■Sony  vs  Nintendo

Sony Group and Nintendo’s Game business is recently gathering attention in three areas. First, in the hardware/platform space- measuring by the number of users utilizing the game communication network via a monthly paid subscription service, Sony’s Playstation has already achieved over one hundred million accounts, whereas Nintendo as a latecomer, has its membership users growing steadily alongside  Nintendo Switch sales.

Second, in the Game IP (Intellectual Property) space, despite Nintendo leading by far, Sony is catching up via its subsidiary Aniplex’s release of the global blockbuster “Demon Slayer-Kimetsu no Yaiba-The Movie”.

Third, in other game related areas, Sony is still the unrivalled lead in movies and music,  however Nintendo has decided to make use of its abundant game IP licenses in its forthcoming launch of theme park Super Nintendo World in collaboration with Universal Studios.

Due to the increasing digital distribution of recent for games, it would not be a surprise if hearing music from older game titles could have contributed to download purchases

Considering the growth rate of eSports-related sales revenue, the contribution amount from sponsors, as well as the increasing number of spectators, it is quite likely that eSports will be recognized and featured alongside actual physical sports such as future Olympic events and other international sport tournaments

• CyberAgent（4751）　 2,021 yen（31/8　closing price）

・Established in 1998 as an internet advertising agency. Launched media business via an Internet TV station “ABEMA”, game business via smartphone games, internet advertising business, venture capital via “investment education business”.

・For their cumulative FY2021 9 month (Oct-Jun) results announced on 28/7, sales revenue increased by 36.1% or 486.7 billion yen compared to the same period the previous year while operating income was 2.7x or 77.513 billion yen. For their game business, new titles contributed to an increase in sales revenue of 59.5% or 186.3 billion compared to the previous year while operating income increased by 3x or 68.5 billion yen, bringing it up by 7.3 points and making it 88.5% of the total pie.

・Prospective annual performance: an increase in sales revenue of 35.8% or 650 billion yen, an increase in operating income of 3x or 100 billion yen compared to the previous year. Their latest smartphone game “Uma-musume Derby” released in February of this year was a huge hit generating 9 million downloads as of July 20^th. In the game, players train racehorce characters to compete and win in races, using actual racehorces as models. The game has been converted into a TV animation, game, manga and songs generating interest from a wide range of viewers.

• Nintendo（7974） 52,900 yen（31/8 closing price）

・Founded in 1889 first manufacturing Japanese “hanafuda” playing cards, in 1947 they started creating/selling Japanese “karuta” playing cards and Western playing cards.  Later they began manufacturing computer-embedded video game consoles as their main product. They have a 32% investment in the Pokemon Company.

・ For their FY2022 1Q (Apr-Jun) results announced on 5/8,  sales revenue was reduced by 9.9% or 322.6 billion yen compared the the same period the previous year and operating income was 17.3% or 119.7 billion yen reduced. Recoiling from their record hit “Animal Crossing” game which received the benefit of the stay-home movement from COVID, sales of hardware units were lower by 21.7% and sales of software units were lower by 10.2%.

・Prospective annual performance: a 9% or 1.6 trillion yen reduction in sales revenue, operating profit down by 22% or 500 billion yet from the previous year. In October their new “Nintendo Switch organic EL model” is set to be released. Production volume may be impacted by the tightness in global demand for the semiconductor parts, but as of the end of June, cumulative units sold of Nintendo Switch reached 89 million units, nearly 100 million. The number of paid online subscription users are steadily growing on the back of of this.

• Capcom（9697）                         3,070 yen（31/8 closing price）

・Founded in 1979 as a family game software development company. They manage three businesses, mainly in digital contents, amusement parks and arcade games. They have produced several popular games including “Street Fighter” and “Monster Hunter”.

・For their FY2021 2Q (Apr-Jun) results announced on 29/7, sales revenue for the same period the previous year increased by 2x or 48.4 billion yen and operating income 2.2x or 23.6 billion yen. Their main digital contents business was supported by new game releases of their popular series “BioHazard” and “Monster Hunter” as well as sales of their older series games via their digital distribution channel.

・Prospective annual performance: YoY increase in sales revenue of 4.9% or 100 billion yen, operating income up YoY 21.4% or 42 billion yen. The company hosted an international eSports official competition “Capcom Pro Tour” featuring their “Street Fighter” game and held a “Capcom Cup” international competition for the finalists. This year from October, the company plans to host a competition called “Street Fighter League” with participants backed by team owners in Japan, establishing its brand as an eSport.

• Konami　Holdings（9766）　　　　　　6,980 yen（31/8 closing price）

・Established in 1969. Their business is centered in four areas: Family/Mobile phone games “Digital Entertainment”, arcade games “Amusement”, casino games “Gaming & Systems”, and sports clubs “Sports”.

・For their FY2022 1Q (Apr-Jun) results announced on 5/8, sales revenue increased by 29.2% or 68.3 billion yen YoY, Sales revenue deducted by COGS and selling/administrative costs or Business Profit was up by 64.2% at 20.3 billion yen. Their main digital entertainment business had sales revenue up by 16.4% YoY at 49.9 billion yen, Business Profit was up 25.2% or 19.2 billion yen YoY showing a healthy trend.

・Prospective annual performance was not announced due to uncertainty from the COVID situation. Catching the wind from the increasing support base for eSports , they see strong growth in their “eFootball Pro Evolution Soccer” game internationally and their “Professional Baseball  Spirits A” and “Jikkyo Powerful Professional Baseball” games domestically. Lastly, the international release of their “Yu-Gi-Oh! Trading Card Game”  and the mileage point service they launched for their board game “Momotaro Dentetsu” are collecting attention.

• Global X Japan Games & Animation ETF（2640） 　 2,439  yen（31/8 closing price）

・This ETF is the first ETF on the Tokyo Stock Exchange to invest in Japanese companies with a large presence in the game industry as well as companies that are active in the comic and animation industry. Newly listed this year in June, the ETF is composed of 20 stock names and aims to track the fluctuation in the market-cap weighted “Solactive Japan Games & Animation Index”.

・The game and animation related sector, apart from recently taking great strides in digitalization and changing to cloud-based platforms has expectations as a new growth area for new technologies incorporating the metaverse such as VR and AR.  For Japanese companies strong in content creation, the shift from paper to digital in the animation industry (incl. manga) and the shift from TV and movies online video streaming platforms, creates big opportunites for growth.