, eBook Distribution (JPY99.3bn; 94.8% of total sales) and Other (JPY5.4bn; 5.2% of total sales) comprised the company's business segments.
The businesses included in the eBook Distribution segment differ between FY02/22 and FY02/23, as prior to FY02/22 it included the print on demand (POD) service business, the PUBNAVI e-book sales management, integrated paper and electronic royalty management system, vertical scroll comics, the FanTop NFT marketplace, and the Zero Comic manga app operated by Nagisa Inc., in addition to e-book wholesale and e-book platform businesses. These businesses, however, are included in the Strategic Investment segment beginning in FY02/23.
eBook Distribution
The eBook Distribution segment consists of the e-book wholesale business and e-book platform business of Media Do and Media Do Tech Tokushima Co., Ltd. (responsible for operations related to digital books).
Role and function of e-book wholesaling
Through wholesaling, Media Do simplifies operations and reduces labor for publishers and e-bookstores by mediating contracts, providing systems, managing campaigns and data, and tallying totals. E-book wholesalers are called upon to fulfill different functions than wholesalers of paper books.
Contract mediation: The company sources content from multiple publishers and provides that content to multiple e-bookstores. The greater the number of suppliers (publishers) and selling destinations (e-bookstores), the more convenience the company’s mediation function provides.
System provision: The company stores on its servers the content data it receives from publishers, ensuring the content is handled appropriately and delivered swiftly to readers; e-bookstores need only link with the server. Rating systems (regulations on what expressions may be used) differ by sales route. Wholesaling sometimes requires revision of inappropriate content. To customers of the Alliance service model (see Service models under the eBook Distribution business section), the company may also provide a viewer (e-book reader software) and other system elements.
Campaign management: E-books present numerous marketing possibilities. For example, to expand the customer base the first volume in an e-book series might be offered for free, with charges assessed for later volumes. Content may be offered for free for a limited period, or apps can divide up stories and allow readers to purchase individual stories. Sales campaigns can facilitate flexibility in price-setting. Wholesalers are required to accurately manage a diverse range of marketing measures on behalf of numerous publishers and e-bookstores. Media Do also makes campaign suggestions.
Data management and tallying: These office functions include monitoring daily sales, managing and tallying lists of the content readers download and readers’ usage history, and outputting this data for publishers and e-bookstores.
Flow of cash through the value chain
Of cash from sales to readers, e-bookstores typically receive around 40%, wholesalers 10%, and publishers 50% (with author royalties paid out of this portion). Based on this, Shared Research calculates Media Do’s contribution margin (sales minus royalties) to be 16–17% (10%÷60%). However, from the company’s disclosure documents, we calculate the royalties as a percentage of eBook Distribution sales for FY02/22 at around 91%, indicating that the company’s contribution margin (sales minus royalties) was approximately 9%. This is because some of the company’s contracts with large e-bookstores stipulate that its percentage sales commission decreases gradually as the sales amount increases. However, as the percentage of royalties the company pays to publishers does not change based on sales amount, higher sales reduce the company’s contribution margin.
Under its Alliance service contract (see Service model under the eBook Distribution business section), e-bookstores receive 70% of the amount paid through apps, as 30% of what readers pay goes to platform operators (e.g., Apple and Google; less than 30% depending on sales value). That 70% is then divided among publishers, wholesalers, and e-bookstores. To avoid paying fees to platform operators, many eBook retailers only offer browser-based payment services and limit the content provided through their apps to the items for which users have already paid.
Although e-bookstores have the right to set the prices at which e-books are sold to end-customers, publishers do influence price-setting to a certain degree, for several reasons. Shared Research thinks possible reasons include that the selling prices of paper books, which are based on resale prices, provide a starting point for setting prices on e-books; that under the Japanese publishing industry’s resale price maintenance system, it is customary for content producers to set prices; and that e-bookstores need publishers to cooperate with them, for the e-bookstores to roll out campaigns while maintaining a certain level of profit margins.
For e-books, author royalties typically represent a fixed percentage of sales at e-bookstores. By comparison, royalties for paper books are determined at a fixed percentage of the number of books printed. Publishers typically pay the author royalties in both cases.
Cost structure
Royalties are variable costs; most other expenses are fixed costs.
From Media Do’s disclosure documents, we calculate royalties as a percentage of eBook Distribution sales for FY02/22 at around 91%, indicating that the company’s contribution margin (sales minus royalties) was approximately 9%. Some of the company’s contracts with large e-bookstores stipulate that its percentage sales commission decreases gradually as the sales amount increases. However, as the percentage of royalties the company pays to publishers does not change based on sales amount, higher sales reduce the company’s contribution margin. The ratio of royalties and other costs to eBook Distribution sales has trended upward, rising from 89.3% in FY02/21 to 91.2% in FY02/22.
We understand that increasing the portion of the value chain allocated to wholesalers is not the company’ intention, nor would publishers and e-bookstores easily agree to such a proposal. For this reason, to increase its profit margin the company needs to boost the gross merchandise value while preventing fixed costs from rising.
How the company forecasts performance
Media Do’s forecasts are comprehensive, incorporating an assumed rate of growth for the overall e-book market and sales fluctuations at individual e-bookstores.
Wholesaling (Media Do)
Domestic share
In FY2020, the market for e-books was worth JPY482.1bn (2021 survey on the e-book business, by Impress Corporation). Of this amount, the company estimates it accounted for JPY158.0bn flowing through wholesaling. Based on this assumption, the company’s share of the wholesaling market in FY2020 accounted for around 35% of the gross merchandise value in Japan (including the gross merchandise value from direct transactions between publishers and e-bookstores). As of FY02/22, the company handled more than 2mn titles.
The main reason publishers and e-bookstores use the wholesaling route for e-books is to avoid complexity (engaging in direct, one-on-one business with numerous publishers and e-bookstores, mediating contracts, and managing campaigns). Accordingly, wholesaling becomes more convenient as the number of publishers and e-bookstores grows. Japan has many publishers rather than a few large ones. Also, oligopoly by foreign e-bookstores such as Kindle has not been prevalent in the Japanese e-book market. This situation creates a strong need for the wholesaling of e-books. Media Do estimates that it has the top share of the market for gross merchandise value via wholesaling. This figure suggests the company’s e-book wholesaling services therefore offer the highest level of convenience to publishers and e-bookstores.
Media Do made Digital Publishing Initiatives Japan Co., Ltd. (DPIJ) a subsidiary in April 2017. As DPIJ’s shareholders included a publishers’ alliance and the Innovation Network Corporation of Japan, the subsidiary had a large share of the market for wholesaling text-based content. This area of Media Do’s business had been lacking; merging with DPIJ allowed it to overcome this weakness. The company also avoided the risk of a commission war by making Digital Publishing Initiatives Japan Co., Ltd. a subsidiary.
E-books present numerous marketing possibilities. For example, to expand the customer base the first volume in an e-book series may be offered for free, with charges assessed for later volumes. Content may also be offered for free for a limited period, or apps can divide up stories and allow readers to purchase individual stories. Flexibility in price-setting can facilitate sales campaigns. Wholesalers are required to accurately manage the diverse range of marketing measures on behalf of numerous publishers and e-bookstores. Managing campaigns appropriately requires personnel as well as systems. As of end-FY02/22, on a stand-alone basis, the company had 308 employees, 2.4 times the 126 people employed at MobileBook.jp (as of end-September 2021), a competing e-book wholesaler. In FY02/22, the company managed more than 10,000 campaigns and says it is the only wholesaler with the personnel to handle that sort of volume.
Agreements with publishers and e-bookstores
E-bookstores usually choose which wholesaler they wish to use, but in some cases publishers designate the wholesaler.
Under exclusive agreements, all transactions flow through Media Do, so wholesaling volume (gross merchandise value) is large. At the same time, commission rates are advantageous to publishers and e-bookstores, so the arrangements benefit all parties.
Media Do suggests exclusive agreements for new e-bookstores with growth potential. In case of small e-bookstores, publishers sometimes suggest the e-bookstores conduct business through wholesalers.
Text-based content has a lower sales volume than manga, and publishers tend to be smaller in scale. Accordingly, at e-bookstores that primarily handle text-based content or those that provide a comprehensive range of content, the company’s share of wholesaling tends to be higher than at e-bookstores specializing in manga.
Selling destinations (e-bookstores)
The company does business with more than 150 bookstores, including all of those ranked in the top 20 by user frequency (Impress Corporation, 2020 survey on the e-book business indicating the top 20 stores where customers had made purchases or paid fees).
Major customers (more than 10% of total sales)
For FY02/22, LINE Corporation (unlisted) accounted for 18.2% of total sales (20.4% in FY02/21), Amazon.com, Inc. (NASDAQ, AMZN) and its group companies accounted for 12.7% (12.8%), NTT Solmare Corporation (subsidiary of NTT [TSE PRM: 9432]) accounted for 14.8% (12.7%), and Digital Commerce Inc. (a subsidiary of DMM.com LLC (unlisted)) 11.6% (undisclosed because it accounted for less than 10% of total sales in FY02/21). The top four collectively accounted for 57% of total sales. The difference in growth rates among e-bookstores is dependent on how aggressive they are in their sales campaigns, and the industry is structured to benefit those capable of shouldering campaign costs, such as by having ample capital or other income sources.
The LINE group operates LINE Manga, the Amazon.com group Kindle, NTT Solmare Comic CMOA, Digital Commerce Inc. operates DMM Books, and BookLive operates the Booklive app as e-bookstores/apps. The company has exclusive agreements with LINE Manga and Comic CMOA.
Note: LINE Digital Frontier Corp. (LDF) was established in July 2018. LINE Manga was operated by LINE Inc. prior to June 2018, but has been operated by LDF since July 2018.
Sales generated from major customers in FY02/21
In FY02/22, sales generated from major customers were as follows: JPY19.1bn (+12.3% YoY) to LINE Digital Frontier Corp.; JPY15.5bn (+47.0% YoY) to NTT Solmare Corporation (subsidiary of NTT [TSE PRM: 9432]); JPY13.3bn (+16.1% YoY) to Amazon Services International Inc., and JPY12.1bn to Digital Commerce Inc. (undisclosed since it accounted for less than 10% of total sales in FY02/21). BookLive Co., Ltd. was excluded from the disclosure because it accounted for less than 10% of the company's sales (JPY8.5bn in FY02/21).
Sales to NTT Solmare increased 47.0% YoY due to aggressive campaigns and commercials by NTT Solmare (Comic CMOA). Sales to Digital Commerce included special demand generated by a large campaign conducted by DMM Books in Q1 FY02/22. As for sales to BookLive, the relative decline in its share of the e-book market has resulted in it accounting for less than 10% of the company's total sales.
Projection of transaction with LINE Digital Frontier Corp. (LDF) from FY02/23 onward
Impact on business performance
The company's full-year FY02/23 forecasts are based on the assumption that transactions with LDF will be approximately 50% less than FY02/22 results (JPY19.0bn in sales). This is based on the assumption that the transfer of operations from the company to eBOOK Initiative Japan Co., Ltd. will begin in Q2 FY02/23, and that all content other than that from Nihonbungeisha Co., Ltd. and publishers with which the company has exclusive contracts (about 10% of FY02/22 sales) will be transferred by Q4 FY02/23. This assumption is founded on the maximum realistic value possible, and the actual transfer schedule will be determined through future negotiations.
The medium-term management plan assumes that transactions with LINE Digital Frontier Corp. will fall by approximately 90% in FY02/24 compared to FY02/22.
Circumstances
On June 1, 2021, eBOOK Initiative Japan Co., Ltd. announced a business alliance with LDF, announcing that it expects to be entrusted with some of the back-end operations of LINE Manga. On November 16, 2021, LDF announced the closing of a take-over bid for eBOOK Initiative Japan Inc.
On April 14, 2022, the company disclosed the status of its transactions with LDF. Specifically, the company disclosed that it had received a request from LDF to discuss transferring the back-end operations it had been entrusted with by LDF to its wholly owned subsidiary, eBOOK Initiative Japan Co., Ltd., as soon as the latter is ready to undertake the work, and that there may be a change in distribution channels in the future. However, the company stated that as of April 14, 2022, no specific details, conditions, or planned transfer date for future transactions between the company and LDF had been finalized, and that discussions are ongoing.
Suppliers (publishers)
Media Do receives permission from publishers and other content holders to use their content, paying royalties in exchange. Publishers are therefore analogous with “suppliers” in general corporate transactions. The company has accounts with more than 2,200 publishers, of which 1,680 are non-manga publishers. The company says it does business with all major publishers (members of the Japan Book Publishers Association, excluding publishers of non-print media, such as audiobooks). The company says it conducts business with more than 99% of domestic publishers that supply e-books.
The top three suppliers of e-book content are estimated to be Kodansha Ltd., Shogakukan Inc., and Shueisha Inc. (each of which is a major manga publisher; the three companies accounted for 45.4% of the company’s total purchases in FY02/19; FY02/22 data has not been disclosed, but the percentage of purchases from these top suppliers continues to remain high). Media Do’s distribution agreements with these companies are one-year contracts that renew automatically if neither party objects.
Systems, infrastructure, and engineers
Content distribution system, e-bookstore system
The company had two distribution systems in place for a time after merging with Digital Publishing Initiatives Japan (DPIJ), but put a fully integrated distribution system in place in FY02/21. The integrated distribution system combines the best features of each of the two former systems. It is based on the system used by DPIJ, which had numerous connections, and includes the Contents Agency System (CAS) functionality of the company’s former system.
By unifying multiple content submission and distribution systems, the company intends to lower the cost of content distribution and utilize the integrated system as a unified database for the publishing industry. The company believes that improving the operational efficiency of publishers by centralizing the submission process and streamlining the distribution of royalties will allow publishers to concentrate on creating works and contribute to creating and digitizing more content. Moreover, a new database connecting all publishers and e-bookstores will enable Media Do to constantly monitor sales status, thereby enhancing the marketing efforts of both publishers and e-bookstores. The new database—which employs blockchain technology—is designed to be compatible with new distribution mechanisms.
The company plans to further migrate to a next-generation core system during the new medium-term management period through FY02/27. The total investment is expected to be JPY500–600mn. This migration will allow the company to launch content and implement campaigns more quickly.
Previous system: CAS
The company previously used the CAS solution, which it had developed. The new integrated distribution system has the same basic functionality as CAS.
CAS comprised a content distribution system, called md-dc, and an e-bookstore system, MDCMS.
md-dc, the content distribution system, was used to store and distribute e-book data files digitalized from the various types of books publishers provided (comics, text-based books, magazines, and photo collections). This system also handled the tallying of sales and royalties due to individual publishers, and produced reports. Media Do says its system has been 99.999% utilized and is capable of handling up to 6.0bn downloads per month. Having access to Media Do’s distribution system means e-bookstores have no need to store content on their own servers. This ability to handle an increased access volume benefited e-bookstores.
MDCMS, the e-bookstore system the company developed, included all the key functionality of other e-commerce sites, such as member management, ranking, point, and payment functions. The system was also equipped with data analysis functionality to facilitate sales management (graphing), track the ongoing status of members and performance throughout their membership periods, analyze access, and manage advertising results.
End-customer information
In cases where Media Do provides its e-bookstore system, end-customer information is stored on its system. However, the company cannot use end-user information without permission, as it belongs to e-bookstores (the exception being information related to its own bookstore). When it needs to analyze end-customer sales information related to marketing measures, the company obtains permission from e-bookstores before extracting this information from its system and analyzing it. On the other hand, the company uses sales information on books it handles itself to determine which items are selling well across the e-book market, as well as strong-selling titles at individual e-bookstores.
Infrastructure
In March 2019, the company began moving its system infrastructure from an on-premises structure onto the cloud.
The shift to a cloud-based structure was completed in 2020, and the company completely shut down its former system in February 2021. The company expects to reduce infrastructure costs by half with the shift to the cloud.
The company’s cloud infrastructure uses Amazon Web Services.
In the past, the company opted for on-premise infrastructure, believing it provided the better security needed for handling copyrighted material. With cloud servers having become more secure, the decision to move to the cloud was based on the need for redundancy in response to a surge in campaign demands and the use of blockchain technology, more expandability, and strong preference by engineers.
Engineers
The company said that it had 156 engineers (Media Do, non-consolidated) as of the beginning of March 2022.
The Media Do workplace offers many growth opportunities. The company’s engineers are in charge of a wide range of areas from front-end through back-end, and are required to tackle new fields such as blockchain technologies and the Go programming language.
The company has a specialist engineer recruitment team and is improving its recruitment with initiatives such as internships and owned media operations.
Industry organizations
Media Do is a member of the World Wide Web Consortium (W3C), a global standardizing body for internet technology. W3C manages EPUB, the international standard for e-books. The company discusses future international standards for e-books with the Digital Publishing Business Group, a body established within W3C. The company is the Group’s only Asian co-chair.
As international standards for e-books significantly affect e-publishing’s creative environment, as well as distribution platforms in general, in April 2017 the company jointly established the Advanced Publishing Laboratory (APL) with the Keio Research Institute at SFC, Kadokawa Corporation, Kodansha Ltd., Shueisha Inc., and Shogakukan Inc. APL makes recommendations for future publishing-related research, including international e-book standards for the publishing of Japanese text (such as the use of vertical script and annotative glosses to indicate pronunciation).
Store operation
1. Comic Navi
The company also operates Comic Navi, its own bookstore site for distributing e-book content. Previously, Comic Navi allowed the company to ascertain trends among end-customers (consumers), but the revised medium-term plan positions the e-bookstore’s role as a way to leverage system development in response to client needs. Whereas Comic Navi’s systems were previously built for e-book stores with monthly turnover of JPY100–200mn, it is enhancing the system’s recommendation function to handle larger bookstores, with monthly turnover of JPY500mn to JPY1.0bn. As well as meeting the needs of existing e-bookstores, Media Do plans to use the system to encourage new clients to make the switch to its own services. Operating a store does put the company into competition with some clients (e-bookstores). However, Comic Navi is relatively small in scale, and clients tend to think the benefits Comic Navi provides (functional enhancements via its systems) outweigh any competitive concerns.
Comic Navi bills readers monthly and provides access to the manga available within their scope of allocated points, which depends on service level, and it is this framework that Media Do credits with Comic Navi’s low cancellation rate. Media Do's identity as a wholesaler enables it to offer a broad range of products. And, given that the e-book market itself is in a growth phase, the company also expects Comic Navi’s turnover to increase.
Strategic Investment business
The Strategic Investment business segment consists of the imprint, publishing solutions, international, and fan marketing businesses.
Imprint business
The imprint business consists of Nihonbungeisha Co., Ltd. (publishing and sales of books and magazines), Jive Ltd. (imprint business), Everystar Co., Ltd. (operation of the novel submission site "Everystar" and production of submitted works), and ARTRA entertainment Inc. (e-comic coloring and comic drawing support services).
Nihonbungeisha Co., Ltd.
Nihonbungeisha Co., Ltd. is a publisher and distributor of practical books, comics, novels, and magazines, both paper and electronic.
Nihonbungeisha's performance in FY02/22 improved more than the company had anticipated. E-book and practical guide sales were strong. In addition, the return rate improved due to book distribution controls. Going forward, the company will cultivate new genres such as vertical scrolling comics.
Background of the acquisition of Nihonbungeisha as a subsidiary
On March 30, 2021, The company acquired all outstanding shares of Nihonbungeisha, making it a wholly owned subsidiary. Nihonbungeisha publishes a wide variety of magazines and books in both paper and digital formats, including lifestyle practical guides, comic books, and novels, and in recent years has also moved into developing and distributing manga apps. The company’s aim behind acquiring Nihonbungeisha is threefold. First, it will be able to broaden its offerings to e-bookstores by owning proprietary content. Second, owning proprietary content will enable the company to expand into new businesses outside of its eBook Distribution business. Finally, creating a successful digital transformation example for small- and medium-sized publishers will not only help the company sell its know-how externally, but also attract more publishers to join the group.
Jive Ltd.
This company handles the imprint business. Media Do explains that the imprint business is low-risk, as digital printing makes small-lot reprinting possible, and web marketing allows the number of copies to be determined accurately.
Profit margins are usually lower for paper books than for e-books, due to costs of printing, returns, and disposal. As a result, profit margins are higher at publishers that have transitioned more fully to e-books, and the margins are improving at large publishers in particular. (According to research by Media Do, in 2015 three large publishers—Shueisha, Shogakukan, and Kodansha—had net margins of 1.26%. That figure had improved to 4.63% by 2018.) Resources are one reason small and medium-sized publishers find the transition to e-books difficult. Small and medium-sized publishers do not possess adequate personnel or expertise to grow e-book sales. Cash flow is another reason. With paper books, publishers are paid when they deliver books to wholesalers. When sales are via e-bookstores, publishers receive payment about two months after the books are sold. This float makes the transition to e-books difficult from the standpoint of cash flow.
The company thinks small and medium-sized publishers can improve profit margins in three ways: by supporting cash flow while promoting a transition to e-books, by using print on demand (POD) to lower return rates on unsold paper books, and by standardizing and increasing the efficiency of marketing, systems, and back-office functions.
Media Do aims to grow by expanding the overall distribution of publications, including the two main types that form the basis of publishing culture in Japan: the producer-driven approach typical of paper books and the market-oriented approach used with e-books and POD. Jive Ltd. was Media Do’s first acquisition in the imprint business, followed by receipt of the Next F label business.
In FY02/22, sales growth was slower than the company's plan. There were delays in system reinforcement, which would entail increasing the number of editorial and sales staff and augmenting their capabilities.
Everystar Co., Ltd.
Everystar Co., Ltd. is a company that operates the novel submission site "Everystar" and conducts publication, adaptation into manga form, and visualization of submitted works. On the novel submission site, the general public can easily submit novels and essays, and communicate directly with readers and users.
Going forward, the company will publish submitted works and promote the publication in other media. Moreover, it will provide original works for vertical scrolling comics (see below).
ARTRA entertainment Inc.
This subsidiary provides e-comic coloring and other services to assist with drawing comics.
Publishing solutions business
The publishing solutions business provides BtoB services to resolve issues faced by the publishing industry. The business consists of vertical scrolling comic production and distribution support, joint initiatives with Tohan Corporation (NFT digital privilege publications, electronic library services, accessible libraries), PUBNAVI (SaaS-based publishing ERP system for sales and royalty management), and PUBFUN (POD business).
Vertical scrolling comic production and distribution support
Media Do intends to expand its support for the production and distribution of vertical scrolling comics. The market for these comics, also referred to as "webtoons," is growing. On the other hand, the conversion of Japanese publishers' content to vertical scrolling comics has been rather limited, and the production method for vertical scrolling comics differs from that of traditional manga in that it requires a division of labor and studio-based production. Moreover, as vertical scrolling comics are produced by various players and distributed to e-bookstores in increasing volume, the company's presence as a wholesaler responsible for distribution from content providers to e-bookstores can be expected to grow.
Vertical scrolling comic market size
The market size of vertical scrolling comics has been expanding in recent years, and according to a QYResearch report entitled "Global Webtoons Market Size, Status and Forecast 2022–2028," the global market for vertical scrolling comics is expected to grow from JPY440bn in 2021 to JPY3.2tn in 2028.
In the vertical scrolling comics market, the manga app Piccoma (service launched in April 2016) operated by Kakao Japan (unlisted), the Japanese subsidiary of South Korean tech giant Kakao Corp. (KRX, 035720), is a leader. According to Kakao's disclosure documents, Piccoma's full-year FY12/20 gross merchandise value (GMV) was JPY37.6bn (180.4% YoY). Moreover, according to press reports, in July 2020, the combined monthly sales value of iOS and Google Play exceeded JPY3.5bn (+220% YoY approximately), making it the highest monthly sales value for non-gaming apps in Japan.
Characteristics of vertical scrolling comic production method
The method of content creation differs between traditional Japanese manga and vertical scrolling comics. In the case of traditional Japanese manga, the artist plays a central role in the creation of content, and is responsible for many functions such as story creation, drawing, and coloring. On the other hand, in the case of vertically scrolling comics, the roles are divided among the writer, artist, colorist, director, etc., and the production is often done in a studio style with a division of labor like in animation and movies.
Media Do's role and added value
The company provides 1) content production and support, 2) provision of original works, and 3) e-book wholesaling in the vertical scrolling comic production and distribution support business. In general, content production and support and the provision of original works have high added value, so the company's profit margin is expected to be higher when it provides these services than when it only serves as a distributor.
Content production and support will utilize Nihonbungensha's publishing capabilities and ARTRA entertainment's coloring and drawing capabilities. The content for which production and support will be provided can be either owned by Media Do or by other companies. In some cases, the company itself may provide original works by leveraging Everystar's original work creation function.
Joint initiatives with Tohan Corporation
The company is working with Tohan to 1) revitalize the paper publishing market, which entails expanding the business of books with NFT benefits and e-book sales at paper bookstores, and 2) promote digital transformation (DX) in the publishing industry through measures such as the promotion of electronic library services.
Capital and business alliance with Tohan and issuance of new shares through third-party allotment
On March 25, 2021, Media Do resolved to form a capital and business alliance with Tohan Corporation, one of Japan’s largest book wholesalers. In connection with this, the company issued new common shares to be placed with Tohan via a private placement and purchased common shares from Tohan, these shares coming from Tohan’s treasury stock holdings and sold to Media Do via a private placement.
With the alliance, the two companies looked to combine their respective strengths and resources, which in the case of Media Do is its highly competitive e-book distribution system and related expertise and its development capabilities in the blockchain technology that is the key to the distribution of a wide range of digital content, and in the case of Tohan, is its extensive physical network, including its sales network and brick-and-mortar bookstore chain. The decision to form an alliance was made based on the recognition of the two companies that the creation of a firm, long-term alliance would allow them to further advance the digital transformation of the publishing industry while helping them increase the value of their own businesses in terms of both enterprise and shareholder value.
Following Media Do’s private placement of newly issued shares with Tohan, Tohan holds a 3.09% stake in Media Do, making it Media Do’s eighth largest shareholder. Following Tohan’s private placement of its own shares (drawn from its treasury stock holdings) with Media Do, Media Do will surpass Kodansha Ltd. to become Tohan’s largest shareholder (Kodansha held a 5.57% stake in Tohan as of end-September 2020). Media Do and Tohan signed the alliance agreement on March 25, 2021; under the agreement, the payment date was for April 12, 2021.
Media Do acquired 3,917,192 shares of Tohan’s common stock (currently held as treasury shares) via a private placement. With a total value of JPY2,938mn, the transaction leaves Media Do with a 5.56% stake in Tohan. In FY03/20, Tohan reported consolidated sales of JPY408.2bn, operating profit of JPY1.3bn, a net loss attributable to owners of the parent of JPY6.0bn, and net assets of JPY97.4bn.
Overview of business alliance with Tohan
The details of the business alliance between Media Do and Tohan is summarized below.
Promote digital transformation of publishing industry: Plans called for Tohan to make use of Media Do’s publishing ERP system (currently under development) and the marketing solutions capabilities of Media Do group member NetGalley LLC to accelerate a switch from Tohan’s traditional producer-driven approach to a market-oriented approach, reduce the return rate of its paper-based publications, and improve profit margins of its bookstore chain. Media Do and Tohan are also looking to pull together information on e-books and paper books published and sold that it can then offer as a resource to sellers of paper books and e-books, libraries, book review websites, and businesses handling information on other types of publications.
Promote digital transformation of publications distribution industry (including sales of e-books): The two companies work together on R&D for a new type of publications distribution model, one that will combine the portability of e-books and other digital publications with the real-life experience of a physical book store and the sense of ownership that comes from paper books and magazines. For its part, Media Do works to develop a new platform for content distribution that makes use of blockchain technology. This effort is proof-of-concept trial run of a new approach to book-selling that provides the consumer with the same physical experience of going into a brick-and-mortar bookstore to buy paper books or other publications. Examples include the provision of limited number of special edition digital content in the form of non-fungible tokens (NFTs) representing digital assets with unique identifying codes made possible by blockchain technology.
Work together in digital library business: OverDrive, Inc. is the largest player in the global digital library market and Media Do is its exclusive agent in Japan. Tohan, with its nationwide network of 21 branch and sales offices, has one of the largest book distribution networks in Japan, and many of the bookstores with which it does business have strong track records of book sales to public schools and public libraries all around Japan. With the alliance between Media Do and Tohan bringing together the solutions capabilities and resources of both companies, the two companies will be in a better position to provide nationwide support for the installation of digital library systems and the ongoing acquisition of digital publications by those libraries.
Extend cooperation to other areas and share management resources: In addition to exploring the possibility of the digital transformation of publications and publication content through cooperative efforts to promote the digitalization of printed books and digital textbook-related businesses, the two companies consider sharing expertise, systems, personnel, and other management resources.
NFT digital publications
The company has launched an NFT-based "digital supplement" service with major book distributor Tohan Corp. Digital supplements are distributed through FanTop, an NFT marketplace developed by Media Do (see below).
Selling books with special rewards makes achieving premier NFT impact easier and increases the visibility of this impact for bookstores and publishers. As of July 2021, the company has begun discussing this plan with Kadokawa, Kodansha, Shueisha, and Shogakukan, all of which are major suppliers for the company. However, there are discrepancies in the amount of interest among content owners.
The digital supplement service provides NFT-enabled content to readers that visit bookstores and purchase products. For example, paper books can be sold with limited edition digital supplements (videos, music, etc.), making digital content into digital collectibles. This will make it easier for the company to use bookstores as a contact point as it will lead to higher sales and unit prices of paper books while also boosting bookstore traffic. In addition, since the company can identify users that have the digital supplement, it can leverage this data and directly market to fans who purchased books. Further, since delivery, management, and other operations are more efficient compared to physical supplements, the company can carry out a variety of campaigns and initiatives simultaneously without limiting these to certain stores. The company also plans to use its equity-method affiliate, MyAnimeList, to generate leads for the NFT marketplace.
Earnings structure
The company will charge a certain rate (lower than FanTop's primary distribution rate of about 30%) for the increase in unit sales price due to the addition of digital NFTs. In its efforts through April 2022, the company has succeeded in increasing the average price of digital NFT books by about 20% over the standard edition without benefits. Furthermore, the average actual sales rate (the percentage of books actually sold out of those shipped to distributors) of digital NFT books increased by approximately 20pp over the standard edition. The company also collects a certain percentage of the value for secondary distribution.
PUBNAVI
PUBNAVI is a Software as a Service (SaaS) publishing ERP system for sales and royalty management, primarily for small and medium-sized publishing companies. The alliance partner is Kowa Computer Co., Ltd., which has extensive experience in building systems for paper books, and the two companies will share revenue from system usage fees. The service is scheduled for launch in June 2022.
Sales management and royalty management related to e-books have become increasingly complex, presenting a challenge to many small and medium-size publishers. For printed books, royalty is levied based on the print run, but for e-books, royalty is levied based on sales volume, and sales continue on a semi-permanent basis. Therefore, the number of e-books subject to management continues to increase. In addition, e-books are not only sold individually, but also in various formats not available with printed books, such as installments or composite volumes, and a subscription model (unlimited volume). More alternative sales models are likely to appear going forward. The company aims to further develop business partners and expand its distribution share by providing PUBNAVI as a system that contributes to operational efficiency and by improving the functionality of its e-book wholesaling system.
PUBFUN
PUBFUN, Inc. is a joint venture between Media Do and Impress Holdings (TSE STD: 9479). The company holds 49% of the shares and Impress Holdings 51%, integrating PUBRID, a print-on-demand (POD) publishing service with strengths in corporate clients, and NextPublishing Authors Press, a service of Impress R&D (a subsidiary of Impress Holdings), whose strength is in individual clients.
Flier Inc.
This company provides the Flier service, offering book summaries aimed at promoting book sales. Monthly fees are set according to service level. At first, it focused on individual users, but it is now focusing on services for corporations as of 2021. Members numbered over 910,000 as of January 2022. The company targets a membership of 1.2 million by 2022.
International business
In the international business, the company will export new technologies such as NFT and provide capital overseas to build a global infrastructure to support global content market expansion. It will also import advanced examples of overseas publishing DX into Japan. The international business comprises Media Do International, Inc. (the company group's international business development base), the Firebrand Group (bibliographic information management, information distribution, and e-book distribution in the US), and Supadü Limited (D2C marketing function provision).
In FY02/22, Japan accounted for more than 90% of Media Do’s sales. The company attributes this to differences between the Japanese and overseas e-book business environments.
The company explains that wholesaling is a rational approach in Japan, which has large numbers of publishers and bookstores. The need for wholesaling is relatively low overseas, where publishing and bookstores both tend to be oligopolistic.
Japanese and overseas markets also differ in content handled. Manga accounts for most of the Japanese market for e-books, whereas text-based content makes up most overseas e-book markets.
The company established Media Do International, Inc. in San Diego, California, in 2016 to promote its business in overseas markets. The company had intended to distribute Japanese content (manga) to e-bookstores, as it did in Japan, but the overseas business has not expanded as it had anticipated. The company attributes this to a small body of content being translated for overseas markets and the fact that wholesaling barely exists overseas.
Media Do International, Inc.
This company’s role is to spread the Media Do group’s business mission overseas and increase business opportunities for rights owners including authors and publishers.
Quality Solutions Inc. and NetGalley LLC
Quality Solutions, Inc. provides publishing workflow management and bibliographic information management services; NetGalley provides a web marketing tool for books, "NetGalley."
In FY02/22, business expanded steadily, but profits fell short of the company's forecast due to increased personnel costs resulting from security enhancements, soaring labor costs, and increased hiring.
Making Quality Solutions Inc. and NetGalley LLC subsidiaries
In January 2021, the company acquired all shares of Massachusetts-based Firebrand group (including Quality Solutions Inc. and NetGalley LLC) through its wholly owned subsidiary, Media Do International, Inc. Firebrand group has two main businesses, its Firebrand business and NetGalley business. The Firebrand business includes publication bibliography information management, information distribution, and e-book distribution. The NetGalley business is a web service business that supports book promotion by delivering digital publication galley proofs to professional readers (including bookstore employees). The Firebrand business has over 100 customers, including two major US publishing companies, and commands a leading share of the market with an annual churn rate of 0%. The NetGalley business has over 500 customers, including five major US publishing companies, and has 800,000 influencer members such as bookstore employees, 40,000 monthly reviews, and a 3% annual churn rate (as of FY02/21 results announcement). The acquisition of Firebrand group will help Media Do in its efforts to promote digital transformation (DX) of the Japanese publishing industry, by allowing it to point to successful DX cases of the North American publishing industry. The acquisition is also aimed at aiding Media Do’s expansion overseas, as it will allow Media Do to tap into the client network of the Firebrand group in North America.
Supadü Limited
Supadü is a SaaS provider of D2C marketing capabilities such as publishers' special sales sites. As of FY02/22, Supadü had over 240 publisher customers, including all five major US publishers. The annual cancellation rate is less than 3%.
Fan marketing business
The fan marketing business comprises FanTop (NFT marketplace), MyAnimeList, LLC (operation of anime and manga community media), Nagisa Inc. (operation of the manga application Zero Comic and ONSTAGE, a video distribution application specializing in 2.5-D and voice content, and J-Comic Terrace, operator of the free e-comic service Manga Library Z.
FanTop (NFT marketplace)
FanTop allows fans of each content to digitally collect and appreciate fan items, or collectibles for fans, and share, transfer, and trade them among fans. The benefits of the digital NFT attached books (mentioned earlier), which the company is offering through an initiative with Tohan Corp., will also be distributed within FanTop.
Release date
The company started selling NFT content in October 2021. Later, in January 2022, it began conducting secondary NFT distribution through its NFT marketplace. It then released a viewer app in February 2022. The viewer app will promote participation of content rights holders in the platform by making NFT content viewable only to their holders. During 2022, it intends to start USD payment-based distribution on MyAnimeList. In the future, the company also plans to start offering a white-label (OEM) system.
Expected customer base, price range, and content
A variety of NFT services are emerging overseas, of which the company highlights NBA Top Shot as a successful example. NBA Top Shot is a service that enables users to collect, buy, and sell photos and videos of NBA players as digital cards. Between its service launch at the end of 2020 and October 2021, NBA Top Shot has processed over 10mn transactions and reached USD700mn in GMV (according to service operator US-based Dapper Labs website). The service achieved high-frequency trading and high GMV as ordinary users such as fans (between several tens of thousands to hundred thousand people) got involved not for speculative holding and selling, but to add to their collection. The company believes that the key to building a successful NFT marketplace does not necessarily lie in building technology, but in attracting fans as ordinary users and distributing content that fans will want to collect. NBA Top Shot mainly consists of ordinary users and distributes a large number of low-priced content, which has in turn generated high GMV. The company will likely develop its services targeting a similar customer base at a similar price range.
The company expects the market to be global, but will likely focus on distributing content from Japanese companies that it has close ties to for the time being.
Earnings structure
Based on the limited information provided by the company, Media Do appears to be planning an earnings structure similar to its eBook Distribution business. The system will likely involve the company collecting a set amount of fee from the buyer (user) and paying a set amount of fee to the respective rights holders (publishers, authors, bookstores, etc.), with the remainder being the company’s profit. As with e-books, securing total distribution is likely to be an important aspect of the business. Users are expected to shoulder approximately 30% of fees for primary distribution and 10–13% for secondary distribution. In addition, other sources of income should be considered, such as margin gained from premiums when issuing limited contents compared to common contents, or fees for issuing serial numbers upon initial issuance. The company estimates the total scale of distribution at JPY9.0bn in FY02/27.
The company's platform structure is designed to be able to connect to other NFT platforms as well. However, as of April 2022, the company's platform is a closed environment with FanTop only, as other NFT platforms are not necessarily offering exclusively authorized content.
Common features of NFT (non-fungible token)
NFTs use the same blockchain technology as cryptocurrencies, with the difference being that NFTs are digital content with unique identifiers, using serial numbers to verify ownership. As of 2021, it is mainly used for trading collectible items. However, while the user will have verified ownership of the content, this does not mean that the copyright will be transferred to the user. As such, copyright holders can increase the number of NFT content available. At the same time, third parties can make copies without proof of ownership. Without a mechanism to verify the copyright holder in the NFT marketplace, it is difficult for users to verify whether NFT content is created with the permission of the copyright holder. It is worth noting that an Ethereum 1.0-based marketplace is not suitable for low-priced content given its high distribution costs.
Background and significance of the company’s entry into the NFT marketplace
The company’s mission, and also its business policy, is “establishing a cycle to create sound copyrighted works.” This cycle refers to distributing copyrightable works in keeping with their fair use and returning the proceeds to the authors. In this way, the company says it intends to facilitate the development of culture around the world and help create social affluence. The company’s management vision is to “deliver more content for everybody to enjoy.” It believes that copyrighted content contributes to cultural development, and an environment for providing access to anyone around the world is emerging. To enable delivery of all sorts of content to people all around the world, the company aims to support all stakeholders, including content creators, producers, sellers, and users.
In the current e-book market, there are cases where copyright holders are unable to collect royalties because of pirate websites. The company believes that blockchain technology can contribute to addressing this issue. It says the technology is well-suited to digital content because it enables traceability, is difficult to forge, and can control supply. Through the control of supply (by having the concept of a fixed number of issues), a service offering an asset model capable of achieving a premium such as that which exists on limited editions becomes a possibility. Through a new distribution format using blockchain technology, the company plans to create a secondary market for e-books. In addition to the conventional sales, subscription, and advertising models, the company aims to create a Digital Content Asset (DCA) model with a mechanism to boost, spread, and visualize fan loyalty. This involves using blockchain technology to establish ownership of music, books, and other digital content, enabling users to not only purchase and consume the content, but also sell it. The company intends to expand the options available to writers and artists, for example by enabling them to limit content distribution to just 100 people.
A secondary market facilitates the shift of content from consumption by users at the point of purchase to one based on assets that have a disposal value. By selling content on to others after they are done using the content, customers can recoup part of the cost of purchase, using the money to buy other content. The company believes such changes in user behavior will lead to increases in the gross merchandise value of content. As of August 2021, there appears to be resistance among publishers because they cannot forecast the impact of the secondary market. However, the company plans to gradually gain the understanding of publishers through NFT initiatives and construct a secondary market.
Technology
Media Do intends to use a consortium blockchain, considering the balance of both speed and security. The system will be able to process transactions at a rate of 5,555tps (transactions per second), or 480mn tps per day. According to the company, assuming an average transaction value of JPY10, the system can handle JPY1.7tn of transactions per year. Amazon Managed Blockchain will make up the infrastructure.
The company uses a blockchain technology called "flow" which features more fixed transaction costs than Ethereum. The Ethereum system is not appropriate for e-books, which are associated with low per-unit costs and high rates of circulation, because its processing speed is insufficient, and its per-transaction costs are high. Therefore, the company believes its use will be limited to content associated with high per-unit prices and low rates of circulation, such as works of art. Unlike other participants in the NFT market, the company is not a financial player. Consequently, it has decided to utilize flow, which facilitates the distribution of a large volume of content at low per-unit prices, rather than Ethereum, which is more technologically appropriate for companies with financial objectives.
MyAnimeList, LLC
MyAnimeList, Inc. operates MyAnimeList, an anime and manga community media site, which saw MAU growth in FY02/22. It completed a capital increase from intellectual property holders, and strengthened overseas expansion of domestic content.
Nagisa Inc.
Nagisa Inc. operates the manga app Zero Comic and the 2.5-D/voice content-specific video distribution app ONSTAGE. Nagisa posted a JPY390mn extraordinary (impairment) loss in FY02/22. The company took into account intensifying competition and changes in the manga app business environment. Going forward, it will focus on fan marketing services.
Making Nagisa Inc. a subsidiary
In October 2020, the company made manga app (Zero Comic, formerly Manga Zero) operator Nagisa a subsidiary, acquiring 68.8% of its shares excluding Nagisa CEO Yokoyama’s stake. The acquisition price was not disclosed. Nagisa operates a Manga business, under which it develops and operates “freemium” apps for manga (Japanese-style comics) and also a FanTech business, under which it operates an on-demand video streaming service that specializes in 2.5-D/voice content. With its prowess in application development and business plan execution, and market track record of more than 40,000,000 downloads of its apps, Nagisa promises to further enhance the competitive position of Media Do in the app market. More specifically, post-acquisition plans call for working together on the development, distribution, and promotion of platforms and solutions that will help Media Do maximize the market reach of its digital content, re-examining distribution channels used for apps and other digital content, making better use of customer data, and finding new ways to market manga content. Media Do explains that it has invested in app businesses, mainly making Nagisa a subsidiary, with the primary goal of acquiring light users. It says new services are more likely to grow through app-based services, not through browser-based services. Accordingly, the company believes that technology and expertise associated with app-based services will be necessary for the development of new services that will drive market expansion.
Extraordinary (impairment) losses
In Q2 FY02/22, the company posted an extraordinary loss (impairment loss) of JPY394mn on goodwill at consolidated subsidiary Nagisa. The company declared a goodwill impairment loss after examining earnings progress against initial expectations and judging that recovery would not be possible following the decrease in advertising revenue in Nagisa’s mainstay manga app business resulting from complying with digital platformer regulations regarding online advertising. Going forward, Nagisa plans to focus on its FanTech business (on-demand video streaming service that specializes in 2.5-D/voice content), which is performing favorably.
J-Comic Terrace Corporation
This company operates Manga Library Z, a free e-comic service, and distributes other e-books.
GREET (video co-watching platform)
The company released GREET, a product that visualizes the history and spread of influence among users, to the public in December 2021.
Specifically, influencers will act as organizers and hold screenings (co-watching events) of their favorite video works. The earnings model relies on the influencers’ followers becoming viewers of these videos and paying for the tickets, with the proceeds divided among the screening organizer, the content copyright holder, and the company. The company is also considering collaborative efforts through which original content could be provided to GREET viewers using the FanTop NFT marketplace.
The COVID-19 pandemic of 2020 has seen the market for experiences suffer a blow amid recommendations to avoid the so-called 3C’s (closed spaces, crowded places, and close contact). This has boosted the need for infrastructure to complement actual experiences. The company also thinks that live online performances have promising growth prospects due to lack of physical constraints (of capacity or distance).
Market and value chain
Japan’s e-book market
Market scale and composition
E-book market scale
In FY2020, the market for e-book publishing was estimated to be worth JPY482.1bn, up 28.6% YoY (2021 survey on the e-book business, by Impress Corporation).
The FY2020 e-books market turned out to be larger than the previous estimate of JPY444.2bn. The institute's analysis shows that the e-book market has expanded significantly due to "stay-at-home" consumption caused by voluntary restraint from going out following the spread of COVID-19 and the impact of blockbuster titles. The FY2021 projection was also significantly upgraded to JPY537.8bn (from JPY481.2bn previously).
Japan’s e-book publishing market is set to keep growing in FY2021 onward, although the pace of growth may level off. By FY2025, Impress expects the e-book publishing market to have a value of around JPY674.7bn.
This survey projects a value of JPY641.4bn for the e-book publishing market in FY2024. This figure represents a 13.1% upward revision from JPY566.9bn in its 2020 survey.
The company projects that the rate of growth in the eBook market in FY2021 will be somewhere between roughly 15% to just under 20% of what it was in FY2020. This projected growth rate is higher than the growth rate forecast made in 2020 survey on the e-book business by Impress Corporation. Even if home-shopping demand associated with the COVID-19 pandemic gradually declines, the company believes that the larger number of users it has acquired due to the spread of the pandemic will habitually utilize eBooks, much in the same way that eBook usage increased following the resolution of past issues associated with eBook piracy.
Manga as a percentage of e-books
Of the e-book market in FY2020, manga accounted for JPY400.2bn (83.0% market share), text-based and other content (e.g., literature, practical guides, and photo collections) JPY55.6bn (11.5%), and magazines JPY26.3bn (5.5%) according to a 2021 survey on the e-book business by Impress Corporation.
Media Do thinks the market for text-based e-book content will increase as people who are more accustomed to reading text electronically grow.
Size of market for manga (including printed manga)
In 2014, the manga market had a total value of JPY313.8bn, with electronic manga making up JPY88.2bn (28% market share) and paper manga JPY225.6bn (72%). In 2021, the market for electronic manga was JPY411.4bn (+20.3% YoY; 66.3% market share), while the paper manga market was JPY208.7bn (+0.4% YoY; 33.7%), according to the Research Institute for Publications.
The company summarizes that the growing popularity of smartphones has increased the number of reader contact points and prompted growth in the e-manga market. Also, the overall market for manga is increasing, and e-manga demand is replacing demand for paper manga, to some degree.
*Only "comic books" for both paper and electronic comics sales are included in comic sales, while "comic magazines" are included in magazines.
Why manga represent a high percentage of e-books
The company says manga are better suited to e-books than text-based books for the following reasons.
According to the company, people tend to read e-books in segments of around 30 minutes, and that manga are better suited to this type of consumption than text-based books, which take longer to read.
The company says it can use marketing measures for manga that work only with e-books, making sales easier for publishers. For example, to expand the customer base the first volume in an e-book series may be offered for free. Content may also be offered for free for a limited period, or apps can divide up stories and allow readers to purchase individual stories.
Manga can be digitized less expensively than Japanese text-based books: several thousand Japanese yen per volume versus JPY20,000–100,000 for text-based books. This difference arises because manga can be treated as images, whereas digitizing Japanese text is complicated as it includes a vertical writing mode and combination of syllabaries (Chinese characters, plus the two phonetic readings of katakana and hiragana for pronunciation guides). Because the profitability of text-based books is falling in Japan, publishers are limiting the scope of digitization. By comparison, books written in alphanumerics like English can be digitized for around JPY1,000, making them less expensive and more profitable than Japanese e-books.
According to an in-house study by Media Do, text-only works account for only around 5% of e-publications in Japan, compared with around 30–40% of the e-publishing markets in the United States and China.
Differences from the music industry
The publishing and music industries have some similarities. Both have been affected by a shift in content provision from physical to digital offerings, but the number of players differs. The publishing industry is characterized by numerous small and medium-sized entities, and even major publishers have a relatively small market share. By comparison, the music industry is dominated by a small number of labels with a high market share.
The issue of pirate websites
The popularity of pirate websites, which offered content free of charge and without the need for user registration, started spreading by word of mouth from around September 2017. Media Do’s performance was affected, with the gross merchandise value (GMV) decreasing notably among manga targeting younger readers. Issues associated with piracy have been resolved for the time being. Following the closure of major pirate manga websites that had had a major impact between 2017 and 2018, the damage caused by pirate websites that had previously not attracted attention has been rising since around October 2020. Pirate websites targeting Japanese users but with servers established in other countries, such as Vietnam, are being identified one after another, and the total number of accesses to the top ten such websites is expected to exceed that of the former major pirate websites.
Impact, damage (2017–2018)
Although accurately assessing the impact and damage of pirate websites is difficult, Media Do gauges the impact by looking at fluctuations in YoY growth at manga stores targeting young readers, which were most notably affected. Sales at these stores rose at an annual pace of around 40% both before pirate websites became popular and after they were shut down. During the period when pirate websites were most prevalent (November 2017 to March 2018), these stores had annualized growth of around 10%. Also, sales of the newest episodes of certain popular titles at e-bookstores were more than 30% lower than for previous episodes among customers aged 15–19. Among the 20–24 age group, these sales were down more than 20%. From this data, the company estimates that in the hardest-hit e-book categories pirate websites depressed sales by around 30%.
According to assumptions by the Content Overseas Distribution Association quoting urgent measures to counter pirate websites (April 2018 meeting of cabinet ministers responsible for anti-crime measures at Intellectual Property Strategy Headquarters), the damage was assessed at approximately JPY300.0bn, based on GMV. These same assumptions note that 96% of access to these sites was from Japan, and that most of the damage was to the domestic market.
The company’s sales in 2H FY02/18 and Q1 FY02/19 were also affected by pirate websites. Although an accurate impact assessment is difficult, company estimates that pirate sites may have reduced sales by around 10% during this period, extrapolating from Q2 FY02/19 sales of JPY12.3bn (after the pirate websites had closed), compared with sales of JPY9.7bn in Q4 FY02/18 (before the pirate sites had closed). If quarterly sales were affected by JPY1.0bn and the company’s percentage of royalties was 86%, Shared Research estimates that quarterly operating profit was reduced by around JPY140mn.
Media Do says it became aware of pirate websites’ impact around September 2017. Rumors of pirate websites had begun circulating around then, and the company says they were beginning to have a clear negative impact on sales growth rates.
According to the company, the user base most susceptible to impact from pirate websites is that of light users, which primarily consists of individuals who utilize apps. Furthermore, pirate websites are more likely to impact performance from content that is short in length than performance from long content.
The problem’s development
The Japanese government began considering measures for blocking access to pirate websites, announcing Emergency Measures for Countering Pirate Websites in April 2018. The emergency measures called for internet service providers to block the three most malicious sites. Access to pirated content on the three sites was blocked at around that time, so the industry assumed the pirate website issue was ending. However, internet service providers had not actually blocked the sites. Around July 2019, overseas authorities detained a suspected operator. As similar pirate websites emerged after that point, it became evident that the authorities had not actually resolved the underlying problem.
The procedures that rights holders must follow to make takedown requests under the US Digital Millennium Copyright Act (DCMA) presents a language barrier for Japanese authors. Also, once a manga artist makes a takedown request, pirate websites may target his or her works in retaliation.
Also, pirate websites used Cloudflare’s content delivery network (CDN). Acting as a reverse proxy for websites, this CDN prevents outside access to servers, with information about the original servicer and operators of pirate websites shrouded by Cloudflare. Furthermore, the pirate websites used non-US providers between themselves and Cloudflare, complicating access to original servers by rights holders wishing to make takedown requests.
The problem’s development
Blocking must be conducted with caution to avoid infringing on the “secrecy of communication” (Article 21-2 of the Constitution of Japan, Article 4-1 of the Telecommunications Business Act).
The emergency measures apply to cases in which (1) the number of content uploads is such that they clearly infringe the legitimate interests of the copyright holder, (2) takedown, arrests, or other methods do not effectively protect those rights, (3) methods and practices do not infringe the secrecy of communication more than necessary, and (4) the infringement on the copyright holder’s rights via the site is extremely clear. Also, the measures indicate that if conditions for emergency evacuation (Article 37 of the Penal Code) are satisfied, the claim of illegality may be rejected.
In addition to secrecy of communication, blocking could be perceived as hindering freedom of expression (Article 21 of the Constitution of Japan), and technically viewers could be inadvertently prevented from browsing a variety of content across the board. These factors made it difficult to block pirate websites other than those that were particularly malicious and caused particularly serious damage, to avoid abusing measures for preventing the browsing of illegal and harmful information in general.
The proposed emergency measures, which were enacted as extraordinary emergency measures until legal systems could be put into place, were limited to the blocking of the three sites through voluntary initiatives of the private sector. The measures also provided that the blocking be performed under an appropriate administrative structure supervised by the private sector. If new, particularly malicious pirate websites emerged, the measures called for the necessary systems to be established quickly, with a deliberative assembly comprising the related company and experts swiftly convened under the Intellectual Property Strategy Headquarters. After that point, a review session was held to discuss measures for addressing pirated content on the internet, but opinions on stepping up blocking methods were non-cohesive, and the interim guidelines were abandoned.
Government’s perspective on blocking domains hosting websites that infringe copyrights
In the Emergency Measures for Countering Pirate Websites, the government outlined its perspective with respect to domains designated for blocking and indicating that blocking be conducted carefully.
We recognize that some or all sites on the target domains were established to distribute manga, anime, films, and other copyrighted material over the internet.
Some sites on the target domains contain a considerable amount of content that clearly infringes on the rights of the copyright holders, and the sites have been accessed a considerable number of times from Japan.
Where multiple sites exist within the target domains, the administrators of the individual sites are considered to be the same party.
Taking into overall consideration a variety of factors, such as that (1) sites included in the target domains do not respond sincerely to the exercise of copyright holders’ rights or takedown requests, (2) the infringing parties and the operators cannot be identified, hindering the exercise of rights and takedown requests, and (3) the sites were not taken down even when criminal prosecution was threatened, we recognize that no other option exists than to block the target domains.
Criminal penalties against users who download pirated content
Music and video (movies)
Since 2010, Japan’s Copyright Act has forbidden the downloading of pirated content, including music and video (movies). October 2012 revisions to the Copyright Act assigned a punishment of “imprisonment for two years or less or a fine of JPY2mn or less (or both)” to parties who, knowing both that the music or video was available for sale or paid delivery and that the content was distributed illegally, stored (downloaded) such music or video on their own personal computers.
Books
Revisions to the Copyright Act were enacted in June 2020, which assigned penalties for users who download printed book content. Regulations on so-called “leech sites” went into effect in October 2020. Other amendments came into effect in January 2021.
In January 2020, Japan’s Agency for Cultural Affairs summarized a report by an investigative commission for Copyright Act reform on the downloading of manga and other pirated content, despite being aware that the content was illegal. The report suggested that negligible downloads, such as smartphone screenshots or copying a single frame from a manga running to dozens of pages should not be considered illegal. The report included a recommendation on introducing criminal penalties for so-called “leech sites,” which lead internet users to pirate sites. Although its initial proposal called for regulating against all forms of download, including screenshots, the commission subsequently narrowed its proposed scope of regulation following repeated criticism that the original proposal would cause internet use to atrophy.
E-book characteristics
From the perspective of readers (customers) and publishers
E-books differ from paper books in several ways.
Readers’ (customers’) perspective
Advantages of e-books
E-books make it easy to change fonts, enlarge text, change background colors, and otherwise improve readability for each reader. Accessibility to e-books is also high.
E-books having the same content as paper books are often less expensive. E-books present opportunities for making free content available or lowering prices significantly through campaigns.
As long as readers can access the internet, they can buy e-books whenever, wherever they like. Paper books are becoming available at fewer locations as the number of physical bookstores decreases. If purchased on the internet, readers pay delivery charges, and the books take time to arrive.
Readers can move about easily with numerous e-books, whereas the number of paper books that can be carried is limited by the space they take up and their weight.
E-books do not deteriorate, whereas paper books are affected by moisture and other factors.
Disadvantages of e-books
E-books generally cannot be lent to others, whereas paper books can be rented or used in conjunction with diverse service models, such as manga coffee shops.
Paper books can be read even if a bookstore closes, whereas e-books cannot.
Some sort of device is needed to read e-books. For paper books, such terminals are unnecessary.
When books include drawings or complicated typesetting, those books tend not to be digitized, so can only be read in paper form. Even if digitized, e-books are usually released after paper books go on sale.
Publishers’ perspective
Advantages of e-books
E-books make diverse marketing measures possible, while the marketing of paper books centers on trial readings. For example, to expand the customer base the first volume in an e-book series may be offered for free, with charges assessed for later volumes. Content may also be offered for free for a limited period, or apps can divide up stories and allow readers to purchase individual stories. Flexibility in price-setting can facilitate sale campaigns.
Different from paper books (for which royalties are paid based on the number of copies printed in most cases in Japan), on e-books author royalties are paid based on the number of e-books sold.
Paper books involve printing and storage costs; e-books do not. E-books are preferable from the perspective of inventory risk and working capital.
Paper books are generally sold on a consignment basis in Japan, whereas e-books are not returned. Under the consignment system, return rates are high, at around 40% by value (2018 study by the Research Institute for Publications).
Japan’s systems for reselling and setting prices
The Japanese publishing industry has a resale price maintenance system for paper books, but this system does not apply to e-books. Because e-book prices can be set freely, prices on paper books and e-books with the same content tend to differ, with e-book prices fluctuating according to timing.
Under the resale price maintenance system, publishers set selling prices, which bookstores uphold.
Although the Antitrust Act generally prohibits retail price maintenance agreements, certain exceptions are allowed. Paper books are granted such an exception, based on the perspective that they promote culture and education. The resale price maintenance system guarantees that a book has the same price at all locations across Japan, signifying that readers have equal-opportunity access to published works.
The resale price maintenance system applies only to tangible objects including physical books, therefore e-books are exempt.
E-book value chain in Japan
Sales routes
Principal sales routes
E-books are sold through five routes, with sales channels (1) and (2) shown below being the main routes. Media Do indicates that as of September 2019, around 40% of e-books sold in Japan went through wholesale routes, or sales channel (1), while some 50% are sold through direct transactions between publishers and e-bookstores, or sales channel (2). Around 10% went through sales channel (3), where publishers sell to consumers through directly managed e-bookstores. Sometimes, e-bookstores use an advertising model (free content that generates advertising revenue) rather than a sales model. Content may also go through multiple sales channels. In such cases, even if the name under which it is sold remains the same the flow of data (a server which stores data for users to download) differs.
Sales channel (1): Publishers sell e-books to wholesalers, who sell them on to retailers, who sell them on to consumers (readers).
Sales channel (2): Publishers sell e-books to retailers, who sell them on to consumers.
Sales channel (3): Publishers sell e-books directly to consumers. In particular, large publishers build and operate their own e-book delivery sites to sell directly to consumers.
Sales channel (4): Authors sell e-books to retailers, who sell them on to consumers.
Sales channel (5): Authors sell e-books directly to consumers via websites the authors operate.
Sales channel (2), which bypasses wholesaling
Unless wholesalers have exclusive agreements in place with publishers, e-bookstores may purchase content from other wholesalers. Publishers may also sell content directly, unless prohibited by contract. Sales routes that do not pass through wholesaling exist for several reasons.
Based on historical business practices
E-book wholesaling did not exist before 2006, when Media Do entered the eBook Distribution business, so e-bookstores and publishers conducted business directly.
Business between large publishers and large e-bookstores
Unlike for paper books, the wholesaling of e-books requires no physical logistics, so e-bookstores and publishers may see no major benefit in using wholesalers. Large publishers and large e-bookstores may enter direct agreements that cut out wholesalers.
Media Do explains that agreements that involve wholesaling are not based on content by content but on content varieties (separating manga from text-based books, for instance). The company says such agreements prevent companies from engaging in direct sales, rather than wholesaling, for specific content likely to sell many copies.
Transactions with special distribution formats
The wholesaling system generally assumes a certain distribution format. If e-bookstores wish to use a special sales method, publishers and e-bookstores may enter direct agreements.
Differences from sales routes overseas
In Japan, around 40% of e-books are sold via the wholesale route. Wholesaling exists because bookstores stock numerous items and Japan has many publishers and bookstores, so wholesaling is more efficient than publishers and bookstores handling transactions directly.
Overseas markets tend to be dominated by a few large publishers. Japan has many publishers, and Media Do has accounts with more than2,200 of them. The company says Japan’s four largest publishers have a total market share of only around 30%. It attributes this situation to an environment that makes it easy even for small publishes to enter the market.
Other than Amazon (Kindle), many e-bookstores such as LINE Manga also have a high share of the market in Japan. The company says this may be because Kindle is better suited to text-based content than to manga and has focused on text-oriented devices and apps. For manga, however, users tend to prefer other sites and apps better suited to manga.
E-bookstores selling their content directly
E-bookstores may seek to differentiate themselves by offering proprietary content.
The trend toward e-bookstores offering proprietary content is particularly pronounced with manga apps, and Media Do thinks this tendency will grow going forward. That said, it is unusual for large publishers to provide their main content only to specific e-bookstores, and such cases only comprise a small portion of the overall market. With manga apps, sometimes content is offered in advance only to specific e-bookstores for a certain period.
For text-based content, the company explains that e-bookstores may bear the cost of digitizing books in exchange for exclusive sales rights arrangements.
Royalty management and sales management issues
Sales management and royalty management related to e-books have become increasingly complex, presenting a challenge to many small and medium-size publishers.
Royalty management: For printed books, royalty is levied based on the print run, but for e-books, royalty is levied based on sales volume. E-books also do not go out of print. Therefore, the number of e-book titles to be managed will continue to increase.
Sales management: E-books can be sold in various formats not available with printed books, such as installments and composite volumes, and subscription model (unlimited volume). More alternative sales models are likely to appear going forward.
End-customers (readers)
Individuals are the end-customers (readers) for e-books and e-book apps.
Usage is high among people aged 10–39 (2021 survey on the e-book business, by Impress Corporation).
Compared with those aged 20–39, people aged 10–19 are less likely to use paid content, but access to free content is high.
Trends at competitors
A competitor in e-book wholesaling is MobileBook.jp Inc., a subsidiary of Dai Nippon Printing Co., Ltd. (TSE PRM: 7912).
In March 2017, the company gained the largest share of the Japanese market for e-book wholesaling when it acquired Digital Publishing Initiatives Japan Co., Ltd.
The company says that while competitors outsource system development, it gains a technological advantage by developing its own systems.
The company is also larger than competitors in terms of employee numbers. This scale allows the company to handle more campaigns.
As MobileBook.jp is unlisted, only information on net income and number of employees is available.
Products that compete for consumer contact time in a broad sense
As manga accounts for more than 80% of the e-books sold in Japan (according to the 2021 survey on the e-book business by Impress Corporation), Shared Research thinks most Japanese e-books are accessed for an entertainment purpose. E-books are usually read on mobile devices, such as smartphones, tablets, and dedicated e-book readers, making e-books akin to mobile amusement, a category where competing products scramble for a share of consumer contact time. In this sense, the company competes with Facebook, Twitter, Instagram, and other social media, as well as mobile games, music, and movies.
Since the closure of pirate websites, the e-book market has grown thanks to the consumer exposure to manga those pirate websites encouraged, helping to entrench a manga consumer base (rather than a base for products that compete in a broad sense).
Strengths and weaknesses
Strengths
The company has the top share of the Japanese market for wholesaling e-books, providing high levels of convenience in transactions with publishers and e-bookstores.
The main reason publishers and e-bookstores use the wholesaling route for e-books is to avoid complexity (engaging in direct, one-on-one business with numerous publishers and e-bookstores, mediating contracts, and managing campaigns). Accordingly, wholesaling becomes more convenient as the number of publishers and e-bookstores grows. Overseas markets tend to be dominated by a few large companies, but Japan has many smaller publishers and few oligopolistic foreign e-bookstores such as Kindle in its e-book market. This situation creates a strong need for the wholesaling of e-books. Media Do estimates that it has the top share of the market in terms of gross merchandise value (GMV) that flows through wholesaling.
Major business partners include large publishers, which have long business relationships with and capital investments in Media Do Holdings.
Three prominent manga publishers, Kodansha Ltd., Shogakukan Inc., and Shueisha Inc., are major shareholders of Media Do. These publishers are also major business partners, accounting for 45.4% of the company’s total purchases (of JPY43.7bn) in FY02/19. Total purchases from the top three providers of e-book content and share breakdown for FY02/20 are not disclosed in annual securities reports, but they contain a comment that the share of the top three providers remains at a high level. The company’s competitiveness and market share in wholesaling are attributable to the trust-based relationships it has built with these large publishers over years of business with them and through their investment in the company. Shared Research thinks the company plans to leverage these relationships now that it has released its NFT marketplace in FY02/22.
Complex functions and know-how are demanded of eBook wholesalers, creating a barrier for entry
It is the wholesaler’s role to provide various functions to reduce the labor and effort of publishers and e-bookstores. The main functions of wholesalers for e-books are being contract intermediaries, providing systems, managing campaigns, and managing/compiling data. Complex functions and know-how are demanded for this role, creating a barrier for entry for eBook wholesalers. Specifically, the wholesaler must store the content data provided by publishers on a server and allow e-bookstores to swiftly distribute appropriately processed content to users just by linking to the server. Rating systems (expression restrictions) also vary depending on the sales route. If needed, wholesalers must revise and appropriately process content. Furthermore, diverse marketing campaigns are also possible at e-bookstores. For example, an e-bookstore may make the first volume free for a limited time to expand the reader base for volumes two and later. It could also divide a book by each chapter on the application so that readers can purchase each individually. It is also possible to conduct discount sales by flexibly changing the price settings. While it is possible to conduct various marketing initiatives like this, wholesalers are required to organize diverse and multiple campaigns among multiple publishers and e-bookstores and manage them accurately. Wholesalers must also monitor daily sales, manage and compile lists of content downloaded by users (readers), manage the use history, output these data, and conduct other administrative tasks.
Weaknesses
While some logistics functions are non-essential for e-books, reliance on wholesaling is lower, and publishers and e-bookstores conduct around 50% of transactions directly.
For paper books, around 80% of the GMV flows through wholesaling (The New and Easy-to-Understand Framework for the Distribution of Publications, 2019–20 edition, Media Pal). Media Do estimates that as of September 2019, wholesaling accounted for only around 40% of the GMV for e-books in Japan, with approximately 50% of GMV occurring as direct sales between publishers and e-bookstores. E-books can be downloaded as digital data, rendering unnecessary some distribution functions handled as part of wholesaling, such as physical distribution and returns of unsold books. Conversely, publishers and e-bookstores can easily engage in direct transactions, without requiring wholesaling. The main reason publishers and e-bookstores employ wholesaling in their e-book transactions is to reduce complexity: decreasing the need to engage in direct, one-on-one business with numerous other publishers and e-bookstores, mediating contracts and managing campaigns. That said, large publishers and large e-bookstores may deal directly with other large publishers and large e-bookstores if they consider the advantage of wholesaling to be relatively low.
The company relies on the eBook Distribution business for most of its sales and profit, so is vulnerable to pirate websites and other external factors.
The eBook Distribution business accounted for most of Media Do’s sales and profit as of FY02/22, making the company vulnerable to outside factors affecting the e-book market. Pirate websites are one such example. The company says the emergence of pirate sites had caused the overall market for e-books to shrink at one point, reducing its sales by around 10% at the time of maximum impact (from FY02/18 to FY02/19). In addition, the company missed its sales target by about JPY1.5bn in FY02/21, of which it estimates about half was attributed to pirate websites.
Having a top share of the market for e-book wholesaling introduces limitations due to conflicts of interests with large publishers and large e-bookstores.
Media Do has the top share of its market in terms of total distribution through wholesaling (company estimate). The company attributes this share to the high level of convenience it provides and solid relationships built over years with its suppliers (large publishers) and selling destinations (large e-bookstores). The flip side of this arrangement is that it takes away the company’s leeway to engage in any large-scale business that would endanger its position in wholesaling or create conflicts of interests with large publishers and large e-bookstores.
Historical performance and financial statements
Income statement
Note: Figures may differ from company materials due to differences in rounding methods.
Cost of sales
Media Do’s cost of sales includes royalties and cost of production (mainly engineers’ labor costs and system costs).
Royalties and other costs
Royalties are rising as a percentage of sales in the eBook Distribution business, for two main reasons.
Royalties make up a higher percentage of sales for general books (other than manga), and these general books make up a growing share of the company’s product mix.
Some of the company’s contracts with large e-bookstores stipulate that the company’s percentage sales commission decreases gradually as the sales amount increases, but the royalties paid to publishers do not vary with sales amount. Therefore, the company’s margins fall as sales amount rises.
SG&A expenses
Commissions paid
These payments are mostly for the use of servers and other distribution system infrastructure.
Non-operating income (expenses) and extraordinary gains (losses)
FY02/19 extraordinary losses
System impairment loss: JPY480mn
The company posted an impairment loss on parts of a system it was developing prior to the merger with Digital Publishing Initiatives Japan (software in progress) that became unnecessary after the merger.
Lunascape Corp.: JPY260mn
This company originally anticipated browser-based sales of new e-books, but it is currently handling subcontracted development for Media Do. This change in business direction resulted in a valuation loss.
Loss on valuation of investment securities
Internet Research Institute Ltd.: JPY540mn
Media Do recorded a valuation loss due to a decline in this company’s share price after its listing in the Tel Aviv Stock Exchange in Israel.
Creatubbles Pte. Ltd.: JPY760mn
Media Do recorded a valuation loss on this company due to slower-than-expected business expansion stemming from insufficient public awareness of its services.
FY02/20 equity-method losses and extraordinary losses
For the shares the company holds in three companies (one overseas listed and two unlisted), it recorded a JPY180mn loss on valuation of shares (extraordinary losses) and a JPY114mn loss from equity-method investments due to loss on valuation of shares, considering the impact of the further spread of the new coronavirus infection on their businesses and the decline in stock prices. A total of JPY152mn loss from equity method investments (the above-mentioned loss and a JPY38mn loss from other equity-method investments) was partially offset by JPY84mn equity-method investment profit. As a result, the income statement shows a JPY67mn equity-method investment loss. The overseas listed company’s valuation was reduced to its market price, and the valuations of the two unlisted companies were reduced to nearly zero, assuming a heavy negative impact from the new coronavirus pandemic.
FY02/20 Extraordinary gains
Gain on sale of investment securities
In Q3 FY02/20, the company posted a JPY290mn gain on sale of investment securities when it sold some of its holdings in Amazia, inc. (TSE GRT: 4424), a business partner.
Balance sheet