2 In the vanguard of creativity Creative Network · In the vanguard of creativity New Face TYO Creative Business City Town Block Planning Today, success or failure is determined by

TYO Productions Inc.2-21-7 Kami-Osaki, Shinagawa-ku, Tokyo 141-0021, Japan

http://group.tyo. jp/

JASDAQ Secur i t ies Code: 4358

Special Report:Web Strategy

Management Strategy Interview 2007

In the vanguard of creativity

Neｗ Face

TYOCreative Business CityTown Block PlanningToday, success or failure is determined by originality and quality in the true sense of the terms.The various brands of the Creative Town Block are working together to move to the next stage.

Part1

Part2● dwarf Inc.

The world of craftsmanship that brings happiness to creator and viewer alike

● Theoria Communications Inc.● COM Co., Ltd.● 1st Avenue Inc.● Haxen International Inc.● DOGA KOBO Inc.


Toward an international

Creative Network


The new TYO town block;The new TYO town block;

WEB x TV-CMWEB x TV-CMThe WEB x 4The WEB x 4 emergency

roundtable discussionemergency roundtable discussion


● dwarf Inc.

Creative Network

01 TYO Business Vol 3


The various brands of the Creative Town Block are working together to move to the next stage.

Website commercials,

cross-media

– The key word of the day is alliances

As a medium, the Internet has become

an integral part of the infrastructure of the

everyday lives of people. All the corporate

advertisers have reached a stage in which

their view of the Internet as an advertising

medium is not “Shall we do something

on the Internet?” but rather “How can we

make our Internet advertising more ef-

fective?” In short, the Internet is now an

ordinary medium. As with other types of

media, the most important task facing us

now is creating high quality content. Now-

adays, the efforts of website production

companies to develop high-end movies

and acquire computer graphics technol-

ogy with outstanding cost performance

inevitably generated a large wave.

To fully grasp these needs and further

develop websites as a profitable business,

we must not follow a philosophy of single

company supremacy, in which each com-

TThe Internet, the driving force in today’s era of media diversification, continues to evolve and change. It is alive with those people who are us-ers as well as our clients.The TYO Group is responding to these inevi-table changes with an approach based on its inherent capability to confront new challenges and create exceptional content of the highest quality. One example is that four Web content production companies of the TYO Group, each with a strong individual character, are working to establish a presence overseas in China, Eu-rope, and the United States. The TYO Group is linking companies and people without regard to the type of company or whether they are lo-

cated in Japan or overseas.The Creative Business City, comprised of a daz-zling variety of 34 companies, gained an excep-tional supremacy within the industry. During the year ended September 2006, celebrating the 25th anniversary since its founding, it posted consolidated net sales of 21 billion yen.The TYO Group has begun to shift the corpo-rate style of this City toward the Creative Town Block concept. In this issue, Hiroaki Yoshida, TYO Group President and CEO, describes the effort to achieve improved craftsmanship and the next method for utilizing the One Capital Multibrand.

TYO Creative Business Ci ty Town Block Planning

oday, success or failure is determined by originality and quality in the true sense of the terms.

TYO Business Vol 3 02

TYO Group representativeHiroaki Yoshida

President and CEO, TYO Productions Inc.

pany follows its own self-centered course.

As long as the Internet is a medium with

a high degree of freedom, the creation of

content will demand a multidimensional

approach. The key word for the world of

the constantly changing Internet in the

future will be alliances. Alliances between

website production companies, website

and TV commercial production compa-

nies, website and computer graphic ani-

mation companies, and website and sales

promotions as well as the funding ability

to support these alliances are indispens-

able.

The diversification of all media, not just the

Internet, will create multidimensional as-

pects to partnerships with a single client.

Deepening creative expertise is impor-

tant, but at the same time I also think that

forming as many connections as possible

with companies and people with whom

you can form alliances is an important

element. A specific example of these alli-

ances is the capital and working partner-

ship formed last December by colab Inc.,

formerly Nexis Communications Corpora-

tion, with SEPTENI HOLDINGS CO., LTD.

I look forward to the fruits produced by

this alliance, which will utilize the content

production and sales forces of each com-

pany in their respective fields of specialty.

The world of the Internet is extremely hot

right now, and it is where the most tal-

ented young people are flocking. I firmly

believe the TYO Group can build a good

mechanism capable of realizing the great-

est happiness of the greatest numbers for

young creators.

Creative potential

– TYO Group innovators

There has been considerable movement

within the TYO Group this year. Five com-

panies became new members

of the group.

Haxen International Inc. is one

of Japan’s foremost docu-

mentary production compa-

nies. They’ve been involved

with the production of regular

programming on commercial

networks and special pro-

grams on NHK. Some ex-

amples of their work include

Jonetsu Tair iku (Continent

of Passion) for the Mainichi

Broadcasting System, Suteki

na Uchusen Chikyugo (The

Splendid Spaceship Earth) for

TV Asahi, and Gaia no Yoake

(Gaia’s Dawn) for TV Tokyo.

Theoria Communications Inc.

is a strategic website creator with strong

ties to foreign-capital affiliated companies.

Their clients include JAL Brand Com-

munications Co., Ltd., CyberAgent, Inc.

and Sony Corporation. They also develop

interactive advertising tools. 1st Avenue

Inc. is a spin-off formed by members of

Production3 of TYO’s production head-

quarters. The people at 1st Avenue call

themselves a “creative boutique” under

the slogan “Creativity is What We See”

where they pursue the potential of vari-

ous types of media while creating new

directions in advertising. COM Co., Ltd.

is a website production company that

creates high quality sites with long-term

prospects, including the Central Japan

Railway Company’s recruitment site and

NTT East’s FLET’S.com site. They’ve won

the acclaim of their clients for boosting

site access totals and enhancing the cor-

porate image. DOGA KOBO inc. is an es-

tablished animation production company

that has created and produced many his-

toric animations for more than 30 years.

They employ Japan’s leading animators

and continuously aim to produce higher-

quality animation. We believe these new

partners will create new value for the TYO

Group.

In addition, the TYO Group continues

innovation that will result in even more

projects to look forward to in the future.

One is the appearance in theaters of

komadorieiga komaneko. The heroine is

Komaneko, the new character created by

dwarf Inc.’s Tsuneo Goda, who also cre-

ated NHK’s Domo-kun. There’s also the

full-time assignment of Tadanori Mabuchi

of TYO-ID to Cailoghi S.r.l. in Florence,

Italy.

People will want to see something good even if they

have to pay for it– A consideration of the creative essence

There are services in the video industry

using the Internet to distribute video con-

tent free of charge. We are convinced that

the idea that only this method will attract

users fails to understand user needs.

TYO Creative Business Ci ty Town Block Planning


Users will not watch content that does not

pique their interest just because it’s free.

There is a trend that holds the combina-

tion of new media and no charge results

in something consumers will want to see.

First, however, we should get a complete

grasp of user needs based on the glaring-

ly obvious concept that users will watch

that which they want to see.

The issue is not whether fees are charged;

rather, the important aspect is the qual-

ity of the content. There are still plenty of

things that users want to see even if they

pay for it. The questions are whether or

not the content is interesting, whether it

is appealing enough that the users want

to see it, and whether it has useful infor-

mation. Therefore, the TYO Group’s idea

is that we will stand out from the pack

and respond to user needs by creating

exceptional content in the future. We will

develop talented creators, form networks,

and further increase our creative abilities.

That is the basis of the TYO Group.

Lately, we often hear the argument that

television commercials aren’t necessary

if a company has a website. I think that’

s jumping to a false conclusion. When

television appeared a half a century ago

and quickly spread throughout the coun-

try, people said that movies would die

because people could watch television.

While the film industry did suffer a major

setback for a time, what happened after

that? Now, it is commonplace for families

to go to cinema complexes, have a meal,

go shopping, and see a

movie. Successful televi-

sion series are turned

into mov ies, and the

satellite channels broad-

cast hundreds of movies

a week. The number

of movie screens has

m o r e t h a n d o u b l e d

over the past 15 years,

and the number of new

productions re leased

to the public has risen

by roughly four t imes

over the same period. In

short, I think the media

seeks and achieves a

prosperous coexistence.

Television and websites have begun a

beneficial association based on a win-win

relationship. Nothing more fits the pessi-

mistic outlook of wondering who will sur-

vive than the creative business. What this

job requires is a more relaxed approach in

which both parties think about what they

can do to make the other more enjoyable.

Companies with vitality will never age

– Their people are active and their potential grows

I’m in the habit of telling people to stop

doing the same thing. The TYO Group’s

asset is its human resources, and this has

remained unchanged since our found-

ing. When talented creators gather and

compete with each other, it produces a

stimulus, resulting in the outpouring of

new ideas. In the end, these new ideas

produce profits. That rational mechanism

is the TYO Group’s distinguishing charac-

teristic.

The larger a company becomes, however,

the more likely it will stagnate in some

areas and lose its vitality. That is the fate

of everything in the world. That’s why

we creative people must create our own

vitality so that we don’t become stag-

nant. Therefore, I tell the members not to

become content with our first success,

but to move on to the next step. Success

can be achieved by succeeding someone

else or through a different form, and if op-

portunities are found overseas, then I en-

courage them to keep pursuing those op-

portunities. When the members develop

vitality, it means that the TYO Group also

will develop vitality.

Accepting a challenge is one of the things

the TYO Group emphasizes. That requires

people who can assert themselves and

show leadership. They will not survive in

this company unless they are the type of

people who bubble over with new ideas

that they want to express and that they

enjoy expressing them. In the same way

that flowing water will never become stag-

nant, a company that receives vitality from

active people will never grow old. It will

always be capable of offering something

fresh.

The creative town block expands overseas

– Aiming for international partnership and providing content with a global standard

There are two keys for the TYO Group’

s overseas business strategy. One is

creative work overseas. Our objective

is to collaborate with talented creators

throughout the world and create high

quality content in an international creative

network. The other is foreign countries

as a market. There has been stunning

economic growth in China and India, and

these are large markets in Asia. Also, Ja-

pan is the world’s leader in the interactive

advertising field, and we anticipate our

work in interactive advertising will be very

successful in Western markets.

TYO obtained authorization to conduct

business in Dalian, Liaoning Province in

2005, and we established the DaLian

Eastern Dragon Cartoon Development

Co., Ltd., an animation production com-

pany. It is the first Japanese-Chinese joint

venture in this industry to be approved by

the Chinese government. This enabled us

to be the pioneer in establishing a pres-

ence in the immense cartoon market of

China, which has 400 million children. We

plan to use this as a stepping stone to

create a network in the Chinese-speaking

world and Southeast Asia through Hong

Kong and Taiwan.

In March 2006, we established TYO Inter-



national B.V. in the Netherlands, an inter-

mediary holding company wholly owned

by the TYO Group, to further strengthen

our business in Western markets. TYO

International B.V. is an important player

in joint international content production,

a sector where demand is expected to

increase in the future. It has become a

center for presenting borderless creative

services, including those on the Internet. If

the company functions well, we plan to set

up similar intermediary holding companies

in China and other countries in Asia. Thus,

the concept of supplying global standard

content is expanding by building both

production and distribution networks and

eventually becoming involved in high qual-

ity creative collaborations.

The mechanism of the company is gradually changing

– But the fundamental concept remains solid

Our launch of intermediar y ho ld ing

companies was not only to conduct

business in Western countries. There

has been an increase in the number

of group member companies, and the

TYO Group organizational template is

now at the point where it will move to

the next stage. We continue to develop

the concept of designating a leader

company in each business f ie ld and

providing functions of an intermediary

holding company as the Creative Town

Block. That’s because, in addition to

the growth in the number of compa-

nies, considerations of establishing a

full-scale business presence overseas

and forming a l l iances with di f ferent

business fields require intermediate or-

ganizations to get a read on conditions

from point-blank range. To achieve that,

we have formulated the Town Block

concept and created another layer be-

tween TYO itself and each of its com-

panies. The modern creative industry is

undergoing a radical transformation. In

conditions such as these, an important

key to growth is how an organization

can respond to th is transformation.

This requires a highly mobile formation.

Of course, there has been no change

s ince our founding

i n o u r m u l t i b r a n d

stance of stressing

the brands of each

of ou r compan ies.

T h e To w n B l o c k

concept is a mecha-

nism that improves

the mobi l i t y of our

companies. We be-

lieve it will enable us

to forge ahead with

c r a f t s m a n s h i p o f

even greater quality.

Ultimately, there is no change in our

principle that though there is but one

strategy, each company must have its

own tactics.

The TYO Group’s aim

– To always compete in earnest

We’ve had to pay close attention to our

stock price since our listing on JASDAQ in

2002. The worst thing a company can do,

however, is to hesitate taking a new step

because of excessive concern about a

decline in stock prices. This

may be just the fashionable

thing to say, but the most

important thing is to make

even just one good product

and do good work, which

will lead to higher prices.

Not only is this the best

course for a company to

take, it is the course a com-

pany must take. A compa-

ny is a living thing, however,

and so its financial perfor-

mance will not perpetually

improve. There are times

when things must level out.

At those times, TYO has

implemented drastic reform

policies to further improve

per formance. We always

compete in earnest, no

matter what the situation.

In the future, we’ll disclose

financial information every

quarter, and we’ll let the

stockholders make their

judgments.

The TYO Group’s objective is to be the

best and the only place for people and

companies in the creative business. We

believe that if we fulfill all the require-

ments, including those for personnel,

resources, funds, trust, and information,

then we will continue to attract superior

people and companies. That place must

also produce self-sustained growth.

TYO Productions Inc.TYO Administration Inc.

Advertisement Business Division

WEB Business Entertainment Business Division

Content SolutionsBusiness Division

International

● A diagram of our anticipated intermediary holding company scheme

… … … … …

Com

pany A

Com

pany B

Com

pany C

Com

pany D

Com

pany E

Com

pany F

Com

pany G

Com

pany H

Com

pany I

Com

pany J

Com

pany K

Com

pany L

Com

pany M

Com

pany N

Com

pany O

Division Business Division


There’s been no change in the approach of conveying a message just because it’s on a website.TYO-ID presents high quality message solutions in the interactive sector. It is a hub linking the TYO group with creative companies and personnel overseas, developing a borderless creative system.

Four company presidents discuss their tasks on Internet commercials and the direction of creativity on the Internet.

The new TYO town block;The WEB × 4 emergencyroundtable discussion

The Internet will continue to grow more interesting in the future because it is a tool with interent potential of different types.We finalized a capital partnership with SEPTENI HOLDINGS CO., LTD., the major Internet advertising company, at the end of last year to further strengthen our business on the Internet. We also are striving to create links with other media apart from the Internet to become a creative enterprise that creates the greatest effectiveness for our clients.

The users have the leading role on the Internet, so our planning is always based on our understanding of the users.Our company is involved with strategic Internet advertising that incorporates considerations of the users’ lifestyle and preferences. Of course it’s involved with cross-media projects, but we also sometimes handle sales promotion events. We have the additional role of promoter with marketing aspects.

In the end, the Internet has to make people happy.We seek to create websites that improve corporate value and are easy for the user to understand. Long term thinking is essential for creating websites. We think of how we can add originality not only when we’re creating the site, but after it’s been opened to the public as well.

1

SpecialReport

Web Strategy

Part

TYO Interactive Design Inc. (TYO-ID)　Kenji Morimoto　President and CEO

colab Inc.　Hiroshi Hirao　President and CEO

Theoria Communications Inc.　Daisuke Uwabo　President

COM Co., Ltd.　Hirotaka Goto　President


Morimoto: While there are many commu-

nications tools for presenting advertising,

the advent of the Internet immediately in-

creased the extent of interactivity for com-

munications.

Hirao: When the Internet appeared, I

thought this was the greatest invention

since the Industrial Revolution, and that it

would become the fifth medium to go with

the existing four. Really, however, it’s be-

come part of the infrastructure for daily life

rather than a medium.

Goto: That’s right. It’s infrastructure, which

makes it convenient and something from

which anyone can obtain the same broad

range of services. Something like water,

however, has facilities and a system, but

not all of the flow of information available

on the Internet today is good. Both the pro-

viders and the recipients need a lot more

common sense.

Uwabo: It’s interactive, so that means it’s

not a one-way street. Word of mouth on the

Internet has a great deal of effectiveness,

but I sense that if it can be linked to other

media, it could create a substantial flow.

Morimoto: We can consider the impor-

tance of the information reach of media

other than the Internet. For example, if we

send a message to a friend, that friend will

have a dif ferent emotion depending on

whether the message is sent by e-mail,

postcard, or letter. In the same way, the ad-

vent of the Internet means that the method

of communication is different than it was in

the past. That’s why I think it is extremely

important to consider which medium to use

when conveying information.

Goto: The Internet has few restrictions,

making the market large and facilitating the

upload of information. But just because

something is put on a website won’t make

it successful. It’s become clearer that the

key is the content and not the medium it-

self.

Hirao: After the advent of the Internet,

there was a period during which people

excitedly wondered whether television and

radio would become obsolete. That has not

been the case at all. Television still has an

overwhelming strength as a medium today,

and radio has not become obsolete. The

Internet may be an indispensable medium

for sales promotion, but it’s no longer the

case that companies use the Internet alone

for that purpose.

Uwabo: It’s obvious, of course, but each

medium has its own distinctive character-

istics. If the creators of commercials are

required to create messages that utilize

those characteristics, we have to start by

asking what the characteristics of the In-

ternet are. The first thing we can cite is the

high degree of user involvement. The users

who can successfully use the Internet are

truly intelligent. It’s not such an easy job to

create something that will meet the expec-

tations of those users.

The Internetis already part of

the information infrastructure.

What is the outlook for checks

in the future?Goto: There are also issues. The Internet

is an interesting medium in which even a

small company can create advertising that

is very cost effective. On the other hand,

the lack of restrictions sometimes results

in exaggeration. It’s a situation in which the

person who talks the most gets the up-

per hand. When it comes to who will take

responsibility, there are no rules at present.

So one issue is the consideration of these

rules on an international scale.

Morimoto: With television commercials,

the users passively receive information, but

on the Internet, they actively seek informa-

tion. If something resonates emotionally

with the user, then the user will expand that

information. In other words, there is a clear

structure that the user has the leadership

role in conveying information. I think it is

important to understand that methods of

approach are different for Internet commer-

cials.

Goto: Ten years ago, people saw commer-

cials on TV, and that caused them to want

that product. Now, the Internet is designed

so that people can compare products and

think about their purchases before they

buy. In other words, websites have taken

on greater importance. That’s why we are

working to create websites that users will

enjoy as they obtain the information they’re

looking for. The websites are easy to un-

derstand and provide benefits to the user.

Uwabo: The ideal is to create the web-

sites and commercials with a synergistic

effect. The most important factor is that

on the Internet we can very effectively put

information that we couldn’t say in a tele-

vision commercial. We have to carefully

consider the way we use the medium and

the Internet mechanism to devise ways that

prevent the user from going elsewhere. In

that sense, we should focus primarily on

the brand experience and be aware of the

Internet, which engages the user.

Goto: We’ve failed if we’ve gotten the user

to come on line, look at the advertising

campaign page, and leave. The relationship

between brand recognition and sales is

disintegrating. We can’t capture the users

with stylish Internet commercials alone.

Rebuilding media with the advent of the Internet

The potential of the Internet as a medium

Linking television commercials and the Internet


Hirao: Look at the ways of receiving in-

formation. The user passively accepts

television commercials, but is always active

when using the Internet. Though the num-

ber of Internet users has skyrocketed, it still

doesn’t have the reach of television. I think

this requires a new type of producer that

understands the differences between the

Internet and other media and can switch

from the conventional ways of thinking.

Morimoto: The situation for creators will

perhaps have changed in about five years.

For our generation, we still have in the back

of our minds the brilliance of the golden

age of TV commercials. Soon there will

be a generation for which the Internet has

been a part of daily life since they were

small. Their sense will be intuitively different

from ours. The sense of distance between

users and TV is definitely changing.

Goto: Internet users are changing in the

same way, and they are developing a new

sense. It’s my mantra that Internet com-

mercials have to be more exciting, enjoy-

able, and provide a greater sense of hap-

piness than a good television commercial.

They won’t last long if both the creator and

the view don’t enjoy them.

Uwabo: There are many different ways to

develop advertising on the Internet, and

depending on both the way it’s created

and the way it’s used, it can become very

boring. But there is no change in our deter-

mination to create high quality content to

boost the client’s brand strength regardless

of the media used.

Goto: There is the sense that the Internet

is viewed using a PC, but we really can’t

forget that there are other ways to access it

as well, starting with cell phones. The reach

of communications tools is expanding. The

Internet is a growing medium.

Hirao: It would be ideal if it could be stan-

dardized, but it’s just not possible. We’ve

strengthened our Internet business through

a tie-up with SEPTENI HOLDINGS CO.,

LTD., but it’s no longer the case that we

can create a commercial and call it a day.

I sense that multidimensional creative de-

velopment utilizing the diversity of the TYO

group is becoming more important.

The success rate for Internetcommercials can’t be predicted.

So what should we do now?

Uwabo: That’s right. Today we have to link

different media to formulate the optimum

strategy that fulfills the client’s requests. For

example, some websites utilize the brand,

while some websites leave everything up to

the product. There are even some websites

that are globally dominant, such as Google.

We have to determine which route is the

best for reaching our objective. There must

be a wide range of incipient resources to

create the most appropriate course, and

the environment to skillfully develop them.

The TYO group’s style of corporate man-

agement is truly the best match for the

times.

Morimoto: Website production companies

cannot be restricted in the same way that

commercial production companies are be-

cause they are multidimensional and have

the option of multiple approaches. All four

of us here today are involved with websites,

but everyone does something dif ferent.

That creates a certain flavor, and has the

potential to enable different kinds of busi-

ness through networking.

Uwabo: At my company, we determine

the target values for the key performance

indicators at the planning stage and pres-

ent the proposal to the client. As a com-

munication tool, websites are free and

nonlinear, so the numerical targets are eas-

ily explained to the client as a fixed point

observation.

Goto: There is definitely no end to web-

sites. As a creative service, they continue to

evolve and change their form as we try this

and that in the course of maintenance. That

makes them an interesting medium. On the

other hand, if we don’t stay on top of them,

they’ll wither and die like flowers. Websites

are living creatures, so I think we’ll create

more success stories in the future for link-

ing websites with television commercials,

and with other media.

Morimoto: The extent of website effective-

ness depends on the way they’re used,

and the users are diverse. I suspect that if

we make satisfying all users as our target,

it will blur our focus and result in shallow

creativity. Focusing on targets that have

apprehended user needs will become in-

creasingly harder to do in the website sec-

tor.* KPI:Key Performance Indicator. This is one of the key parameters that constitute a company’s operating rev-enue.

What could be seen on the Internet, and what can’t be seen?

The necessity for producers who understand the Internet

How to create an Internet strategy


Hirao: Meetup sites have spread from the

United States. They’re different from sites

for individuals to meet each other. These

are supporting sites for meetings of people

with similar hobbies. Some of the former

sites result in criminal behavior, but Meetup

sites are very useful for making friends. De-

pending on their use, of course, the result

could be the exact opposite, but that’s not

limited to websites.

Morimoto: In other words, that’s a differ-

ence in content, not a difference in me-

dium. The logic of bequeathing something

good and flourishing to posterity hasn’t

changed since the Edo period. About the

only communication tool they had in the

Edo period was word of mouth, but word

about products with a good reputation

quickly spread between people. Today, the

only thing that has evolved is our tools. The

logic that people will not become excited

without something to brighten their spirit

is universal. That’s the starting point for

creativity in any era. I think the TYO group’s

initial intention of creating high quality con-

tent is because we realize the importance

of this starting point.

Uwabo: I also think we shouldn’t forget

the sense that what we’re making is digital,

but our spirit is still analog. Even with the

fastest communication tool, the schema of

person-to-person interaction hasn’t broken

down.

Morimoto: The advent of borderless me-

dia has resulted in the greater necessity for

and advantages of creative collaboration

that transcends national borders. At TYO-

ID, Director Yutoku Matsutani has moved

to TYO International B.V. in the Nether-

lands, and the former President Tadanori

Mabuchi has transferred to Cailoghi S.r.l. in

Italy. The previous fervor for joint produc-

tion with overseas companies has cooled.

The greatest encouragement for us is the

increased opportunities to be objectively

evaluated on a global level, such as when

creative people overseas speak well of

Japanese creators.

Goto: Websites and other aspects of IT

create a sense of leeway, and I think we

have to take them in that direction. IT en-

ables joint production with people over-

seas. Trying to figure out what to do in a

limited space will not lead to good results.

At those times, one of the TYO group’s

biggest advantages is that we can benefit

from the wisdom of a different type of cre-

ator, and that also leads to self-growth.

Hirao: It’s at times of great change that

horizontal relationships are important. Dif-

ferent types of people become more active,

and more powerful networks are created

within the group. This also creates a good

sense of distance and stimulation. It ex-

pands the potential for creativity.

A sense of excitement for moving to the next development:

Expectations for websites

are growing.

Goto: In the end, the great stimulus and

enjoyment in the TYO group is getting to-

gether with people who want to do some-

thing, and who are capable of doing some-

thing. Everyone thinks it’s great to have fun

while making something. I think that idea is

at the core of the TYO group.

Morimoto: We always want to provide a

stimulus for our employees. Making a profit

is the prerequisite, but we have to have a

forward-looking approach first.

Hirao: The TYO group is a collection of

small companies. The two aspects of the

group’s diversity and its dependency have

a great influence on our creativity, I think.

Uwabo: I think it is not easy to find so

many ideas and the strength of the net-

works in just any company. Speaking for

myself, my work has gotten a lot easier

since I joined the TYO group. It’s a collec-

tion of companies doing different things,

but when it comes to a showdown, we can

easily collaborate without the barrier that

usually exists between different companies.

There’s no substitute for the speed that we

can achieve.Morimoto: In the same way that talented

creators gather in a creative city, the TYO

group is a corporate body that always

is facing outside to provide its stimulus.

That’s why we want to be a Creative Town

Block.

Toward the next stage for websites

The importance of a network

The future shared by the TYO group

Title: PepsiClient: SUNTORY Ltd.Agency: Asatsu-DK Inc. /

International partner: grouek (Paris)

colab Inc.2nd Floor, TYO Main Office, 2-21-7 Kami-Osaki, Shinagawa-ku, Tokyo 141-0021, JapanTEL: +81-3-5434-8815 / FAX: +81-3-5434-8816 URL: http://www.colab.ne.jp/Date established: June 24, 1996Capital: 20 million yen (Investment share of TYO Productions: 51%)Business content: The planning and production of communications policies,

primarily for the InternetThe Chocoladefabriken Lindt & Sprungli AG site

TYO Interactive Design Inc.6th Floor, RE-KNOW Meguro Building3-1-4 Kami-Osaki Shinagawa-ku, Tokyo 141-0021, JapanTEL: +81-3-5793-8500 / FAX: +81-5793-9030　URL: http://www.tyo-id.co.jp/Date established: October 1, 2002Capital: 10 million yen (Investment share of TYO Productions: 100%)Business content: The planning, production, and operation of website

advertising, Internet promotions, and interactivecontent


The model for advertising has changed

due to the advent of the Internet medium,

and today the initiative for advertising is

shifting from the sponsor to the user. We

believe that a brand experience involving

the user, rather than a one-sided brand

strategy, has become increasingly impor-

tant, and we are devising communication

methods based on that concept. We do

not formulate an advertising budget in ac-

cordance with a product’s sales. Rather,

our promotional approach is to incorpo-

rate a marketing concept that reflects in

the product the branding to develop prod-

uct devotees by having them experience

the changes in their daily life resulting from

product use, as well as our understand-

ing of user needs. I am originally from

the advertising industry and have written

advertising copy. In the early days of the

Internet, I discovered the NCSA Mosaic

browser and was jolted by the realization

that it would change the world of adver-

tising. It’s rather simple, but I was truly

inspired at the time and changed course

into my current business. I insisted that

website design capabilities were essen-

tial and spurred on the designers I knew.

The TYO group has an environment that

allows us to plan as much as we would

like. Now, we have started to take on new

challenges.

Theoria Communications Inc.1st Floor, MO Building, 3-14-15 Higashi, Shibuya-ku, Tokyo 150-0011, JapanTEL: +81-3-5774-8558 / FAX: +81-3-5774-8557URL: http://www.theoria.ne.jp/Date established: June 23, 1999Capital: 85 million yen (Investment share of TYO Productions: 87%)Business content: Creating communications systems using the Internet, planning and producing broadcast and distribution content, and planning and producing advertising content

I think the roles of websites can be gener-

ally classified into three areas: advertising,

information conveyance, and community

systems. At present, we are striving for

growth in the information conveyance and

community systems sectors. This involves

determining how to create websites that

impart easily understandable informa-

tion to the user, and how to protect and

develop community systems. The Internet

has continuously evolved since its incep-

tion, so once we create a website and

obtain the client’s trust, they will continue

to order work from us. This results in our

continued growth, so we then focus on

enhancing our business by developing

websites. In this industry, however, users

are very demanding, so we present the

optimum proposal they will most readily

understand, including information that

the client may not want to hear. At times,

we have to stand firm and be convincing.

It often happens that randomly creating

websites just to curry favor with the client

will result in websites that suffer sharp

drops in user hit rates with the passage of

time, even if those websites are attractive

when first launched.

Becoming a member of the TYO group

has drastically increased our potential.

Our great ambition is to become a website

infrastructure company that collaborates

with other companies, is stimulated by

first-class creators, and continues to grow

in this enjoyable atmosphere.

COM Co., Ltd.3rd Floor, New TYO Wing, 1-7-13 Mita, Meguro-ku, Tokyo 153-0062, JapanTEL: +81-3-5724-5639 / FAX: +81-3-5724-5654 URL: http://www.com56.com/Date established: December 18, 1996Capital: 74 million yen (Investment share of TYO Productions: 51%)Business content: Providing comprehensive Internet-re lated serv ices, including the planning, creation,

production, and operation of Internet and Intranet sites, Internet advertising, Internet promot ions, and of fe r ing Internet consultation

COM Co., Ltd.

Our ideal is to become a company for which it is said, “The Web would not function well except for COM”After conducting research into artificial intelligence at university, I became fascinated by the Internet in 1996 and formed a company because I wanted to promote Internet use. Since then, there has been no change whatsoever in my attitude of creating websites that offer enjoyment.

Theoria Communications Inc.Daisuke Uwabo

President

COM Co., Ltd.

Hirotaka GotoPresident

Client: Japan Central Railway CompanyTitle: Japan Central Railway Company’s new recruitment

site for 2008

Client: Kodansha Ltd.Title: Monthly King Web Site

Profiles of New Members of the TYO group


Our company was the pioneer in developing an approach for strategy-based interactive promotions. We present communication models for the Internet generation of the future with keen insight into user needs, and use our unique methods to improve the client’s brand value.

The brand experience plays a major role in advertising


Fukuda: The Internet’s household diffusion rate soared to close to 90%* in no time at all. Some still doubt that the Internet can be called a medium, but it is an indispensable one for companies. While the linkage and development of television commercials and websites is becoming the rule rather than the exception, people are still seeking the optimum relationship between the two. Ter-restrial digital television broadcasts start in 2011, and I get a real sense that there is now a surge in the reorganization of television media business models that incorporate the Internet to meet that challenge.Ebihara: The pattern in which people are strictly recipients is no longer the standard. The methods of obtaining information and the speed for obtaining that information is diversifying based on individual lifestyles and preferences. For example, television tuners have now become standard for PCs, as the border between tele-vision and computers has disappeared. It will be easy to provide interactive services once terrestrial broadcasts begin, so it will no longer be possible to distinguish between television and the Inter-net if someone accesses the Internet while they’re watching TV.Fukuda: Of course the clients are paying attention to the diversifi-cation of information in the future. Orders will grow more complex. Over the next few years there will be constant change in the busi-ness model of television commercials and Internet commercials. And this will present new opportunities for our creators.

* The Internet diffusion rate at the end of FY 2005: 87.0% for households (Survey of telecommunications usage trends, Ministry of Internal Affairs and Communications, Information and Communication Statistics Database)

Fukuda: Creating commercials is no longer a simple problem solved by a single equation. The TYO group consists of companies that create commercials and websites with individuality and diver-sity. They also have formed a wealth of alliances with companies outside the group. For us, this means that we have the potential to-survive periods of volatility. Producing commercials usually involves

the division of labor, so this will become integrated as the joint production of websites continues, or else there will be a separation and then a fusion.Ebihara: The same is true for the clients. They are confused by the reorganization of business models for the television medium. Supporting Web applications is only one of the measures of this re-organization story. That is why clients seek a production company that will cooperate like a partner or a mentor. Only an organization such as the TYO group, in which diverse production companies have banded together for their mutual benefit, can accurately meet these needs. We should have a sufficient number of methodologies for the pattern of success for both the clients and the creators.Fukuda: We must not forget that the foundation of the TYO group is production companies. We offer productions that will increase the clients’ profits. We are creating content, not a medium. There is always volatility, and today is nothing unique in that regard. It’s a matter of course that our strategy should be to take advantage of our business opportunities now and always be on the lookout for new challenges.

Aiming to develop multitalented employees that can respond to diversification and change.

Ebihara: The future will require that each person have multiple skills. Rather than people who can create commercials, there will be a premium on multitalented people who understand the Internet as well. While the TYO group has an environment that enables the development of people capable of both, the task before us is how to develop the industry leaders of the future.Fukuda: In the borderless and unregulated Internet medium, it is easy for a surfeit of information to develop. The phenomenon of the separation of distributor and user may well occur. It is possible that the intent of the distributor will not be conveyed as is to the user. Therefore, peace of mind and trust will become extremely impor-tant. Our attitude must be that the creator has an ethical view and takes responsibility for the creation. We must incorporate that into our personnel development.Ebihara: The future will become even more fascinating for the TYO group, and we have a growing sense of expectation.

Client: Nissan Motor Co., Ltd.T i t l e : Spr ing : Minna-Nor ina-

SERENA

TYO Productions Inc.2-21-7 Kami-Osaki, Shinagawa-ku, Tokyo 141-0021, Japan　TEL: +81-3-5434-1580 / FAX: +81-3-5434-1595 URL: http://www.tyo.co.jp/index2.html　Date established: April 2, 1982　Capital: 1,077 million yen (Holding company)Business content: The planning and production of television commercials

Client: NIKE JAPAN Title: Nike Cosplay

Two division heads who are the driving force of creative work at the TYO group discuss the Internet, commercials, and the media of the future.

The relationship between advertisers and us-ers has changed, and now the trend is for the transformation of business styles. There will be a wide array of success stories.

Reorganizing media business models for 2011.

The times require diversification through alliances.

TYO Productions Inc.Waju FukudaExecutive Managing Director, head of #2 production division

TYO Productions Inc.Jun Ebihara

Executive Managing Director, head of #1 production division


TYO International B.V. is an intermediary holding company wholly owned by the T YO Group and was established in The Netherlands in March 2006 as the core en-tity for the Group’s international strategy. The company was based on the concept of expanding the TYO Group’s Creative Busi-ness City beyond Japan, to support inter-national mergers and acquisitions, as well as establishing new companies, to conduct ef fective and creative business, and to actually contribute to the management of the companies in which they take a stake. That is to say, they are playing the lead role in the international expansion of the

TYO Group’s business model. T h e W e b -centered advertising f ield has the great advantage of productions that consist of digitized data. For example, we produced the website of a Tok yo client in Brazil . Providing these borderless services is the hallmark of the international group we continue to create. In every sense, that set us apart from our competitors.Japan is one step ahead, today, in Web-cen-tered interactive advertising. But there are capable companies and personnel involved in planning and design throughout the world. The network consisting of the TYO Group and these companies and personnel enhances corporate value across different markets as they share technology and ca-pabilities.The Group took the f irst step by estab-lishing a foothold in Europe when they assumed a capital stake in unit9 in UK, to which they had sent Takayoshi Kishimoto, Japan’s leading creative director, as one of the corporate directors. They then took a capital stake in grouek in France and set up Cailoghi in Italy. In the future, we will shape the creative global standard in Web advertising by linking the TYO Group with the global advertising market. The means

by which we will achieve this is investing in existing overseas companies and estab-lishing new companies, to produce digital advertising, which will be focused primar-ily on interactive advertising based on the Web.We also intend to expand our network in f ie lds other than Web a dver t is ing, strengthen our business by utilizing the characteristics of creative networks that are not reliant on a particular region, and form links through physical and capital tie-ups. We are aware that one important role for us in the future will be to serve as a bridge closely connecting the TYO Group companies in Japan and other regional group companies, generating a truly inter-national group synergy.

The TYO Group has launched the global development of its own business model. TYO Interna-tional B.V. is the TYO Group’s first intermediary holding company. It is an important entity in the group’s international strategy and has taken the lead in TYO Group’s European operations.

grouek SARL (France)TYO International B.V. (The Netherlands)

Cailoghi S.r.l. (Italy)

TYO International B.V.Managing Director / CEO : You Matsutani

Director / COO : Ronald Jimmink

TYO International B.V.Stille Veerkade 36, 2512BG Den Haag, The NetherlandsTEL: +31-70-3265604 / FAX: +31-70-3265666URL: http://www.tyo-international.com/Date established: 10 March, 2006Capital: €6.5 million (Investment share of TYO Productions: 100%)Business content: Investment in interactive content production companies in Europe and the Americas; corporate operation and management

Japan■TYO Interactive Design, Inc.

■colab Inc.

■Theor ia Communicat ions Inc.

■COM Co., Ltd.unit9 Ltd. (UK)

Toward an international creative network

TYO Global Network Strategy

2

SpecialReport

Web Strategy

Part


unit9 is based in London, a beehive of

activity for designers and creators from all

over the world. It is involved in the produc-

tion of Web content and animation. Its par-

ticular specialty is the creation of products

for amusement and play using animation

and characters. Their staff of roughly 20

comes from 10 different countries, which

makes their office a remarkable array of

English accents. International projects are

the norm in the Anglosphere, and more

than half of unit9’s clients are American

companies. Their system is such that they

receive work from French companies in UK

and work with Italian companies to com-

plete part of the job. Therefore, the flow of

work is far more dynamic than simply being

between Tokyo to London; Japan helps

out on American jobs, and they collaborate

with grouek in France and Gringo in Bra-

zil on productions using the Internet and

e-mail.

Regarding ourselves from the perspective

in UK, or from the outside of Japan, we

have discovered once again that we can

take pride in the exceptional quality of Jap-

anese products and the accuracy of our

work. At the same time, however, we real-

ize that Japan is still too self-effacing and

must blow its own horn more. To achieve

this, our goal will be to perform collabora-

tive work that blends Japan with the world,

and offer our users playful and fun jobs that

produce advertising on the increasingly im-

portant Internet. We intend to create prod-

ucts that unfailingly incorporate the user’s

perspective and sensibilities, because we

are the medium closest to the user.

2-4 Hoxton Square, London, N1 6NU, UKTEL.+44 20 7613 3330

7 rue Oberkampf, 75011 Paris, FranceTEL.+33 1 43 57 56 37

unit9 Ltd.

grouek is comprised of four staff members

involved in the production of highly creative

interactive content that the users can enjoy

and participate in. Our works have been

highly acclaimed, having won the WA-

NADOO TROPHEE DE LA PUB.COM, an

online advertising award from France-Tele-

com’s Wanadoo, and have been profiled in

such magazines as Strategies, Etapes, and

Digit (UK), and such portal sites as Netdiv-

er, Praktica, and French’ n Fresh. In addi-

tion, the Pepsi NexGame won the Silver W3

Award. The Pepsi NexGame was an arcade

game with interactive characters and 3D

action that users can play online, which we

created in partnership with TYO-ID. We are

in constant communication with TYO-ID for

joint projects, maintaining contact through

video conferencing, using e-mail and iChat.

They mirror us in their close attention to

design and detail, and we are constantly

impressed by the professional attitude and

sound corporate structure of the Japanese

team.

Broadband is used widely in French house-

holds, and the online advertising market

is blooming. This expansion demands

quality visual effects and designs backed

by solid ideas and concepts. In the future,

we hope to grow in tandem with the group

companies, and will step up to meeting the

challenge of bigger projects and greater

creativity, and enter competitions with inter-

national clients.

grouek SARL

Cailoghi is an advertising content produc-

tion company jointly established by unit9

Ltd. and TYO International B.V. in Decem-

ber 2006 in Florence, Italy. In the future,

it will directly supply and refer talented

creative staff members active in Europe

and the U.S. so that it can provide fresh

and novel creative offerings that respond

to increasingly sophisticated

needs. This company wi l l

serve as a hub for the flow

of creative international staff

with brilliant ideas.

Via dei Bardi 36, 50125 Firenze, ItaliaTEL/FAX. +39 055 245 855

Cailoghi S.r.l President: Tadanori Mabuchi

Cailoghi S.r.l.

Buildings with offices

http://www.unit9.com/

http://www.cailoghi.it/

http://www.grouek.com/

unit9 Ltd.　Director / Creative DirectorDirector / TYO Interactive Design Inc.: Takayoshi Kishimoto

Four creative partners

komadorieiga komaneko (The stop motion

f i lm Komaneko) was released in theaters

last December and met with an enormous

response. Stop motion is widely perceived to

be for children, but this film also captivated

adults. I received joyous messages from them

saying they had seen it several times. Our

objective for the stop motion works we create

is to combine a child-like purity with an artistic

sense. I think we might have come close to

our goals with this work released in theaters. I

understood the wonder of stop motion when

I created the animated character Domo-kun

for NHK (Japan Broadcasting Corporation).

It was initially used as a theme character for

the NHK broadcast satellite network. My initial

impression of Domo was as a stuffed animal.

I also devised plans using flat surface anima-

tion and computer graphics, but when I was

at a loss as to how to proceed, I discovered

the doll created by Hirokazu Minegishi using

stop motion animation. I immediately sensed

that this was it. As the character took on a

three dimensional form through the story-

boards, and I breathed life into it, I felt both joy

and wonder.

The character grows

Domo will be broadcast on the Nickelodeon

network in the United States. Nickelodeon is

the world’s largest television network for chil-

dren. We are now in the process of making 26

two-minute episodes. Only several seconds’

worth of stop motion filming can be completed

in a day, so we have divided the work among

five teams and are proceeding simultaneously.

We plan to finish production in the spring of

2007. People overseas have a different sense

of humor than the Japanese, so we’ve entirely

rewritten the stories. The continuation of the

series in Japan and the creation of a television

series for overseas markets meant that Domo

has really grown. This is due to the many

people who have sensed the unprecedented

originality of Domo and, more than anything,

the worldwide acceptance of the warmth of

stop motion animation.

Creator has to enjoy craftsmanship

Now, I want to build our own studio to cre-

ate our own production environment. Fortu-

nately, I have received assistance from both

people and luck to create my own works.

There are some people who do not seem to

get a break, however, so I want our studio

to be a place where they can work, too. This

company started out as a one-person opera-

tion, and has grown to 10 employees. I’ve

recently come to think that creating a movie

is the same as creating a company, and that

we must share the same dream. When Domo

began, there were consecutive days of dif-

ficult filming, but it ended with a dawn. At that

time, Minegishi said, “Ah, that was fun.” I felt

the same way, but I also got a start. I thought,

well, the creator also has to have fun, and that

has to be conveyed to the viewer. I thought

it would be wonderful if the creator and the

viewer could share the same enjoyment.

Stop motion animation is time consuming, so

I want our works to be worth viewing decades

from now. I think that feeling will definitely be

manifested in the quality of the work.

komaneko was produced with the time-consuming stop motion tech-nique that incorporates the warmth of the creators, and utilizes en-joyment, the essence of animation. Is the heartwarming earnestness of the cat a projection of the creator himself? His boundless creativ-ity resulted in the development of fascinating characters.

Enthralled with stop motion

In the Vanguard of Creativity


TYO Business Vol 313

dwarf Inc.Tsuneo Goda

PresidentDomo-kun filming at Dosuta studio

Makuma-kun © NHK – dwarfFrom Hikaru Utada’s “Boku wa Kuma”, an NHK’s Minna-no-Uta (Everyone’s song)

Komaneko © TYO/dwarf ·Komaneko film partnersThe character was created to show the process of stop motion animation in the “Exhibition Showing Process: The creation of storyboard space images” at the Tokyo Metropolitan Museum of Photography in 2003. Screenings nationwide began in December 2006.

Domo-kun © NHK – TYO

dwarf Inc.1-7-13 Mita, Meguro-ku, Tokyo 153-0062, JapanTEL: +81-3-5719-4666 / FAX: +81-3-5719-4667 URL: http://www.dw-f.jp/Date established: September 1, 2003Capital: 30 million yen (Investment share of TYO Productions: 100%)

dwarf Inc.Tsuneo Goda

PresidentDomo-kun filming at Dosuta studio



Kameda: We got our start seven years

ago at the Cannes Lions International

Advertising Festival, when we got an un-

expected chance to have a relaxed con-

versation. Manjot’s ideas about creativity

and the direction in which he was headed

were similar to mine. We thought we could

develop a new creative style and generate

a good synergistic effect.

Manjot: We shared the idea that being

close to the producer and director would

have good results, and that we should be

involved with in-depth creativity. That was

how we launched the company and be-

came part of the TYO group. Our creative

partnership began as Production3, and

we launched 1st Avenue Inc. last October.

Kameda: The creativity we’re aiming for

is based on the considerations of what we

wish to convey and how we can express

that. We get a firm fix on the core of the

idea, present a creative concept, and give

it form. That enables us to fulfill diverse

client needs.

The encounter with Ise Shrine

Kameda: This is the third year for our

creative production for the Ise shrine,

which seems as if it could turn into my life’

s work. We creative people can become

involved with many influential projects

over a short time span. When taking the

long view, however, as a creator I won-

dered what I could leave behind for the

next generation. At that time, I became

involved with the Ise shrine and the cer-

emony held for moving its location.

Manjot: I too was deeply moved by the

significance and creative beauty of the Ise

shrine. I thought that the younger genera-

tion had to know more about it so that

this wonderful place and this event would

continue forever. Then, I was gripped by

the powerful passion that conveying the

wonder of the Ise shrine to the younger

generation was our duty as creators.

Kameda: We wanted to do socially sig-

nificant work in a creative form, and were

able to create a new trend in advertising.

More than anything else, this left a great

impression on our creative spirit.

Work that creates needs

Manjot: For us, anything that can be seen

is the subject of creativity. Even if we have

only one idea, there are a lot of media for

developing that idea. We don’t merely

want to respond to the client’s needs. We

want to create those needs themselves.

Kameda: That’s why we have to evolve

as the client evolves. To achieve that, we

always have a creative structure in place

to respond instantly to changes. We in-

crease the number of our ways by doing

jobs with different staff members for each

new project to strengthen the network.

In the future, we will be involved with cre-

ative projects other than just commercials

and advertising. We hope to provide total

communication and total coordination as

the Creative Boutique.

Manjot: One of the meanings in our name

“1st Avenue” is to be the first to create a

particular path. To do that, we have to go

where no one has gone before. We want

to create many paths, so that people will

find themselves suddenly thinking, oh, this

was done by 1st Avenue too.

1st Avenue Inc.

Concept First - Only One BoutiqueCreative work that is not derived from existing work and is flexible about media is natural for them. A new boutique has been created that refines solutions for the client’s maximum benefit and creates all com-munication as own brand.

1st Avenue Inc.1-7-13 Mita, Meguro-ku Tokyo 153-0062, JapanTEL: +81-3-5719-1900 / FAX: +81-3-5719-1901 URL.http://www.1st-avenue.jp/Date established: October 2, 2006Capital: 10 million yen (Investment share of TYO Productions: 75%)Business content: Advertising planning and production

Creativity starts with formulating the concept

Client: Hawaiian Tourism AuthorityTitle: “Hula” version

Client: KIRIN BREWERY COMPANY, LIMITEDTitle: Kirin Nodogoshi Draft, “Debut” version

Ise shrine poster

1st Avenue Inc.President and COO: Katsumi KamedaVice-President and CCO: Manjot Bedi

1st Avenue Inc.President and COO: Katsumi KamedaVice-President and CCO: Manjot Bedi



I got my start in the film industry working as an assistant director for the director Nagisa Oshima. After Sozosha, the film production company created by Oshima and others, broke up, I became involved in production work in a variety of areas. These included live radio shows, television information programs, talk shows, sports programming, and stage productions. This experience gave me a great deal of confidence, and I began to understand then that the basis for craftsmanship was the same for all of them. The field that fas-cinated me was documentaries.The essence of documentaries is the appeal of the people themselves who arise during the course of human history. Whether we’re talking about structures or ornaments, all of them are the historical testimony of human intervention. Docu-mentaries are so moving because certain people existed.One recent project that was a historical scoop was the documentary produced as part of the 21st Century Project for TBS (Tokyo Broadcasting System Television). This documentary was about the search for the hidden treasures of the Chinese emperors, which had become lost due to the relocation of documents during the Sino-Japanese War. These treasures filled 29,000 boxes. Some of them had been taken to Taiwan, but no one knew where about 8,000 boxes were. We went to Tai-wan to hear the testimony of a 90-year-old living witness, and we at last discovered the remaining boxes in a storehouse in Nanjing. We got to experience the real thrill of getting a scoop and producing a documentary on a story of social signifi-cance that aroused a dormant period of history.

My policy is to create documentaries in a straightforward manner. It’s always impor-tant to have one’s antenna up, but even if one gets a hint, the hard part comes later. That’s digging into something and think-ing, this is it!I think the key to success is whether one can maintain the energy for the search. The work of a documentary maker re-quires the concentration involved in changing one’s perspective when one runs into difficulties and finding a solution. That is being straightforward.It is difficult for some people to produce overseas documentaries because they don’t have the ability to negotiate and gain permission for conducting research. Our company has a strong network in China and Russia in particular, and we have been able to conduct some difficult research there. For example, we covered the astonishingly successful Chinese track and field athletes, dubbed Ma’s Army, and in Russia, the Pushkin and Hermitage art museums. In both cases, there was a flood of offers from around the world to cover those subjects, but the gates were locked. And we turned them into docu-mentaries in both cases, showing our net-working capabilities and perseverance.Our guidepost for the future will be to es-tablish five or six regular programs among all documentary programs. Then, while using these as the basis of our operations, we will continue to concentrate on docu-mentary production, but use our technical skills to create corporate PR and product promotion videos.

Haxen International Inc.

Documentaries move people because they present people.Haxen’s status as one of Japan’s foremost documentary production compa-nies was created by an indomitable, steel-hard spirit for the conduct of inves-tigative reporting and its positive energy. Haxen has sprung into action to seek new ways to move people in an increasingly diverse society.

The world of documentaries that are created in a straightforward manner

Haxen International Inc.2-14-10 Shibuya, Shibuya-ku, Tokyo 150-0002, JapanTEL: +81-3-3498-3811 / FAX: +81-3-3486-8060URL.http://www.haxen.co.jpDate established: October 16, 2006Capital: 10 million yen (Investment share of TYO Productions: 100%)Business content: The production of television programs, commercials, videos; the production and marketing of DVDs, media-related operations, and creative sales promotions

Driven by a sense of historical mission

NHK BS-2: Chikyu ni Kokishin (Curiosity about the Earth) “Panda Yasei no Nazo ni Semaru – Chugoku / Genshi no Mori de Naniga?”

TV Tokyo: Gaia no Yoake (Gaia’s Dawn) “Moeyo Sakhalin”

TV Asahi: Suteki na Uchusen Chikyugo (The Splendid Spaceship Earth) “Namakemonoryu Kaiteki Seikatsu”

Haxen International Inc.Satoshi Kanda

President



Japanese animation has become extraordi-

narily popular worldwide, and demand is rising

abroad as well as at home. In conjunction with

this, such work as video and color finishing is

increasingly being outsourced overseas, and

other production processes are following. This

has required that animation production compa-

nies employ strategic business operations.

Creating animations is a long-term job, in which

all the processes take about 10 weeks to finish.

These include the picture storyboards, the orig-

inal illustrations, the animation, the coloration,

the filming, and the editing. In addition, much of

the work is sent to other companies to perform,

requiring strict control over the process and the

costs. This requires a solid financial bedrock,

which is the cause of management-related

concerns. Becoming a member of the TYO

group has become a source of great strength

for our company, as it has allowed us to focus

on the creative work. We are convinced we will

expand the range of our work in the future.

Our efforts to confront new challenges in our work

Since our founding 30 years ago, we have been

an animation production company with an

established reputation for creating artwork and

the processes of the original illustrations and

animation. We began to purchase equipment

to digitize our filming in 2000, and we have

created a structure that enables us to com-

plete all the processes in-house except for the

backgrounds and editing. This was a turbulent

period for the animation industry. At present,

we have five teams, each working separately

on different projects. We have worked with Stu-

dio Ghibli on many projects, and our full-length

feature presentations include the science fiction

comedy, Space Family Carl Vinson. In 2005, we

produced a work with Takataya Kahei as the

main character, called Kahei no Umi (The Sea

of Kahei). Takataya was born in the mid-Edo

period, and rose from rural poverty to become

a rich merchant. Unlike previous projects, in

which we were responsible for single process-

es, we produced everything ourselves. I sense

that this work raised the awareness of each of

our employees and determined the direction for

our company.

I studied civil engineering and city planning at

university, and I never thought I’d get involved

in this industry. But I started this work by

chance, and though I was unsure of myself at

first, I gradually began to understand the ap-

peal and motivation of this occupation. This in-

volves properly creating the artwork in a limited

time and then gradually completing the project

itself. There is also the professional attitude of

animators, and, more than anything, the power

of animation to move people.

We want to carefully nurture the animation, and the animators

In the future, we want to become more involved

with original animation and create children’s

cartoons much like the masterpieces of the

past. There has been an increase in the num-

ber of animations recently, but I am concerned

because I feel that the breadth of the stories

covered has deteriorated. Customers have

hailed our company for the quality of our art-

work, and we definitely want to create universal

animation with lovely pictures that everyone

from children to adults can enjoy. Our first pri-

ority is to create an environment in which it is

easy for animators to work, so that they can re-

spond to customer demands with excellent

quality. For example, France gives subsidies for

animation to support the arts, but Japan still

has a tendency to give priority to commerce. It’

s unfortunate because the high quality of Japa-

nese animation is recognized throughout the

world. Hereafter, we want to create works that

raise the status of animation in Japan.

DOGA KOBO Inc.

The transformation of a long-established animation studio based on first-class production technology.The company was turned into an attractive studio where exceptional animators could work. The young executive talks about devoting his energies to develop-ing new sectors and creating mechanisms to improve the status of animators while upholding the transmission of techniques in an unbroken line.

3. The work is completed after digitization, colorization, and filming.

2. The animation work is performed based on those instructions.

1. The director of presentation and artwork gives instructions for modifying the original illustrations.

DOGA KOBO Inc.4th Floor, Towa Building, 5-41-21 Higashi-Oizumi, Nerima-ku, Tokyo 178-0063, JapanTEL: +81-3-3978-6393 / FAX: +81-3-3978-7221URL.http://www.dogakobo.com/Date established: July 11, 1973Capital: Five million yen (Investment share of TYO Productions: 70%)Business content: Animation production

Multi-process animation

Examples of work processes from Kahei no Umi (The Sea of Kahei)

DOGA KOBO, Inc.Ryo IshiguroPresident


Group Companies

Group Outline

Corporate Information

KiramekiInvestment share of TYO Productions: 80%2-9-21 Kami-Osaki, Shinagawa-ku, Tokyo 141-0021, JapanTEL: +81-3-5795-0702 FAX: +81-3-5795-0703

Advertising Business

MONSTER FILMS Inc.Investment share of TYO Productions: 80%4-2-14 Roppongi, Minato-ku, Tokyo 106-0032, JapanTEL: +81-3-6229-1611 FAX: +81-3-6229-1622

SASSO Films, Inc.Investment share of TYO Productions: 70%3-17-39 Nishi-Azabu, Minato-ku, Tokyo 106-0031, JapanTEL: +81-3-5785-3011FAX: +81-3-5785-3012

TYO Productions Inc. Operating Holding Company2-21-7 Kami-Osaki, Shinagawa-ku,Tokyo 141-0021, JapanTEL: +81-3-5434-1580FAX: +81-3-5434-1595

M-one Productions Inc. Investment share of TYO Productions: 100%Hiroo Alpha Bldg., 4-5-48 Minami-Azabu, Minato-ku, Tokyo 106-0074, JapanTEL: +81-3-5447-6751 FAX: +81-3-5447-6755

Camp KAZ Productions Inc.Investment share of TYO Productions: 100%B1 floor, MT3 Bldg., 1-12-24 Mita, Meguro-ku, Tokyo 153-0062, Japan TEL: +81-3-5725-6321 FAX: +81-3-5725-6322

Planning and production of television commercials and advertising

Ultra Inc.Investment share of TYO Productions: 100%1-1-4-604 Kami-Osaki, Shinagawa-ku, Tokyo 141-0021, JapanTEL: +81-3-5475-6922 FAX: +81-3-5475-6923

OK Planning and Produce CorporationInvestment share of TYO Productions: 80%Kaname Bldg., 4F, 1-4-20 Minami-Azabu, Minato-ku, Tokyo 106-0047, JapanTEL: +81-3-5442-8391 FAX: +81-3-5442-8392

1st Avenue Inc.Investment share of TYO Productions: 75%1-7-13 Mita, Meguro-ku Tokyo 153-0062, JapanTEL: +81-3-5719-1900 FAX: +81-3-5719-1901

Strategia Inc.Investment share of TYO Productions: 90%Bungei Shunju Ginza Annex, 5-5-12 Ginza, Chuo-ku, Tokyo 104-0061, JapanTEL: +81-3-3569-1555 FAX: +81-3-3569-1565

T he TYO group consists of TYO Productions Inc. and 37 consolidated subsidiaries and equity

method affiliates. The Group is engaged in advertising, Web, entertainment, content solutions, and Interna-tional businesses with the goal of expanding and de-veloping the “Creative Business City” based on its core medium-term management strategy of multi-branding, that is, forming a Group comprising many leading con-

tent production companies with TYO serving as the operational holding company. The Group’s 37 compa-nies, with TYO Productions at the center, seek to es-tablish themselves as the top brands in their respective visual content markets while simultaneously expanding into related visual content businesses. The Group as a whole strives to create an innovative business model for the visual content business.

● Location of Head Office 2-21-7 Kami-Osaki, Shinagawa-ku, Tokyo

●TYO Group Executives Officers and Auditors

President and CEO,and CEO of the Group Hiroaki Yoshida Director and Group

Executive Officer Koichi Iida

Director and Senior Group Executive Officer Katsumi Kimura Auditor Hidejiro Matsuda

Director and Senior Group Executive Officer Kazuyoshi Hayakawa Auditor Keisuke Morishima

Director and GroupExecutive Officer Shuji Kakimoto Auditor Shigeyuki Mito

Managing Director, Chief Manager of Productions and GroupExecutive Officer Minoru Ui

●Capital

●Number of group companies

●Number of group employees

●Consolidated net sales

¥1,077 million (as of September 30, 2006)

37 (as of March 31, 2007) (including equity method affiliates)

654 (as of September 30, 2006)

¥21,054 million (as of September 30, 2006)

(As of September 30, 2006)

TV commercial

planning and production

TV commercial


TV commercial


Advertisement planning and production

TV commercial


TV commercial


Planning and production

TV commercial





Group management servicesTYO AdministrationInvestment share of TYO Productions: 100%2-21-7 Kami-Osaki, Shinagawa-ku, Tokyo 141-0021, JapanTEL: +81-3-5434-1585FAX: +81-3-5434-1595

Entertainment businessDigital Frontier Inc.Investment share of TYO Productions: 100%1-7-13 Mita, Meguro-ku, Tokyo 153-0062, JapanTEL: +81-3-5794-8444FAX: +81-3-5794-8445

Suzak Inc.Investment share of TYO Productions: 100%1-7-13 Mita, Meguro-ku, Tokyo 153-0062, JapanTEL: +81-3-5724-5912FAX: +81-3-5724-5913

Sting Inc.Investment share of TYO Productions: 80%1-7-13 Mita, Meguro-ku, Tokyo 153-0062, JapanTEL: +81-3-5768-6234 FAX: +81-3-5768-6682

Planning, production and sales of game software, planning, production and sales of music videos, computer graphics (CG), plan-ning and production of animation and other digital content, planning and development of characters, broadcast program planning and production.

Haxen International Inc.Investment share of TYO Productions: 100%2-14-10 Shibuya, Shibuya-ku, Tokyo 150-0002, JapanTEL: +81-3-3498-3811 FAX: +81-3-3486-8060

Content Solutions BusinessPost Production Center Inc.Investment share of TYO Productions: 73%3F-4F, Minami-Azabu Shibuya Bldg., 4-11-30Minami-Azabu, Minato-ku, Tokyo 106-0047, JapanTEL: +81-3-3473-2861 FAX: +81-3-3473-2566

Crank Inc.Investment share of TYO Productions: 100%B1 floor, Landic Minami-Azabu Bldg., 4-11-21 Minami-Azabu, Minato-ku, Tokyo 106-0047, JapanTEL: +81-3-5447-6081 FAX: +81-3-5447-6082

Provision of platforms (editing space, editing equipment, etc.) and editing technology for visual content production / Operations related to filming of visual materials

TYO Interactive Design Inc.Investment share of TYO Productions: 100%6th Floor, RE-KNOW Meguro Bldg.,3-1-4 Kami-Osaki Shinagawa-ku, Tokyo 141-0021, JapanTEL: +81-3-5793-8500 FAX: +81-5793-9030

Web Business

Theoria Communications Inc.Investment share of TYO Productions: 87%1st Floor, MO Bldg., 3-14-15 Higashi, Shibuya-ku, Tokyo 150-0011, JapanTEL: +81-3-5774-8558 / FAX: +81-3-5774-8557

colab Inc.Investment share of TYO Productions: 51%2nd Floor, TYO Main Office, 2-21-7 Kami-Osaki, Shinagawa-ku, Tokyo 141-0021, JapanTEL: +81-3-5434-8815 FAX: +81-3-5434-8816

COM Co., Ltd.Investment share of TYO Productions: 53%3rd Floor, New TYO Wing, 1-7-13 Mita, Meguro-ku, Tokyo 153-0062, JapanTEL: +81-3-5724-5639 FAX: +81-3-5724-5654

Planning and production of interactive content

International Business

Cailoghi s.r.l.Investment share of TYO International B.V.: 80%Via dei Bardi 36, Firenze ITALIATEL/FAX: +39-055-245-855

WEB制作

Da Lian Eastern Dragon Cartoon Development Co., Ltd.(equity method affiliate)Investment share of TYO Productions: 35%No. 610, Huangpu Road, Dalian High-tech Industrial Zone,Liaoning Province, China

Overseas development centers for interactive content and animation

REAL-T Inc.Investment share of HAL Film Maker: 80%4-38-19 Naritahigashi, Suginami-ku, Tokyo 166-0015, JapanTEL: +81-3-5929-1695 FAX: +81-3-5929-1694

dwarf Inc. Investment share of TYO Productions: 82%1-7-13 Mita, Meguro-ku, Tokyo 153-0062, JapanTEL: +81-3-5719-4666 FAX: +81-3-5719-4667

Build Up Inc.Investment share of TYO Productions: 80%1-7-13 Mita, Meguro-ku, Tokyo 153-0062, JapanTEL: +81-3-5768-2520 FAX: +81-3-5768-2521

Mazri Inc.Investment share of TYO Productions: 100%2-21-7 Kami-Osaki, Shinagawa-ku, Tokyo 141-0021, JapanTEL: +81-3-5434-8751 FAX: +81-3-5434-5530

Yumeta Co., Ltd.Investment share of TYO Productions: 80%Yokoyama Bldg., 1-42-20 Matsuyama, Kiyose-shi, Tokyo 204-0022, JapanTEL: +81-424-95-5116 FAX: +81-424-95-5117

5pb Inc.Investment share of TYO Productions: 80%28-11 Sarugaku-cho, Shibuya-ku, Tokyo 150-0033, JapanTEL: +81-3-5457-3567 FAX: +81-3-5457-3568

HAL Film Maker Co., Ltd.Investment share of TYO Productions: 82%4th floor, Ogikubo Fukuchi Building, 1-10-6 Kamiogi, Suginami-ku, Tokyo 167-0043, Japan TEL: +81-3-5347-9330 FAX: +81-3-5347-9337

GEMBA, Inc.Investment share of Digital Frontier: 85%1-1-5 Kami-Meguro, Meguro-ku, Tokyo 153-0051, JapanTEL: +81-3-5724-4442 FAX: +81-3-5724-4443

SARUCHIN COMPANYInvestment share of Digital Frontier: 80%2-7-2 Kitazawa, Setagaya-ku, Tokyo 155-0031, JapanTEL: +81-3-3467-5505 FAX: +81-3-3467-5642

DOGA KOBO Inc.Investment share of TYO Productions: 70%5-41-21 Higashi-Oizumi, Nerima-ku, Tokyo 178-0063, JapanTEL: +81-3-3978-6393 FAX: +81-3-3978-7221

Digital content, games and CG planning

and production

Character planning and development

Post production for

animations

TV commercial planning and

production, Music production

Animation planning and production

Digital content and CG


Broadcast program



Web production

Web production

Web production

Web production

CG and digital content


Game software

development

Music clip planning and production

Game software

development


Planning, image production, and modeling for

movies, CM, games, and amusement

facilities

Filming-related operations

Post production

for films


Administration operations

Investment in Europe and the United

States, and corporate operations and management

TYO International B.V.Investment share of TYO Productions: 100%Stille Veerkade 36, 2512BG Den Haag, The NetherlandsTEL: +31-70-3265604FAX: +31-70-3265666

Webadvertising production

Great Works America Inc.Investment share of TYO International B.V.: 60%401 Park Avenue South, New York 10016, USATEL:+1-646-403-9740

Great Works, S.L.Investment share of TYO International B.V.: 60%C/Santa Eulalia, 5-9, 08012 Barcelona, SpainTEL:+34-93-217-34-58

InteractiveAgency

Great Works ABInvestment share of TYO International B.V.: 60%Sveavagen 66, 111 34 Stockholm, SwedenTEL:+46-8-52-80-77-70

InteractiveAgency

InteractiveAgency


Advertising planning and production

Television commercials

Advertisers

Broadcasting companies

Production orders

Advertising orders

(In some cases there is direct ordering and the designation of production companies)

Productions

Television broadcasts (Watching)

Advertising agencies, etc.

M-one Productions Inc.

Camp KAZ productions Inc.

MONSTER FILMS Inc.

TYO Productions Inc.

Ultra Inc.

Strategia Inc.

1st Avenue Inc. SASSO Films, Inc.

Kirameki

OK Planning and Produce Corporation

Users / Viewers

Web Business

Web

Advertisers

Internet

Users / Viewers

Production orders

Advertising orders

Productions

Communications (Browsing / Use)


colab Inc.

COM Co., Ltd.


TYO Interactive Design Inc.

(In some cases there is

direct ordering and the

designation of production

companies)

Advertising Business

T his business is being handled by 10 companies. These include seven

companies producing television commer-cials, our primary business since its estab-lishment. These also include ULTRA Inc. and Strategia Inc., two companies whose primary work involves advertising from planning to production, and 1st Avenue Inc., which was spun off as an indepen-dent unit in October 2006. In addition to further strengthening our brand strength and sales capabilities, these 10 compa-nies will continue to offer creative work fulfilling client needs through advertising planning and production as advertisers adopt diversified advertising strategies.

O ur Web business, which we estab-lished as an independent segment

this year, is being handled by four compa-nies, including COM Co., Ltd. and Theoria Communications Inc., which became part of the corporate group last year through the merger and acquisition process. Our workload continues to increase in con-junction with the growth of the Internet advertising market in an environment in which more advertisers are aggressively employing the Internet as a primary me-dium to rank with television commercials. colab Inc., the former Nexis Communica-tions Corporation, formed a capital tie-up with SEPTENI HOLDINGS CO., LTD. in December 2006 to beef up their sales ca-pabilities. In the future, we will aggressively pursue business growth by producing and offering communication tools integral to corporate advertising, with each company utilizing their individual strengths.



Broadcast Stations

Movie Theaters

Sales Companies

Game Equipment and Software Manufacturers

Record Companies

LimitedLiability

Partnership

Build Up Inc.

Yumeta Co., Ltd.

dwarf Inc.

Digital Frontier Inc.

GEMBA, Inc.

SARUCHIN COMPANY

REAL-T Inc.

HAL Film Maker Co., Ltd.

DOGA KOBO Inc.

Haxen International Inc.

5pb Inc.

Suzak Inc. Mazri Inc.

Sting Inc.

Movies Characters

DocumentariesAnimation

Music

Games

Modeling

Computer Graphics

Clients

Broadcasting

Screening

DVD Sales

Game Software Sales

CD Sales Promotion Videos

DVD Sales

Partical Investment

Entertainment Business

O ur core enterprise is the entertainment business. We conduct operations over a wide range of

fields, including the production of animation, computer graphics, game software, music videos, and documen-tary programs, as well as character planning and pro-duction.Our objective is to further boost our earnings and invest some of those earnings in production committees and acquire rights while reaping steadily rising earnings from the production of content of exceptional quality, includ-ing television programs and films, and game and music

production using animation and computer graphics. We continue to diversify our visual content production sector, adding documentary program producer Haxen International Inc. to the group in October 2006.In the future, we intend to devote additional resources to business expansion, focusing as much as possible on the core businesses of our group, by enhancing the brand strength of each enterprise, investing in produc-tion committees, establishing new companies, and acquiring existing companies through merger or acqui-sition.


Content Solutions Business

International Business

Filming / Equipment

Post production

Advertisers

Broadcasting companies

Users / Viewers

Provision of solutions

Advertising orders

Productions ordering / Production

Television broadcasts (Watching)


Television commercial production company

Post Production Center Inc.

Crank Inc.

T his business involves the provision of solutions to visual content production

companies. Our efforts are comprised of two business models—the post produc-tion division and the filming-related opera-tions division.The post production division uses the most advanced platforms and editing technology for productions of all types that handle visual content. The filming-related operations division sends camera operators and lends filming equipment to filming projects. In the future, these two divisions will further expand the range of the solutions they provide as business opportunities in conjunction with overall group growth, while providing high quality technology.

O ur group’s multi-brand strategy is to broaden our overseas expansion, develop our produc-

tion function overseas with a focus on the Internet and animation, and create an international creative network between talented creators and the TYO group.In the website production sector, we established the new overseas intermediate holding company TYO Inter-national B.V. in The Netherlands in March 2006 to create

a content market and distribution network. We took our first step in that direction by taking a capital stake in a European website production company.In the animation production sector, group company Dalian Eastern Dragon Cartoon Development Co., Ltd. established in Dalian, China, is involved in television pro-gram production and preparing to take the plunge into feature film broadcasting.


Medium-Term Management Plan

Challenges Ahead


T he objective of our group is to establish ourselves as the leading brand in the video markets in which

our group companies operate. In addition, we will con-tinue to expand our business into different visual content sectors with the intention of creating a new business model that is not limited to the existing visual content business. Our aim is not merely to expand profits by boosting our shares through continued multi-branding in each business segment. We also will rebuild the busi-ness portfolio for the entire group and ameliorate busi-ness risk caused by changes in the economic climate. Our goal over the mid-term is for sales of 40 billion yen by 2010, achieving our plan as outlined below.Achieving this goal will require a definite improvement in

the sales and ordinary income ratio. We plan to estab-lish standard numerical targets for each segment for all the group companies in the first half of fiscal year ended 2007 and concentrate our operational efforts on achiev-ing them.We will redouble our business development and earn-ings management efforts in the future as we work to achieve our mid-term business targets. We particularly want to strengthen our presence in the Web and enter-tainment segments, so we will concentrate our attention on them as we aggressively continue to form new com-panies and acquire others through mergers and acquisi-tions.

O ur most pressing challenges as we work to achieve our group’s mid-term target of 40 billion

yen in sales by 2010 include a further expansion of our

business areas including overseas development, thor-ough implementation of cost management, and invest-ments in all our production committees.

2

3

1 Thorough profit managementWe will define standard numerical values for sales and ordinary income ratios in every segment to identify the mission of all our group companies, and strive to establish solid profit management with a dedicated concentration to conducting business that achieves these figures.

The Web and animation businesses are part of the international market, so we plan to conduct aggressive overseas business development, including mergers, acquisitions, and the establishment of new companies, to expand our business opportunities.

There was an increase in the number of group companies from 25 to 37 by the end of the consolidated fiscal year ended September 2005. In the future, we intend to strengthen our brand through an active program of mergers, acquisitions, and the establishment of new companies in the Web and entertainment segments in particular. We also aim to expand our business with the intention of exchange listing individual group companies.

Promoting mergers, acquisitions, and the establishment of new companies

Group development overseas

4

In addition to the production of animations, films, and games in our entertainment business, we will acquire window rights and copyrights by investing in production committees to obtain greater profits.

Investment business development

Fiscal Term Fiscal year ended September 2007

Fiscal year ended September 2008



Net Sales (¥ billion) 24.0 29.0 34.5 40.0

Ordinary Income (¥ billion) 1.22 1.68 2.28 3.00

Sales and Ordinary Income Ratio (%) 5.1 5.8 6.6 7.5


Administration work / Budget control

Audit

Audit

Our group companies

TYO Administration Inc.

Audit

Audit

Alliances

AlliancesConcurrent positions

Appointment Appointment Appointment

General Shareholders’ Meeting

Board of Directors

Board of Auditors

Management Planning Division

Productions headquarters

Accounting auditors

Board of Directors Auditors

President

Internal audits

Internal auditsBudget control

Internal audits

All company auditing reports

Group internal auditing office

President


Our Basic Stance on Corporate Governance

O ur basic stance is to strengthen the corporate governance of TYO Productions and the Group

as a whole. We recognize that corporate governance structures for the entire Group and for Group subsid-iaries and equity-method companies constitute an im-portant factor in expanding our creative business areas

based on our multi-branding strategy. While guidelines and auditing represent standard control mechanisms, we believe we must refine the incentives and other means offered to Group companies to encourage rou-tine compliance in the course of our corporate activi-ties.


0

2500

5000

7500

10000

12500

15000

17500

20000

0

8,000

4,000

12,000

16,000

20,000

24,000

14,966

19,83921,054

Fiscal yearended

September 2004

Fiscal yearended

September 2005

Fiscal yearended

September 2006

0

200

400

600

800

1000

1200

1400

0

200

400

600

800

1,000

1,200

1,400

1,2791,280

980

Fiscal year ended

September 2004

Fiscal yearended

September 2005

Fiscal yearended

September 2006

0

200

400

600

800

1000

1200

1400

0

200

400

600

800

1,000

1,200

1,400

842

1,1851,207

Fiscal yearended

September 2004

Fiscal yearended

September 2005

Fiscal yearended

September 2006

0

100

200

300

400

500

206

489

450

Fiscal yearended

September 2004

Fiscal yearended

September 2005

Fiscal yearended

September 2006

Financial Information

O ur corporate group is an aggregation of several exceptional content production companies with

one capital foundation. We continue to grow through a mechanism that maximizes overall group performance in which each production company freely pursues prof-its as an independent brand. Our industry has steadily become more aware of this mechanism, called the Creative Business City, since the previous term. The number of group companies rose from 25 at the end of consolidated fiscal year ended 2005 to 32 at the end of consolidated fiscal year ended 2006.As a result of each group company’s efforts to achieve the business targets, 25 of 31 companies (including

both the parent and the consolidated subsidiaries) were successful. The six companies that did not achieve their targets posted a decline in profits, and the 25 compa-nies that did reach their goals were unable to offset this decline. Therefore, our performance fell short of our stated forecast figures at the start of the term.Owing to these factors, our consolidated business re-sults for the 25th fiscal year were 1,279 million yen in op-erating income (a 0.1% slide from the previous consoli-dated fiscal year), 1,185 million yen in ordinary income (a 1.8% decline) and 450 million yen in current net income for the term (a 7.8% drop) on sales of 21,054 million yen (a 6.1% increase).

Net Sales Operating Income

Ordinary Income Current Net Income

(Unit: ¥ Million)

(Unit: ¥ Million)

(Unit: ¥ Million)

(Unit: ¥ Million)

* The number of group companies is that as of the end of September 2006

Results for the Consolidated Fiscal Year ended 2006 Under Review


Advertising Business Unit: ¥ thousands

Entertainment Business Unit: ¥ thousands

Content Solutions Business Unit: ¥ thousands

The company posted operating income of 1,276 million yen, a 2.7% year-on-year rise, on 14,394 million yen in sales, a 10.6% increase. Ad-ditionally, 46 million yen in goodwill amortization from mergers and acquisitions is included in selling, general and administrative expens-es.

The company posted operating in-come of 140 million yen, a 533.8% year-on-year surge, on 4,639 mil-lion yen in sales, an 11.7% decline. Additionally, 110 mil l ion yen in goodwill amortization from merg-ers and acquisitions is included in selling, general and administrative expenses.

The company posted operating income of 334 million yen, a 2.6% year-on-year drop, on 2,883 million yen in sales, a 20.2% jump. Ad-ditionally, 15 million yen in goodwill amortization from mergers and acquisitions is included in selling, general and administrative expens-es.


Fiscal year ended September 2006 Difference Year-on-year

change

Sales 13,015,977 14,394,201 1,378,223 110.6%

(Customers) 12,930,565 14,349,044 1,418,479 111.0%

(Inter-segment Sales) 85,411 45,156 40,255 52.9%

Operating cost 11,772,926 13,117,250 1,344,324 111.4%

Operating income 1,243,051 1,276,950 33,899 102.7%



change

Sales 5,254,012 4,639,064 614,947 88.3%

(Customers) 5,224,833 4,574,384 650,449 87.6%


Operating cost 5,231,806 4,498,315 733,490 86.0%

Operating income 22,206 140,749 118,542 633.8%



change

Sales 2,399,599 2,883,881 484,281 120.2%

(Customers) 1,684,236 2,131,323 447,087 126.5%


Operating cost 2,056,606 2,549,768 493,162 124.0%

Operating income 342,992 334,112 8,880 97.4%

Sales by Business Segment


Cash flows from operating activitiesThe funds derived from operating activities totaled 785 million yen, 847 million yen above last year’s total. The factors contributing to the increase in these funds were primarily increases in net income before income taxes, depreciation expenses, goodwill amortization amounts, increases in advances received, and a decrease in accounts receivable. In contrast, the factors contributing to a decline in these funds included a rise in inventory assets and corporate tax payments.

Cash flow from investing activitiesThe funds used for investing activities totaled 1,217 million yen, 411 million yen more than last year’s total. The primary factors contributing to the acquisition of these funds included income derived from the sale of subsidiaries’ stock and the reversal of insurance reserves. In contrast were the acquisition of tangible and intangible fixed assets, investments in production committees and other capital partnerships, and investments in affiliated companies.

Cash flow from financing activitiesThe funds derived from financing activities totaled 567 million yen, 390 million yen more than last year’s total. The factors contributing to this result included both expenditures for the repayment of both short-term and long-term borrowings, and contracting for new long-term loans.

Cash flows from operating activities

Cash flow from investing activities

Cash flow from financing activities

0

500

1000

1500

2000

2500

0

400

800

1,200

1,600

2,000

2,400

2,800

2,6332,439

1,441

Fiscal yearended

September 2004

Fiscal yearended

September 2005

Fiscal yearended

September 2006

0

2500

5000

7500

10000

12500

0

4,000

2,000

12,000

6,000

8,000

10,000

14,000

11,071

12,99612,119

Fiscal yearended

September 2004

Fiscal yearended

September 2005

Fiscal yearended

September 2006

0

5

10

15

20

0

5

10

15

20

13.0

18.1

20.1

Fiscal yearended

September 2004

Fiscal yearended

September 2005

Fiscal yearended

September 2006

0

5

10

15

20

25

30

0

5

10

15

20

25

15.3

25.2

18.8

Fiscal yearended

September 2004

Fiscal yearended

September 2005

Fiscal yearended

September 2006

-900-600-3000

3006009001200

176

485

-61

-900

-1,200

-600

-300

0

300

600

900

1,2001,136

-866

567

785

-1,217

-805

Fiscal yearended

September 2004

Fiscal yearended

September 2005

Fiscal yearended

September 2006

Consolidated Cash Flows


(Unit: ¥ Million) (Unit: ¥ Million)Consolidated Net Assets Consolidated Total Assets

Consolidated Equity Ratio Consolidated Return on Equity Ratio

(Unit: ¥ Million)

（％）（％）


Fiscal Term Previous Consolidated Fiscal Year (as of Sept. 30, 2005) %

Consolidated Fiscal Year Under Review (as of Sept. 30, 2006) %

Difference

Item Amount Ratio Amount Ratio Amount

(Assets)

I. Current Assets

1. Cash and cash equivalents 1,359,200 1,511,731 152,530

2. Notes and accounts receivable 3,953,720 3,785,717 (168,003)

3. Inventories 1,686,705 1,823,034 136,328

4. Deferred tax assets 99,344 98,345 (998)

5. Other 188,387 309,319 120,931

6. Allowance for doubtful accounts (18,194) (17,659) 535

Total Current Assets 7,269,163 60.0 7,510,488 57.8 241,324

II. Fixed assets

1. Tangible fixed assets

(1) Buildings 1,122,970 1,238,000

Accumulated depreciation 459,312 663,658 525,157 712,843 49,185

(2) Land 746,208 746,208 －

(3) Other 547,158 715,621

Accumulated depreciation 295,100 252,058 429,933 285,688 33,630

Total tangible fixed assets 1,661,925 13.7 1,744,740 13.4 82,815

2. Intangible fixed assets

(1) Business rights 44,565 － (44,565)

(2) Consolidated adjustment account 579,345 － (579,345)

(3) Goodwill － 465,947 465,947

(4) Other 271,564 193,813 (77,750)

Total intangible fixed assets 895,475 7.4 659,760 5.1 (235,714)

3. Investments and other assets

(1) Investment securities 564,201 492,847 (71,353)

(2) Contribution to capital － 515,382 515,382

(3) Investment in affiliated companies 23,673 227,144 203,470

(4) Deferred tax assets 240,515 280,506 39,991

(5) Insurance reserves 832,711 860,480 27,769

(6) Lease deposits 388,714 488,798 100,084

(7) Other 280,801 222,719 (58,082)

(8) Allowance for doubtful accounts (37,555) (6,009) 31,545

Total investments and other assets 2,293,061 18.9 3,081,869 23.7 788,807

Total Fixed Assets 4,850,462 40.0 5,486,371 42.2 635,909

Total Assets 12,119,626 100.0 12,996,860 100.0 877,234

Consolidated Balance Sheet

(Unit: ¥ thousands)


Fiscal Term Previous Consolidated Fiscal Year (as of Sept. 30, 2005) %

Consolidated Fiscal Year Under Review (as of Sept. 30, 2006) %

Difference


(Liabilities)

I. Current Liabilities

1. Accounts payable 2,238,100 2,261,995 23,895

2. Current portion of long-term bonds 100,000 50,000 (50,000)

3. Short-term borrowings 4,020,358 3,292,357 (728,000)

4. Accrued liabilities 606,704 581,033 (25,670)

5. Income taxes payable 470,108 287,854 (182,253)

6. Advance received 493,116 622,249 129,133

7. Allowance for bonuses 114,202 103,862 (10,340)

8. Allowance for customer benefit program － 919 919

9. Other 124,121 207,518 83,397

Total Current Liabilities 8,166,711 67.4 7,407,790 57.0 (758,921)

II. Fixed Liabilities

1. Bonds 135,000 85,000 (50,000)

2. Long-term loans 598,510 2,416,232 1,817,722

3. Allowances for retirement benefits 18,115 19,802 1,687

4. Allowances for retirement benefits and compensation for executives. 426,701 368,683 (58,018)

5. Other 71,925 65,864 (6,060)

Total Fixed Liabilities 1,250,252 10.3 2,955,582 22.7 1,705,330

Total Liabilities 9,416,963 77.7 10,363,373 79.7 946,409

(Minority interests)

Minority interests 263,481 2.2 －－ (263,481)

(Shareholders’ Equity)

I. Capital stock 1,076,952 8.9 －－ (1,076,952)

II. Capital surplus 1,040,843 8.6 －－ (1,040,843)

III. Retained earnings 542,923 4.5 －－ (542,923)

IV. Net unrealized gain on other securities 64,855 0.5 －－ (64,855)

V. Treasury stock (286,394) (2.4) －－ 286,394

Total Shareholders’ Equity 2,439,181 20.1 －－ (2,439,181)

Total Liabilities, Minority Interests and Shareholders' Equity 12,119,626 100.0 －－ (12,119,626)

(Net Assets)

I. Common stock

1. Capital stock －－ 1,077,582 8.3 1,077,582

2. Capital surplus －－ 1,029,124 7.9 1,029,124

3.Retained earnings －－ 636,857 4.9 636,857

4. Treasury stock －－ (429,011) (3.3) (429,011)

Total common stock －－ 2,314,553 17.8 2,314,553

II. Evaluation and conversion difference

1. Net unrealized gain on other securities －－ 20,469 0.2 20,469

2. Foreign currency translation adjustment －－ 16,085 0.1 16,085

Total evaluation and conversion difference －－ 36,554 0.3 36,554

III. Minority interests －－ 282,378 2.2 282,378

Total net assets －－ 2,633,487 20.3 2,633,487

Total liabilities and net assets －－ 12,996,860 100.0 12,996,860




Fiscal TermPrevious Consolidated Fiscal

Year (Oct. 1, 2004 to Sept. 30, 2005) %

Consolidated Fiscal Year Under Review

(Oct. 1, 2005 to Sept. 30, 2006) %Difference


I. Net Sales 19,839,635 100.0 21,054,751 100.0 1,215,116

II. Cost of Sales 15,525,208 78.3 16,398,135 77.9 872,926

Gross Profit 4,314,426 21.7 4,656,616 22.1 342,189

III. Sales, General and Administrative Expenses

1. Provision for allowance for doubtful accounts 4,609 2,107

2. Executive compensation 898,515 953,846

3. Salaries and bonus 493,750 570,033

4. Provision for accrued bonus 31,152 35,127

5. Business consignment fee 261,012 349,053

6. Rent expenses paid 149,030 156,842

7. Provision for allowances for retirement benefitsand compensation for executives 17,246 14,982

8. Retirement benefit cost 10,652 12,601

9. Depreciation of consolidated adjustment accounts 182,476 －

10. Goodwill depreciation － 216,742

11. Other 985,409 3,033,856 15.2 1,066,046 3,377,382 16.0 343,525

Operating Income 1,280,570 6.5 1,279,233 6.1 (1,336)

IV. Non-operating Income

1. Interest income 774 5441

2. Insurance refund 35,351 27,670

3. Dividends from investment in associations 51,402 52,320

4. Other 21,115 108,644 0.5 25,443 110,876 0.5 2,232

V. Non-operating Expenses

1. Interest expenses 81,404 72,939

2. Loss on sale of accounts receivable 25,466 32,447

3. Equity in losses of affiliates － 2,878

4. Commission expenses 23,552 21,992

5. Depreciation on investments in associations 29,459 62,017

6. Other 21,636 181,520 0.9 11,982 204,257 1.0 22,737

Ordinary Income 1,207,693 6.1 1,185,852 5.6 (21,841)

VI. Extraordinary Income

1. Gain on sales of equity in affiliates － 141,627

2. Gain on sale of securities 42,050 42,050 0.2 － 141,627 0.7 99,577

VII. Extraordinary Loss

1. Loss on disposal of fixed asset 13,484 3,212

2. Loss due to expropriation of fixed asset 60,536 －3. Provision for prior year allowances for retirement

benefits and compensation for executives － 43,532

4. Valuation loss on investment securities － 74,021 0.4 62,800 109,545 0.5 35,524

Income before income taxes and distribution of net income/loss to silent partnership 1,175,722 5.9 1,217,935 5.8 42,212

Distribution of net income/loss to silent partnership －－ 8,009 0.1 8,009

Net income before income taxes 1,175,722 5.9 1,209,926 5.7 34,203

Income taxes - current 714,696 680,351

Income taxes - deferred (132,440) 582,255 2.9 (8,214) 672,137 3.2 89,882

Minority Interests 104,425 0.5 87,104 0.4 (17,320)

Net Income 489,042 2.5 450,684 2.1 (38,357)

Consolidated Statements of Income



Fiscal Term Previous Consolidated Fiscal Year (Oct. 1, 2004 to Sept. 30, 2005)

Consolidated Fiscal Year Under Review (Oct. 1, 2005 to Sept. 30, 2006) Difference

Item Amount Amount Amount

I. Cash Flows from Operating Activities (61,570) 785,763 847,333

II. Cash Flows from Investing Activities (805,457) (1,217,248) (411,790)

III. Cash Flows from Financing Activities 176,872 567,835 390,963

IV. Foreign Exchange Adjustments on Cash and Cash Equivalents (3,686) 19,079 22,766

V. Increase (Decrease) in Cash and Cash Equivalents (693,841) 155,430 849,271

VI. Cash and Cash Equivalents at Beginning of Year 2,050,142 1,356,300 (693,841)

VII. Cash and Cash Equivalents at End of Year 1,356,300 1,511,731 155,430

Common stock Evaluation and conversion difference

Stock purchase warrants

Minority interests

Total net assets Capital

stock Capital surplus

Retained earnings

Treasury stock

Total common

stock

Net unrealized

gain on other

securities

Foreign currency

translation adjustment

Total valuation

and conversion differencet

Balance at September 30, 2005 1,076,952 1,040,843 542,923 (286,394) 2,374,325 64,855 － 64,855 12 263,481 2,702,675

Difference in amount during fiscal year

New stock issuance (¥ thousand) 630 642 1,272 － 1,272

Distribution of surplus (Note) (¥ thousand) (154,702) (154,702) － (154,702)

Appropriation of profit as directors’ bonuses (Note) (¥ thousand)

(202,047) (202,047) － (202,047)

Net income (¥ thousand) 450,684 450,684 － 450,684

Disposal of treasury stock (¥ thousand) (12,361) 51,638 39,277 － 39,277

Acquisition of treasury stock (¥ thousand) (194,256) (194,256) － (194,256)

Difference in amount (net) in items other than shareholders’ equity during fiscal year (¥ thousand)

－ (44,386) 16,085 (28,300) (12) 18,897 (9,415)

Total difference in amount during fiscal year (¥ thousand)

630 (11,719) 93,934 (142,617) (59,772) (44,386) 16,085 (28,300) (12) 18,897 (69,187)

Balance at September 30, 2006 1,077,582 1,029,124 636,857 (429,011) 2,314,553 20,469 16,085 36,554 － 282,378 2,633,487

Note: Profit appropriation items as presented to the regular general shareholders’ meeting held in December 2005.

Consolidated Statements of Shareholders’ Equity


Consolidated Statements of Cash Flow(Unit: ¥ thousands)


TYO Productions Inc.2-21-7 Kami-Osaki, Shinagawa-ku, Tokyo 141-0021, Japan

http://group.tyo. jp/

JASDAQ Secur i t ies Code: 4358

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