'My Favorite' (left) and Demon Slayer movie (right) poster. /Courtesy of each company

Sony has become the largest shareholder of KADOKAWA, a content group with annual sales exceeding 2 trillion won, enhancing its influence in the content sector. KADOKAWA produced the popular anime "My Favorite One," which boasts cumulative sales of over 15 million copies. Sony is expected to expand its content by integrating KADOKAWA's popular intellectual property (IP) with its existing animation streaming service and production companies.

◇ 80-year history KADOKAWA, game and animation production

According to the Nihon Keizai Shimbun on the 22nd, Sony Group acquired additional equity in KADOKAWA for 50 billion yen (approximately 46.13 billion won). As a result, they became the largest shareholder with about 10% equity in KADOKAWA. Sony plans to participate in KADOKAWA's capital increase scheduled for January next year by dispatching one director.

KADOKAWA is a Japanese content group established in 1945. It originated from the manga publisher "KADOKAWA Shoten" and exerts influence in the Japanese game, animation, and light novel markets. KADOKAWA recorded revenue of 2.3532 trillion won last year.

KADOKAWA acquired the animation studio that produced the popular anime "My Favorite One" last July. The anime gained popularity after its opening song challenge became a global trend following its release on Netflix. The duo YOASOBI, who performed the opening song, gained attention by appearing on domestic music broadcasts. Additionally, the game subsidiary FromSoftware's "Dark Souls" series and "Elden Ring" have garnered popularity.

A source in the Japanese investment sector noted, "Sony is a vertically integrated global entertainment corporation from production to distribution," adding that "Sony's valuation is expected to rise. The company's stock price, which was $15 in May, has risen to around $20 as of today.

◇ Sony-KADOKAWA, collaboration in content investment and production

Sony appears set to strengthen its global content competitiveness using KADOKAWA as a springboard. This strategy involves adapting popular IP into various media, such as animation, film, and games, in a so-called "media mix strategy." Sony owns the animation streaming service Crunchyroll and the animation studio Aniplex, which produced "Demon Slayer." The film version of "Demon Slayer" has generated approximately $500 million (694.3 billion won) in revenue. There are also discussions underway about co-producing KADOKAWA content as live-action films, dramas, and animations.

Both parties stated they would collaborate for joint investments and productions in the content sector. KADOKAWA plans to use 20 billion yen (18.47 billion won) of the funds procured for creating and acquiring new content IP, and 30 billion yen (27.69 billion won) for the overseas expansion of its content IP. They are reportedly considering establishing production and sales bases in the U.S., Europe, and China and also aiming for mergers and acquisitions (M&A) with local companies.

The size of the Japanese content market, including animation and games, is estimated at 14 trillion yen (approximately 129.43 trillion won). According to Japanese media, as the popularity of animation and games rises globally, overseas sales of Japanese content are projected to reach around 5.8 trillion yen (53.58 trillion won) in 2023, nearly quadrupling over the past decade. The Japanese government plans to increase exports of its content, including manga and games, to 20 trillion yen (177 trillion won) by 2033.

Meanwhile, prior to Sony becoming the largest shareholder, Kakao held 8.87% equity as the top shareholder. Tencent also holds approximately 6.86% equity and is one of the major shareholders. When rumors of KADOKAWA's sale emerged, both Kakao and Tencent reportedly expressed interest in acquiring it, but ultimately, Sony secured its position as the largest shareholder.