Avex Group - IR Webcasting · 5/15/2015 · Corporate Philosophy of Avex group On the basis of everyone’s dreams and aspirations, we are committed to delivering excitement to the

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May 15, 2015

Avex Group

Mid-Term Strategy 2018

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[1] Introduction

[1-1] Changes in the business domain

[1-2] Corporate Philosophy of Avex Group

[2] Review of “Next Era 2014,” the previous medium-term business plan

[3] Current facts

[4] Future direction

[5] Target guideline

©2015 Avex Group Holdings

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Changes in the business domain

What has remained unchanged is our wish to

deliver excitement to customers

Digital video

distribution

Digital music

distribution

Live

Management

Record label

Music package

1988 1990 1995 2002 2009 2014

Early period Growth period Transition period

Sales of imported records

Started the record label business

Full-scale operation of the management business

Full-scale operation of the live business

Started digital music distribution

Started digital video distribution


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Corporate Philosophy of Avex group

On the basis of everyone’s dreams and

aspirations, we are committed to

delivering excitement to the world

without being limited by convention.

Aspiring to be a company

that creates an exciting

experience


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[1] Introduction


[2-1] Review of the previous mid-term business plan “Next Era 2014”

[2-2] Achievements made through alliances with digital platforms

[3] Current facts




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Review of the previous mid-term business plan “Next Era 2014”

Targets set with the Next Era 2014 (announced on December 1, 201)０

Results

FY2011 FY2012 FY2013 FY2014

Net Sales Achieving consolidated net sales at 140

billion yen or more for FY2013 ¥121. billion ¥138.7 billion ¥156.9 billion ¥169.2 billion

Operating

Income

Margin

Continuing to achieve 10% or higher 10.1% 10.1% 6.6% 5.1%

ROE Achieving 15% or higher 14.7% 18.4% 14.6% 12.2%

D/E Ratio Striving to reduce interest-bearing liabilities*1

by targeting 1 time or below 0.7 0.4 0.2 0.2

Dividends Achieving a dividend ratio of 30% or more*2 34.8% 31.8% 37.1% 35.2%

As a result of business diversification, we achieved a new record high in net sales for four

consecutive years. We also improved our financial standing and aggressively enhanced

shareholder returns. Improvement of the operating income margin is a future task.

*1: Reduced interest-bearing liabilities from 40 billion yen to 10 billion yen

*2: The dividend ratio was raised to 35% in the fiscal year ended March 31, 2014


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Achievements made through alliances with digital platforms

We aggressively promoted alliances in the digital domain based on the growth strategy.

＋

LINE MUSIC

Total number of subscribers: 5.36 million (As of March 31, 2015, including subscribers to BeeTV)

Total number of subscribers: 1.57 million (As of March 31, 2015)

Kodansha, Shueisha,

Shogakukan, and others


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[1] Introduction


[3] Current facts

[3-1] Trend of digitalization of entertainment

[3-2] Market changes related to our company

[3-3] Changes in users

[3-4] Change in the music business

[3-5] Facts about the environment related to digital platforms

[3-6] Facts about the environment related to the live platform




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Trend of digitalization of entertainment

Digitalization of the market has greatly changed the means of providing content.

Change of

device

Music

Video

Games

Competitive

environment

PCs Feature phones Smartphones

Records CDs and DVDs Digital music

distribution

TVs and

movie theaters DVDs

Digital video

distribution

Game arcades Home video game

consoles

Smartphone

games

Digitalization

Entry of global players


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Market changes related to our company

*Sources: Recording Industry Association of Japan, Japan Video Software Association, Motion Picture Producers Association of Japan, Inc.,

Media Development Research Institute Inc.

The size of the markets of our existing businesses have been on a downward trend.

Music software (Packages) 2009 2014

Video software (Packages) 2009 2014

Digital music

distribution 2009 2014

Rental video 2008 2013

316.5

254.1

19.7%

273.9

229.9

16.1%

90.9

43.6

52.0%

255.5

202.9

20.6%

¥billion


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Changes in users

Changes in the use of money and time

Diversification of tastes

Digitalization has greatly changed the behavior of users.

Changes in the way users obtain information


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Change in the music business

Digitalization and changes in users have resulted in big changes in media and the music

business

Before Now/Future

Media Mass media ➡ Social media

Mu

sic

bu

sin

es

s

Management Major talent agencies ➡ Increase of

new players

Production Major labels ➡ Increase in independent

production

Sales Domestic players ➡ Entry of

global players


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Facts about the environment related to digital platforms

Size of the digital music distribution market (¥billion) Source: International Federation of Phonogram and Videogram Producers (IFPI), 2014

Size of the online video distribution market (¥billion) Sources: THE DIGITAL ENTERTAINMENT GROUP (United States), 2014,

IT Navigator, Nomura Research Institute, Ltd. (Japan), 2014

• Currently both the digital music distribution market and digital video distribution market have large room for growth in Japan.

• However, it is likely that global players will enter the Japanese market, resulting in fierce competition.

0 1,000 2,000 3,000 4,000 5,000

アメリカ

日本

Entry into Japan by global players

0 500 1,000 1,500 2,000 2,500 3,000

アメリカ

日本

United States

Japan

United States

Japan

50 100 150 200 250 300 100 200 300 400 500


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Facts about the environment related to the live platform

Size of the concert market (¥billion) Source: All Japan Concert & Live Entertainment Promoters Conference

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2010年 2011年 2012年 2013年 2014年

0

500

1000

1500

2000

2500

3000

2010年 2011年 2012年 2013年 2014年

Size of the amusement and theme park market (¥billion) Source: Ministry of Economy, Trade and Industry

Concert market expanded and

exceeded 270 billion yen. (Reference) The amusement and theme park

market has also grown to 600 billion yen.

• While digitalization is happening, the market related to live concerts, in which artists and the audience share time and space, has been expanding.

• However, the concert market may level off in the future due to the venue capacity issue.

300

250

200

150

100

50

0

700

600

500

400

300

200

100

0

2010 2011 2012 2013 2014 2010 2011 2012 2013 2014


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[1] Introduction


[3] Current facts


[4-1] Strengths and the competitive advantage of Avex Group

[4-2] Business policies for the next three years

[4-3] Mid-term strategy: Content strategies

[4-4] Mid-term strategy: Digital platform strategies (Music)

[4-5] Mid-term strategy: Digital platform strategies (Video)

[4-6] Mid-term strategy: Live platform strategy



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Strengths and the competitive advantage of Avex Group

We own rights as a content owner and are capable of

making use of rights proactively by responding to

environmental changes.

We have the capacity and foundation for 360-degree business operation, covering labels, publishing,

management, digital, live music, anime, and schools.

We achieved the largest share for three consecutive years in the music market in Japan. We have

bargaining power and influence in the industry.

Being an independently-owned listed company, we have

reliability and financial power and can make decisions

promptly and flexibly.

Avex is a comprehensive entertainment company which is unparalleled in the world. We

have various strengths demanded by artists, content owners, and players from other

industries.


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Business policies for the next three years

We have formulated three business policies to respond to environmental changes and to

make the first move while taking advantage of our own strengths.

1. Enhancing content 2. Evolving digital services

3. Expanding live business

Establishing a cycle in which content and platforms circulate.


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1) Improving and establishing the

mechanism for creating our hit content

Mid-term strategy: Content strategies

Our own content (Japan) Other companies’

content (Japan) Overseas content

In order to enhance content, we promote the following four strategies.

1. Enhancing content

2. Evolving digital services


2) Alliances with

external content owners

3) Acquiring influential

overseas artists

4) Expanding the range of content (from the

range centering on music and video content)

Anime

Music and

video

Characters

Information

Improving the quality of content and increasing the quantity

Exp

an

din

g th

e ra

ng

e o

f co

nte

nt

Games


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More opportunities

to be exposed

to music

Mid-term strategy: Digital platform strategies (Music)

Evolving into a service which provides new encounters with music

Creating a lifestyle that is full of music

In response to changes in users, we are starting a new music

streaming service

Participating

live concerts, etc.

Interest in music

and artists

Sharing exciting

experiences





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Mid-term strategy: Digital platform strategies (Video)

• Evolving digital video distribution services by responding to expected

changes in lifestyle and competition

• Promoting alliances more aggressively, assuming future expansion in Asia

Evolving existing services (Enabling consumers to

experience new lifestyles)

Enhancing alliances (Enhancing the business model

by increasing partner companies)

Expansion in Asia (Developing businesses reflecting

the characteristics of each country)

Ex

pa

ns

ion

of d

igita

l pla

tform

s

Creating a lifestyle in which people enjoy video content





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• Boosting user demand further by enhancing the lineup of content

• Creating new opportunities to enjoy entertainment through alliances

Mid-term strategy: Live platform strategy

Enhancing

the lineup of

content

Increasing opportunities to

enjoy entertainment

Creating a lifestyle full of entertainment experiences





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[1] Introduction


[3] Current facts



[5-1] Vision of our businesses in the future

[5-2] Guidelines for medium-term targets


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FY 2014 FY2017

Net Sales （envisioned amount）

¥169.2 billion ¥200.0 billion

Content

Digital platform

Live platform

Enhancing content

Vision of our businesses in the future

Evolving digital services

Expanding live business

Expanding

the range of

content

By expanding existing businesses, we aim to achieve net sales of 200 billion yen in FY2017.

Overseas expansion


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Guidelines for medium-term targets

Management indexes for FY2017

Net Sales ¥200.0 billion

or more

Operating

Income Margin 10% or higher

ROE 15% or higher


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Aspiring to be a

company creating an

exciting experience


Documents

Avex Group - IR Webcasting · 5/15/2015 · Corporate Philosophy of Avex group On the basis of everyone’s dreams and aspirations, we are committed to delivering excitement to the