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1/25
May 15, 2015
Avex Group
Mid-Term Strategy 2018
2/25
[1] Introduction
[1-1] Changes in the business domain
[1-2] Corporate Philosophy of Avex Group
[2] Review of “Next Era 2014,” the previous medium-term business plan
[3] Current facts
[4] Future direction
[5] Target guideline
©2015 Avex Group Holdings
3/25
Changes in the business domain
What has remained unchanged is our wish to
deliver excitement to customers
Digital video
distribution
Digital music
distribution
Live
Management
Record label
Music package
1988 1990 1995 2002 2009 2014
Early period Growth period Transition period
Sales of imported records
Started the record label business
Full-scale operation of the management business
Full-scale operation of the live business
Started digital music distribution
Started digital video distribution
©2015 Avex Group Holdings
4/25
Corporate Philosophy of Avex group
On the basis of everyone’s dreams and
aspirations, we are committed to
delivering excitement to the world
without being limited by convention.
Aspiring to be a company
that creates an exciting
experience
©2015 Avex Group Holdings
5/25
[1] Introduction
[2] Review of “Next Era 2014,” the previous medium-term business plan
[2-1] Review of the previous mid-term business plan “Next Era 2014”
[2-2] Achievements made through alliances with digital platforms
[3] Current facts
[4] Future direction
[5] Target guideline
©2015 Avex Group Holdings
6/25
Review of the previous mid-term business plan “Next Era 2014”
Targets set with the Next Era 2014 (announced on December 1, 201)0
Results
FY2011 FY2012 FY2013 FY2014
Net Sales Achieving consolidated net sales at 140
billion yen or more for FY2013 ¥121. billion ¥138.7 billion ¥156.9 billion ¥169.2 billion
Operating
Income
Margin
Continuing to achieve 10% or higher 10.1% 10.1% 6.6% 5.1%
ROE Achieving 15% or higher 14.7% 18.4% 14.6% 12.2%
D/E Ratio Striving to reduce interest-bearing liabilities*1
by targeting 1 time or below 0.7 0.4 0.2 0.2
Dividends Achieving a dividend ratio of 30% or more*2 34.8% 31.8% 37.1% 35.2%
As a result of business diversification, we achieved a new record high in net sales for four
consecutive years. We also improved our financial standing and aggressively enhanced
shareholder returns. Improvement of the operating income margin is a future task.
*1: Reduced interest-bearing liabilities from 40 billion yen to 10 billion yen
*2: The dividend ratio was raised to 35% in the fiscal year ended March 31, 2014
©2015 Avex Group Holdings
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Achievements made through alliances with digital platforms
We aggressively promoted alliances in the digital domain based on the growth strategy.
+
LINE MUSIC
Total number of subscribers: 5.36 million (As of March 31, 2015, including subscribers to BeeTV)
Total number of subscribers: 1.57 million (As of March 31, 2015)
Kodansha, Shueisha,
Shogakukan, and others
©2015 Avex Group Holdings
8/25
[1] Introduction
[2] Review of “Next Era 2014,” the previous medium-term business plan
[3] Current facts
[3-1] Trend of digitalization of entertainment
[3-2] Market changes related to our company
[3-3] Changes in users
[3-4] Change in the music business
[3-5] Facts about the environment related to digital platforms
[3-6] Facts about the environment related to the live platform
[4] Future direction
[5] Target guideline
©2015 Avex Group Holdings
9/25
Trend of digitalization of entertainment
Digitalization of the market has greatly changed the means of providing content.
Change of
device
Music
Video
Games
Competitive
environment
PCs Feature phones Smartphones
Records CDs and DVDs Digital music
distribution
TVs and
movie theaters DVDs
Digital video
distribution
Game arcades Home video game
consoles
Smartphone
games
Digitalization
Entry of global players
©2015 Avex Group Holdings
10/25
Market changes related to our company
*Sources: Recording Industry Association of Japan, Japan Video Software Association, Motion Picture Producers Association of Japan, Inc.,
Media Development Research Institute Inc.
The size of the markets of our existing businesses have been on a downward trend.
Music software (Packages) 2009 2014
Video software (Packages) 2009 2014
Digital music
distribution 2009 2014
Rental video 2008 2013
316.5
254.1
19.7%
273.9
229.9
16.1%
90.9
43.6
52.0%
255.5
202.9
20.6%
¥billion
©2015 Avex Group Holdings
11/25
Changes in users
Changes in the use of money and time
Diversification of tastes
Digitalization has greatly changed the behavior of users.
Changes in the way users obtain information
©2015 Avex Group Holdings
12/25
Change in the music business
Digitalization and changes in users have resulted in big changes in media and the music
business
Before Now/Future
Media Mass media ➡ Social media
Mu
sic
bu
sin
es
s
Management Major talent agencies ➡ Increase of
new players
Production Major labels ➡ Increase in independent
production
Sales Domestic players ➡ Entry of
global players
©2015 Avex Group Holdings
13/25
Facts about the environment related to digital platforms
Size of the digital music distribution market (¥billion) Source: International Federation of Phonogram and Videogram Producers (IFPI), 2014
Size of the online video distribution market (¥billion) Sources: THE DIGITAL ENTERTAINMENT GROUP (United States), 2014,
IT Navigator, Nomura Research Institute, Ltd. (Japan), 2014
• Currently both the digital music distribution market and digital video distribution market have large room for growth in Japan.
• However, it is likely that global players will enter the Japanese market, resulting in fierce competition.
0 1,000 2,000 3,000 4,000 5,000
アメリカ
日本
Entry into Japan by global players
0 500 1,000 1,500 2,000 2,500 3,000
アメリカ
日本
United States
Japan
United States
Japan
50 100 150 200 250 300 100 200 300 400 500
©2015 Avex Group Holdings
14/25
Facts about the environment related to the live platform
Size of the concert market (¥billion) Source: All Japan Concert & Live Entertainment Promoters Conference
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2010年 2011年 2012年 2013年 2014年
0
500
1000
1500
2000
2500
3000
2010年 2011年 2012年 2013年 2014年
Size of the amusement and theme park market (¥billion) Source: Ministry of Economy, Trade and Industry
Concert market expanded and
exceeded 270 billion yen. (Reference) The amusement and theme park
market has also grown to 600 billion yen.
• While digitalization is happening, the market related to live concerts, in which artists and the audience share time and space, has been expanding.
• However, the concert market may level off in the future due to the venue capacity issue.
300
250
200
150
100
50
0
700
600
500
400
300
200
100
0
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
©2015 Avex Group Holdings
15/25
[1] Introduction
[2] Review of “Next Era 2014,” the previous medium-term business plan
[3] Current facts
[4] Future direction
[4-1] Strengths and the competitive advantage of Avex Group
[4-2] Business policies for the next three years
[4-3] Mid-term strategy: Content strategies
[4-4] Mid-term strategy: Digital platform strategies (Music)
[4-5] Mid-term strategy: Digital platform strategies (Video)
[4-6] Mid-term strategy: Live platform strategy
[5] Target guideline
©2015 Avex Group Holdings
16/25
Strengths and the competitive advantage of Avex Group
We own rights as a content owner and are capable of
making use of rights proactively by responding to
environmental changes.
We have the capacity and foundation for 360-degree business operation, covering labels, publishing,
management, digital, live music, anime, and schools.
We achieved the largest share for three consecutive years in the music market in Japan. We have
bargaining power and influence in the industry.
Being an independently-owned listed company, we have
reliability and financial power and can make decisions
promptly and flexibly.
Avex is a comprehensive entertainment company which is unparalleled in the world. We
have various strengths demanded by artists, content owners, and players from other
industries.
©2015 Avex Group Holdings
17/25
Business policies for the next three years
We have formulated three business policies to respond to environmental changes and to
make the first move while taking advantage of our own strengths.
1. Enhancing content 2. Evolving digital services
3. Expanding live business
Establishing a cycle in which content and platforms circulate.
©2015 Avex Group Holdings
18/25
1) Improving and establishing the
mechanism for creating our hit content
Mid-term strategy: Content strategies
Our own content (Japan) Other companies’
content (Japan) Overseas content
In order to enhance content, we promote the following four strategies.
1. Enhancing content
2. Evolving digital services
3. Expanding live business
2) Alliances with
external content owners
3) Acquiring influential
overseas artists
4) Expanding the range of content (from the
range centering on music and video content)
Anime
Music and
video
Characters
Information
Improving the quality of content and increasing the quantity
Exp
an
din
g th
e ra
ng
e o
f co
nte
nt
Games
©2015 Avex Group Holdings
19/25
More opportunities
to be exposed
to music
Mid-term strategy: Digital platform strategies (Music)
Evolving into a service which provides new encounters with music
Creating a lifestyle that is full of music
In response to changes in users, we are starting a new music
streaming service
Participating
live concerts, etc.
Interest in music
and artists
Sharing exciting
experiences
1. Enhancing content
2. Evolving digital services
3. Expanding live business
©2015 Avex Group Holdings
20/25
Mid-term strategy: Digital platform strategies (Video)
• Evolving digital video distribution services by responding to expected
changes in lifestyle and competition
• Promoting alliances more aggressively, assuming future expansion in Asia
Evolving existing services (Enabling consumers to
experience new lifestyles)
Enhancing alliances (Enhancing the business model
by increasing partner companies)
Expansion in Asia (Developing businesses reflecting
the characteristics of each country)
Ex
pa
ns
ion
of d
igita
l pla
tform
s
Creating a lifestyle in which people enjoy video content
1. Enhancing content
2. Evolving digital services
3. Expanding live business
©2015 Avex Group Holdings
21/25
• Boosting user demand further by enhancing the lineup of content
• Creating new opportunities to enjoy entertainment through alliances
Mid-term strategy: Live platform strategy
Enhancing
the lineup of
content
Increasing opportunities to
enjoy entertainment
Creating a lifestyle full of entertainment experiences
1. Enhancing content
2. Evolving digital services
3. Expanding live business
©2015 Avex Group Holdings
22/25
[1] Introduction
[2] Review of “Next Era 2014,” the previous medium-term business plan
[3] Current facts
[4] Future direction
[5] Target guideline
[5-1] Vision of our businesses in the future
[5-2] Guidelines for medium-term targets
©2015 Avex Group Holdings
23/25
FY 2014 FY2017
Net Sales (envisioned amount)
¥169.2 billion ¥200.0 billion
Content
Digital platform
Live platform
Enhancing content
Vision of our businesses in the future
Evolving digital services
Expanding live business
Expanding
the range of
content
By expanding existing businesses, we aim to achieve net sales of 200 billion yen in FY2017.
Overseas expansion
©2015 Avex Group Holdings
24/25
Guidelines for medium-term targets
Management indexes for FY2017
Net Sales ¥200.0 billion
or more
Operating
Income Margin 10% or higher
ROE 15% or higher
©2015 Avex Group Holdings
25/25
Aspiring to be a
company creating an
exciting experience
©2015 Avex Group Holdings
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