Kadokawa Dwango Financial Results for the 3rd Quarter Ended December 31, 2017

Key insights

7 takeaways

01
Kadokawa Dwango reported a significant decline in profitability for the nine months ended December 31, 2017, with operating income dropping to 2,943 million yen, a 60.2% decrease compared to the same period in 2016.See it on page 1
02
The Niconico platform experienced a decline in dues-paying members, contributing to lower revenue and increased operating expenses due to heavy investment in the new 'Niconico (く)' version and associated functional updates.See it on page 5
03
The Publication segment saw a 38.2% year-on-year decrease in operating income to 3,802 million yen, driven by a decline in major hit titles and a reactionary drop in sales for books related to the movie 'Your Name.'See it on page 6
04
Despite a 3.3% revenue increase in the Video and Game segment, operating income for the division fell by 92.9% to 96 million yen, impacted by a shift in sales mix and development expenses for games like 'ARK: Survival Evolved.'See it on page 22
05
As of December 31, 2017, Niconico reported 70.32 million issued IDs and 2.14 million premium members, with an average monthly active user (MAU) count of 8.97 million for the October–December 2017 quarter.See it on page 19
06
The company's cash and deposits decreased by 10,912 million yen to 94,630 million yen, attributed to tax payments, bonuses, treasury stock acquisition, and a delay in receipts due to a bank holiday.See it on page 8
07
The company maintains a full-year operating income forecast of 5,800 million yen for the fiscal year ending March 31, 2018, having achieved a 50.7% progress rate through the third quarter.See it on page 3

Summary

Kadokawa Dwango’s financial results for the nine-month period ending December 31, 2017, reflect a challenging fiscal environment characterized by declining profitability across its primary business segments. Consolidated revenue reached 151,875 million yen, a slight increase from the previous year, yet operating income fell significantly to 2,943 million yen. This contraction in profit was driven by increased investment in the Niconico platform, rising operational costs, and a reactionary decline in earnings following the success of previous hit titles.

The company’s operations are divided into Web Services, Publication, and Video and Game segments. The Web Services segment, centered on Niconico, experienced a decline in revenue due to a reduction in dues-paying members, compounded by heavy investment in the platform’s new version and functional upgrades. The Publication segment maintained stable revenue through strong e-book and e-magazine performance, though operating income suffered from lower sales of physical books and preparation expenses for a new distribution facility in Tokorozawa. The Video and Game segment saw revenue growth supported by social and package game sales, yet overall segment profit was hampered by the absence of the significant financial contributions seen in the prior year from major film releases.

Management is actively addressing these performance hurdles through a strategic focus on user engagement and infrastructure modernization. Key initiatives include the rollout of the new Niconico interface, which integrates video, live broadcasting, and interactive features, alongside a long-term commitment to capital investment in the Tokorozawa project. Despite the current downward pressure on operating income, the company maintains a solid financial position with an equity ratio of 45.8 percent, as it continues to pivot toward digital-first service improvements and long-term infrastructure development.