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Market Analysis

Consolidated Financial Results for the Fiscal Year Ended March 31, 2014

The fiscal year ended March 31, 2014, represented a period of significant structural transition and strategic reinvestment for the Japanese social networking and gaming firm. While net sales experienced a modest 3.8% decline to ¥12,155 million, the company recorded a net loss of ¥227 million, a sharp reversal from the previous year’s profit. This downturn was largely attributed to impairment losses from the liquidation of Chinese subsidiaries, the closure of local bases, and high effective tax rates resulting from goodwill amortization. Despite these losses, the company’s financial foundation remained robust, with total assets increasing to ¥26,492 million and an equity ratio of 84.5%. The Social Net Business segment served as the primary revenue engine, contributing ¥11,550 million in external sales. This performance was bolstered by the growth of the mobile title Monster Strike, which signaled a shift in the company’s core growth drivers. To support this evolution, the group pursued aggressive portfolio expansion through the 100% acquisitions of Diverse, Inc. and Confianza & Co., Inc. for approximately ¥1.2 billion, alongside a strategic business transfer to enhance research and matchmaking services. These moves were complemented by internal restructuring, including the disposal of aging server infrastructure and software assets totaling ¥337 million. Capital management was a central focus throughout the period, characterized by a hundred-for-one stock split and new share issuances that raised ¥6.5 billion. These actions nearly doubled cash and cash equivalents to ¥16.8 billion, providing the liquidity necessary for future scaling. Looking toward fiscal year 2015, the outlook is highly optimistic, with projections suggesting net sales will more than triple to ¥40,000 million and net income will reach ¥6,000 million. To further improve share liquidity and broaden the investor base in anticipation of this growth, the board approved an additional five-for-one stock split effective July 2014.

investment mergers-acquisitions market-analysis+2

mixiMay 2014

Financial

Summary of First Quarter Financial Results for the December 2014 Fiscal Term (Consolidated)

KLab Inc. reported a significant financial turnaround in its consolidated results for the first quarter of the fiscal term ending December 2014. Following a net loss in the same period the previous year, the company achieved profitability with a net income of 51.1 million yen. Revenue grew to 4.4 billion yen, representing a 24.8% increase year-over-year. This growth was primarily driven by the sustained performance of the mobile title Love Live! School Idol Festival, successful New Year in-game events, and the contribution of the newly released Celestial Craft Fleet. The transition to profitability was supported by aggressive cost-reduction measures and structural reforms. The company reduced its workforce by 141 positions to a total of 825 employees and successfully lowered outsourcing expenses by 59.3% from their 2013 peak. Operational efficiency was further enhanced by liquidating unprofitable projects, consolidating domestic subsidiaries to streamline indirect costs, and closing several overseas and regional offices. While total assets decreased slightly to 8.3 billion yen, net assets rose to 4.8 billion yen, aided by a capital increase resulting from the exercise of stock subscription rights by Deutsche Bank’s London Bureau. The report focuses on the Japanese mobile gaming market for the period of January 1 to March 31, 2014. Looking forward, management maintained a cautious but positive outlook, forecasting first-half revenue of 8.9 billion yen and an operating income of 216 million yen. However, the company noted that the volatile nature of the mobile gaming industry, which is highly dependent on hit products, makes full-year forecasting difficult. Segment data confirms that the game business remains the primary revenue driver, accounting for nearly the entirety of the company's 4.4 billion yen in quarterly sales.

investment market-analysis japan+1

KLabMay 2014

Financial

IGG Inc. Q1 2014 Quarterly Report

IGG Inc. achieved a significant financial turnaround during the first quarter of 2014, transitioning from a US$3.9 million loss in the prior year to a net profit of US$13.6 million. Total revenue surged by 206.3% year-over-year to reach US$44.1 million, a transformation driven by the company’s aggressive pivot toward the mobile gaming market. By the end of March 2014, mobile games accounted for 79.3% of total revenue, a dramatic increase from just 12.3% in the first quarter of 2013. This growth was anchored by the global success of the title Castle Clash, which alone generated 84% of all mobile revenue, supported by a massive user base of 147 million registered accounts. The company’s geographic and operational scope expanded following its October 2013 listing on the Hong Kong Stock Exchange. Utilizing US$105 million in net proceeds from the IPO, the group focused on enhancing in-house development, licensing third-party titles, and pursuing strategic acquisitions across high-growth regions. While gross profit rose to US$32.2 million, the gross profit margin experienced a slight decline to 73.0% due to rising mobile operating costs and substantial advertising expenditures required to maintain global market share. The financial structure also stabilized significantly, with total equity reaching US$149.98 million, reversing a substantial deficit from the previous year. Corporate governance and equity incentives remain central to the group’s long-term strategy. Controlling shareholders, led by Chairman and CEO Zongjian Cai, maintain a 32.86% stake through a concert party agreement, while institutional investors like IDG-Accel and Temasek hold significant positions. To align employee interests with shareholder value, the group manages several equity incentive structures, including Pre-IPO and Post-IPO share option schemes and a Share Award Scheme. These programs, combined with a centralized management structure, are intended to provide the stability and motivation necessary to sustain the company’s momentum in the competitive international mobile gaming industry.

investment market-analysis mobile+2

IGGMar 2014

Financial

Financial Highlights for the First Half of the Fiscal Year Ending March 2014 (FY2013)

Tecmo Koei Holdings reported significant growth across all major profitability metrics for the first half of the fiscal year ending March 2014. Net sales reached 15.46 billion yen, representing a 12.6% increase over the same period in the previous year. This growth was accompanied by a substantial rise in operating income, which surged 83.8% to 1.65 billion yen. Most notably, net income experienced a dramatic year-over-year increase of 329.6%, totaling 2.38 billion yen for the six-month period ending September 30, 2013. The Game Software segment remained the primary revenue driver, contributing 9.77 billion yen in sales, a 10.8% increase. However, the Online & Mobile and Media & Rights segments showed the strongest relative growth at 27.9% and 32.5% respectively. While most divisions saw improved performance, the Amusement Facilities and Pachislot & Pachinko segments experienced slight declines in sales. From a profitability standpoint, the Online & Mobile segment demonstrated a significant recovery, with operating income rising 62.1% to 455 million yen. The consolidated balance sheet as of September 30, 2013, shows total assets of 88.2 billion yen, a decrease from the 95.01 billion yen reported at the end of the prior fiscal year. This change was largely driven by a reduction in current assets, specifically cash and accounts receivable. Conversely, investment securities rose to 50.02 billion yen. Total liabilities decreased significantly from 13.39 billion yen to 6.07 billion yen, primarily due to a reduction in accounts payable and income taxes payable. Looking ahead to the full fiscal year results, forecasts suggest continued growth with net sales expected to reach 37 billion yen and operating income projected at 7 billion yen. These targets indicate a positive outlook for the remainder of the year, particularly for the Online & Mobile segment, which is forecasted to double its annual operating income compared to the previous full year.

market-analysis investment japan+1

Koei TecmoMar 2014

Financial

FY2014 Second Quarter Financial Results

GREE reported second-quarter net sales of ¥32.6 billion and operating income of ¥9.2 billion for the 2014 fiscal year, reflecting a strategic focus on stabilizing profitability amidst a shifting mobile landscape. By implementing a 15% reduction in fixed costs and achieving ¥2.1 billion in total cost savings, the company successfully mitigated profit declines. A significant transition in consumer behavior is evident as smartphone coin consumption rose to 68% of the total mix, signaling a decisive move away from legacy feature phone platforms toward modern mobile ecosystems. The native game segment reached a critical milestone by achieving monthly profitability in overseas operations as of December 2013. This international growth was largely propelled by the success of titles such as Knights & Dragons, which generated over $5 million in revenue within a 30-day window. Domestically, the web game business showed signs of recovery with a 15% month-over-month increase in coin consumption, supported by the launch of several high-performing partner titles. These operational successes are bolstered by a robust pipeline of upcoming releases across diverse genres, which management expects will drive a full turnaround by the fourth quarter. Beyond its core gaming operations, the company is diversifying into advertising, venture capital, and offline entertainment to broaden its revenue base. Organizational adjustments include a total headcount of 2,051 employees and the establishment of a new customer support center in Sendai to improve service quality. As the company enters its tenth year of operation, it remains focused on maintaining strict cost controls while expanding its global footprint and diversifying its business domains to ensure long-term sustainability in the competitive digital entertainment market.

investment market-analysis japan

GREEFeb 2014

Financial

Quarterly Consolidated Balance Sheets (FY2013 Q3)

The financial statements for the third quarter of fiscal year 2013 reveal a significant downturn in performance compared to the previous year. Net sales dropped by approximately 36%, falling from ¥9,922 million in the prior year’s third quarter to ¥6,357 million. This decline in revenue, coupled with relatively high selling, general, and administrative expenses, resulted in an operating loss of ¥509 million, a sharp reversal from the ¥2,342 million operating income reported during the same period in 2012. The bottom-line results show a net loss of ¥1,573 million for the nine-month period ending December 31, 2013. This deficit was exacerbated by non-operating expenses, including ¥152 million in equity losses of affiliates, and a substantial increase in deferred income taxes totaling ¥685 million. Total assets decreased from ¥20,083 million at the end of the previous fiscal year to ¥17,623 million, primarily driven by a reduction in cash and deposits and accounts receivable. Cash flow data indicates a shift in corporate strategy and liquidity management. While operating activities resulted in a net cash outflow of ¥570 million, investing activities provided a net inflow of ¥1,231 million, largely due to the withdrawal of time deposits. Notable investments included ¥925 million for the purchase of investments in subsidiaries and ¥303 million for business transfers, which contributed to a significant increase in goodwill from ¥178 million to ¥1,036 million. Despite the reported net loss, the company maintained a cash and cash equivalents balance of ¥9,628 million at the end of the period, supported by its existing reserves and investment liquidations.

investment japan market-analysis+1

mixiFeb 2014

Report

Faits Essentiels 2014

The purpose of the compilation is to present a comprehensive portrait of Canada’s video‑game industry in 2014, demonstrating its economic weight, employment dynamics, and public perception. Data were gathered from four principal sources: an NPD Group survey of 3 359 adults and 526 adolescents (margin of error ± 2.19 %); a comparable 2012 NPD study of 2 969 adults and 527 adolescents (± 1.5 %); a Nordicity questionnaire completed by 90 Canadian studios; and a NewZoo global consumer poll of 35 000 respondents aged 10‑65. The scope covers the national market and its three largest provinces—Quebec, British Columbia and Ontario—while also

market-analysis player-demographics north-america

ESAC – Entertainment Software Association of CanadaJan 2014

Report

Essential Facts 2014: Canada

The 2014 overview of Canada’s video‑game sector presents a comprehensive picture of an industry that ranks among the world’s largest by per‑capita employment and is a cornerstone of the nation’s digital economy. Drawing on custom research commissioned by the Entertainment Software Association of Canada (ESAC)—including NPD surveys of 3,359 adults and 526 teens in 2014, a 2012 survey of 2,969 adults, 527 teens and 687 children, and quantitative data from 90 Canadian companies—the analysis covers national trends, regional breakdowns, workforce characteristics, public perception and consumer behaviour. Employment figures reveal 16,500 individuals directly working in game development, equivalent to 27,000 full‑time jobs, with a 5 % increase in staff between 2011 and 2013 and two‑fifths of firms forecasting a 25 % expansion within two years. The sector generated $2.3 billion in GDP contribution and $1.6 billion in direct spending, a 12.5 % rise from 2011. More than half of Canadian companies identify as independent developers, and 53 % of the 329 firms operate as such. Salaries average $72,500 annually, with a median employee age of 31,

market-analysis player-demographics salary+1

ESAC – Entertainment Software Association of CanadaJan 2014

Financial

Financial Highlights for the 3rd Quarter of the Fiscal Year Ending March 2014 (FY2013)

Tecmo Koei Holdings reported significant financial growth for the third quarter of the fiscal year ending March 2014, demonstrating a strong upward trend in profitability and revenue compared to the same period in the previous year. Net sales for the nine-month period reached 25.58 billion yen, a 15.2% increase year-over-year. This growth was accompanied by a substantial rise in earnings, with operating income climbing 43.5% to 3.58 billion yen and net income nearly doubling with a 90.8% increase to 4.98 billion yen. These results indicate high operational efficiency and a successful product mix during the reporting period. The Game Software segment remained the primary driver of revenue, contributing 17.03 billion yen in sales, a 16% increase. However, the Online & Mobile segment showed the most significant momentum in profitability, with operating income rising 49.3% to 698 million yen. Other segments, such as Media & Rights and Pachislot & Pachinko, also saw revenue gains, while the Amusement Facilities division experienced a decline in both sales and operating income. The company’s balance sheet reflects a strategic shift in asset allocation, characterized by a decrease in cash and time deposits and a notable increase in investment securities, which rose from 45.34 billion yen to 56.26 billion yen. Geographically focused on the Japanese market with broader international implications, the data suggests a positive outlook for the full fiscal year. Management forecasted total annual sales of 37 billion yen and a net income of 5.7 billion yen. The financial position remains robust, with total net assets increasing to 86.88 billion yen by the end of December 2013. This stability is supported by a significant rise in accumulated other comprehensive income, driven largely by unrealized gains on securities and favorable foreign currency translation adjustments.

investment market-analysis japan

Koei TecmoJan 2014

Financial

Fiscal Year Ending March 2014 Financial Results

Tecmo Koei Holdings reported record-breaking financial results for the fiscal year ending March 31, 2014, marking the fourth consecutive year of profit growth. Net sales reached 37.58 billion yen, an 8.5% year-on-year increase, while net income rose 22.6% to 6.94 billion yen. This performance was driven by the successful execution of the "IP Creation and Expansion" strategy, highlighted by the 30th anniversary of the Nobunaga’s Ambition series and the launch of the new Toukiden IP, which sold 550,000 units. The Game Software segment remained the primary revenue driver, contributing 25.4 billion yen in sales, followed by the Online & Mobile segment at 6.4 billion yen. Geographically, Japan accounted for over 83% of total sales, though the Asian market showed the strongest growth at 33.2%. While total unit sales remained relatively flat at 6.5 million units, profitability improved significantly; the operating profit ratio rose to 19.0%, and the ordinary profit ratio reached 28.6%. These gains were supported by a reduction in the cost of goods sold and improved management of SG&A expenses. Looking ahead to fiscal year 2014, the company plans to achieve further growth with a sales target of 38 billion yen and an ordinary profit ratio exceeding 30%. Strategic priorities include expanding smartphone and browser games in Asian markets, pursuing major collaborations such as Hyrule Warriors for the Wii U, and supporting new hardware platforms like the PlayStation 4 and Xbox One. To reward shareholders, the company maintains a 50% payout ratio policy, increasing the annual dividend to 41 yen with a long-term goal of reaching 50 yen.

investment market-analysis japan

Koei TecmoJan 2014

Report

Dossier de Prensa: España 2014

AEVI was created in 2014 to replace aDeSe and to serve as the unified voice of Spain’s video‑game ecosystem, encompassing publishers, developers, distributors and related agents. Its core mission is to promote domestic industry growth, attract investment, defend intellectual‑property rights and foster a sustainable, responsible market that highlights the sector’s cultural and innovative value. The association now gathers companies that control more than 90 % of the national distribution market, including major global publishers such as Activision‑Blizzard, Nintendo, Sony, Electronic Arts, Ubisoft and Microsoft Iberia, as well as the first development member, Novarama. Industry data indicate that Spain ranks among the top five European and top ten global gaming markets, with 19 million players across all platforms. In 2013 total consumer spending reached €762 million—software €401 million, hardware €275 million and accessories €86 million—despite a 7 % decline in physical sales that nevertheless halved the previous years’ downturn. Adult participation stands at 24 % while 62 % of minors play regularly. Regulatory focus centers on the PEGI self‑rating system, introduced in 2003, and on pending legislative reforms to the Penal Code and Intellectual‑Property Law aimed at curbing piracy, which cost the sector €284 million in 2013 and, if eliminated, could generate roughly 26 600 new jobs. AEVI also promotes major events, notably the second edition of Madrid Games Week in October 2014, positioning the capital as a key venue on the international exhibition circuit and providing a forum for industry debate.

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AEVIJan 2014

Financial

Fiscal Year Ending March 2015: 1st Half Financial Results

Koei Tecmo Holdings reported record-breaking financial results for the first half of fiscal year 2014, ending September 30, 2014. Net sales reached 16.1 billion yen, a 4.2% increase year-over-year, while operating profit nearly doubled to 3.29 billion yen. This performance represents the fourth consecutive year of sales and profit growth, driven by strong software sales on new hardware platforms, the expansion of the download business, and high-performing social games. The game software segment remains the primary revenue driver, contributing 9.87 billion yen in sales. Key titles such as Hyrule Warriors, Toukiden: Kiwami, and Atelier Shallie performed well globally. Geographically, while Japan remains the largest market accounting for 78.2% of sales, overseas revenue grew by 31%, with significant gains in North America and Europe. The company also noted a strategic shift toward multi-platform development, supporting PlayStation 4 and Xbox One, and expanding its presence in the smartphone and mobile market through native apps and regional expansion in China, Korea, and Taiwan. Management’s long-term strategy focuses on intellectual property creation and expansion through a "media mix" approach, including animations, comics, and movies. A notable organizational change included the merger of Koei Tecmo Games and Gust to strengthen development synergies. For the full fiscal year 2014, the company projects net sales of 38 billion yen and an operating profit of 8 billion yen. Based on this growth, the company has targeted an annual dividend increase to 50 yen, maintaining a policy of a 50% payout ratio or a minimum 50-yen dividend to enhance shareholder returns.

investment mergers-acquisitions japan+1

Koei TecmoJan 2014

Financial

Annual Report & Accounts 2014

Modern Times Group recorded a solid top‑line expansion in 2014, with net sales rising 11 % to SEK 15.7 billion on a constant‑exchange‑rate basis. Growth was split between 4 % organic increase and a further 7 % generated by acquisitions, notably the 2013 purchase programme that expanded the group’s presence in the Nordic pay‑TV and emerging‑market segments. Operating profit slipped modestly, falling 3–4 % to roughly SEK 1.3 billion and delivering an 8.1 % operating margin, while cash flow remained robust and net debt was cut to 0.2 × EBITDA, half the level of the prior year. The board proposed, and shareholders approved, a cash dividend of SEK 10.50 per share—about 57 % of net income—resulting in a payout of SEK 700 million. At year‑end the market capitalisation stood at SEK 16.8 billion, with 17,721 shareholders; the ten largest owners held 47 % of the equity and 64 % of voting rights, and Swedish institutional investors owned roughly 59 % of the shares. Segment performance was mixed. Free‑TV Scandinavia delivered flat revenue with a slight profit decline, while Pay‑TV Nordic posted an 8 % sales increase and a 14 % rise in operating profit. Broadcasting contributed SEK 13.2 billion of the total revenue and generated SEK 2.12 billion of operating profit, marginally below the previous year. The group continued to hedge virtually all USD and EUR programme‑acquisition exposures, maintaining a SEK 137 million hedging reserve, and held full‑coverage insurance on its assets. Corporate governance was overseen by a seven‑member board, four of whom were classified as independent, supported by remuneration, audit and a newly created corporate‑responsibility advisory committee. The board approved all major investments, acquisitions and disposals above SEK 2 million. Financial statements were prepared under IFRS, with joint ventures now accounted for using the equity

investment mergers-acquisitions market-analysis+1

Modern Times GroupJan 2014

Financial

FY2014 First Quarter Financial Results

The financial results for the first quarter of fiscal year 2014 reflect a strategic pivot toward smartphone-centric operations and strict cost management. While net sales decreased quarter-over-quarter to ¥35.3 billion, operating profit rose to ¥9.8 billion, a ¥2.0 billion increase driven by a 12% reduction in total costs. This improvement was achieved through a ¥3.7 billion cut in advertising and fixed expenses, successfully meeting cost-reduction targets ahead of schedule. However, the period also saw a ¥5.2 billion extraordinary loss due to asset write-offs for underperforming titles and provisions for a voluntary retirement program. The operational focus has shifted heavily toward the smartphone market, which now accounts for approximately 65% of total coin consumption. While coin consumption on feature phones continues to decline, smartphone consumption grew by ¥1.6 billion during the quarter. This growth was particularly strong in native game apps for overseas markets and third-party browser games. Overseas operations are currently on track to reach monthly profitability by the end of 2013, supported by the horizontal deployment of successful game engines and marketing techniques. Management expects a full turnaround in sales and profits by the fourth quarter of FY2014. This outlook is based on a revised development pipeline that prioritizes high-quality releases and a transition into new genres beyond traditional card battle games. By realigning development resources and maintaining a leaner cost structure, the company aims to achieve a 15% year-over-year reduction in fixed costs by the end of the fiscal year while expanding its presence in the global native app market.

market-analysis player-demographics mobile+1

GREENov 2013

Financial

FY2013 Second-Quarter Financial Statements

The financial results for the second quarter of fiscal year 2013, covering the six-month period ending September 30, 2013, reveal a significant downturn in performance compared to the same period in the previous year. Net sales fell sharply from ¥6,817 million to ¥3,979 million, representing a decline of approximately 41.6%. This contraction in revenue led to an operating loss of ¥398 million, a stark reversal from the ¥1,612 million operating income recorded in the second quarter of fiscal year 2012. The bottom-line results show a net loss of ¥1,352 million for the period, contrasted with a net income of ¥1,205 million in the prior year. This deficit was exacerbated by a substantial increase in deferred income taxes, which rose to ¥666 million, and equity in losses of affiliates totaling ¥126 million. Consequently, retained earnings decreased from ¥10,409 million at the end of fiscal year 2012 to ¥8,728 million, contributing to a reduction in total net assets to ¥14,664 million. Despite the reported losses, the consolidated statement of cash flows indicates a stable liquidity position. While operating activities resulted in a net cash outflow of ¥448 million, investing activities generated a significant inflow of ¥2,774 million, primarily driven by ¥4,000 million in proceeds from the withdrawal of time deposits. These movements resulted in a net increase in cash and cash equivalents, ending the period at ¥11,247 million. The balance sheet remains deleveraged with total liabilities decreasing to ¥2,816 million, down from ¥3,791 million at the start of the fiscal year.

investment japan mobile+1

mixiNov 2013

Financial

Namco Bandai Holdings Annual Report 2013

The 2013 fiscal year demonstrated Bandai Namco’s ability to convert its long‑standing intellectual property into record financial results, underscoring an IP‑Axis strategy that leveraged legacy brands across toys, games and multimedia. Consolidated net sales reached ¥487.2 billion, a 7.3 % increase year‑on‑year, while operating income surged 40.6 % to ¥48.6 billion, delivering a 10 % operating margin and a 14.1 % return on equity. Net profit of ¥183.1 billion and cash holdings of ¥119 billion (≈US $1.27 billion) highlighted strong liquidity, and a ¥2.64 billion mid‑year dividend reflected confidence in cash generation. The Content segment accounted for 83.4 % of sales, with flagship franchises such as Mobile Suit Gundam contributing ¥65.2 billion and the Idolmaster franchise expanding from a single arcade title into a multi‑platform ecosystem. Domestic demand drove the bulk of performance; overseas sales comprised only 7.6 % of revenue, prompting a strategic merger of Namco Bandai Games Europe and Namco Bandai Partners to consolidate European marketing and restore profitability. Related‑party activity centered on a 26.3 % stake in Happinet, which generated ¥46‑48 billion in sales and ¥9‑10 billion in receivables. The company adjusted its actuarial assumptions, lowering the discount rate to 0.6‑1.4 % and reducing expected plan‑asset returns, while operating‑lease obligations rose to ¥8.7 billion. Corporate social responsibility was framed around four pillars—product safety, societal impact, environmental stewardship, and supply‑chain management—and operationalized through initiatives such as a

market-analysis game-publishing mobile+3

Bandai NamcoSept 2013

Financial

FY2013 Fourth Quarter Financial Results

The fiscal year ending June 2013 marked a significant transitional period for GREE, characterized by a decline in overall financial performance alongside a strategic pivot toward the smartphone market. Net sales fell to ¥152.2 billion, while operating profit experienced a 41% year-over-year drop to ¥48.6 billion. This downturn was primarily driven by the erosion of the legacy feature phone web game market and rising fixed costs. To address these challenges, the company recorded a ¥6.7 billion net extraordinary loss for asset write-offs, signaling a commitment to a "selection and concentration" strategy designed to streamline operations and reduce fixed costs by 10% by the end of the following fiscal year. Despite the contraction in traditional segments, the native games business emerged as a critical growth engine, achieving over 30% quarterly growth and accounting for more than 20% of total coin consumption by the fourth quarter. Success was bolstered by global franchises such as Knights & Dragons, which helped establish a stronger international footprint. Moving into fiscal year 2014, the growth strategy centers on the launch of approximately 25 new titles, focusing on smartphone-centric web games and high-performance native apps. The company is also diversifying its revenue streams by expanding into advertising, merchandise, and other non-gaming ventures. Operational stability is supported by a domestic user base of 44.8 million, predominantly composed of adults over the age of 20. To maintain platform integrity and safety, extensive resources are dedicated to 24/7 content monitoring and age verification protocols. These efforts are complemented by industry-wide self-regulation through the Japan Social Game Association, focusing on the prohibition of real money trading and the promotion of educational outreach. This combination of fiscal restructuring, aggressive product development for mobile platforms, and robust safety standards forms the foundation for the company’s projected turnaround.

market-analysis monetization japan

GREEAug 2013

Financial

Quarterly Consolidated Balance Sheets: 1Q FY2013

The financial results for the first quarter of fiscal year 2013, covering the period from April 1, 2013, to June 30, 2013, indicate a significant downturn in performance compared to the same period in the previous year. Net sales fell sharply by approximately 39%, dropping from ¥3,539 million in 2012 to ¥2,144 million in 2013. This contraction in revenue led to an operating loss of ¥84 million, a stark reversal from the ¥889 million operating income recorded in the prior year’s first quarter. The bottom-line results further reflect this decline, with the company reporting a net loss of ¥253 million for the quarter, compared to a net income of ¥562 million a year earlier. This deficit was exacerbated by non-operating expenses, specifically a ¥117 million loss from equity in affiliates, and an extraordinary impairment loss of ¥34 million. Consequently, retained earnings decreased from ¥10,409 million at the end of fiscal year 2012 to ¥9,827 million by June 30, 2013. Despite the operational losses, the consolidated balance sheet shows a stable liquidity position. Total assets stood at ¥18,868 million, with cash and deposits remaining a primary component at ¥12,643 million. Cash flow analysis reveals that while operating activities resulted in a net outflow of ¥210 million, investing activities generated a significant inflow of ¥2,371 million, primarily driven by the withdrawal of time deposits. This resulted in a net increase in cash and cash equivalents, ending the period at ¥11,143 million. The overall financial position remains characterized by a high equity ratio, though the period was defined by shrinking sales and a transition into net losses.

investment market-analysis japan+1

mixiAug 2013

Financial

Square Enix Annual Report FY2013

Square Enix experienced a period of severe financial volatility during the fiscal year ended March 31, 2013, reporting its first operating loss since the 2003 merger. Despite a 15.7% increase in net sales to ¥147,981 million, the company recorded a substantial net loss of ¥13,714 million. This downturn was primarily driven by a structural crisis in the high-definition (HD) games category, where major Western titles such as Tomb Raider and Hitman: Absolution failed to meet sales targets amid intense competition and high retail promotion costs. Furthermore, the company incurred ¥11,210 million in extraordinary losses related to the disposal and revaluation of game content as part of a major organizational restructuring. The financial results highlight a widening gap between traditional and emerging business models. While the Digital Entertainment segment remained the primary revenue driver, particularly in the Japanese market, it was hampered by long development cycles and low investment turnover in the console space. Conversely, social gaming and digital publications showed resilience. The Amusement division also struggled, posting an operating loss due to weak arcade machine sales. To mitigate these challenges, management initiated a strategic pivot toward a "unified system" emphasizing digital distribution, free-to-play models, and tablet development. This shift includes leveraging global IPs across multi-device environments and expanding the use of "meta-narratives" to engage customers. Geographically, Japan remains the company's strongest market, though significant resources are being directed toward overseas expansion and the establishment of new studios, such as in Montreal, to bridge the gap between HD production and mobile platforms. Despite the net loss and a 98.4% drop in net cash from operating activities, the company maintained a stable liquidity position with ¥98,822 million in cash and cash equivalents. Moving forward, the strategy focuses on network-compliant entertainment and region-specific content portfolios to adapt to a rapidly evolving global gaming landscape.

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Square EnixJul 2013

Report

Canada's Video Game Industry in 2013: Final Report

**Canada’s Video Game Industry in 2013 – Final Report (Summary)** --- ### 1. Industry Perception of Tax Credits - **Overall valuation:** Canadian video‑game tax credits received an **average rating of 4.4 / 5**, indicating that firms consider them a highly valuable policy tool. - **Key benefits identified:** - **Project opportunities:** Highest impact score (**4.0 / 5**). - **Employee retention, revenue growth, and industry visibility** also scored strongly, reflecting that tax incentives help companies keep talent, expand sales, and raise the sector’s profile. - **Cost‑effectiveness:** Respondents reported that the **administrative burden is low relative to the financial value** they obtain from the credits. - **Growth outlook:** The survey revealed a **very optimistic near‑term outlook**: **40 % of firms expect revenue growth of more than 25 %** in the coming year, underscoring confidence that the tax environment is a catalyst for expansion. --- ### 2. Economic‑Impact Analysis | **Component** | **Methodology** | **Key Findings** | |---------------|----------------|------------------| | **Direct impacts** | • Calculated from reported industry revenues and wages.<br>• Applied an **operating‑surplus‑to‑labour‑income ratio of 15.17 %** (derived from the broader software‑publishing sector) to estimate profits and value‑added. | • Direct employment, labour income, and GDP contributions were quantified based on actual firm‑level data. | | **Indirect impacts** | • Integrated the survey data with **Statistics Canada Input‑Output (I‑O) tables**.<br>• Modeled supply‑chain spillovers, capturing purchases from other Canadian industries and adjusting for **import leakages** (goods/services sourced abroad). | • Showed how video‑game firms stimulate activity in supporting sectors (e.g., hardware, professional services, marketing). | | **Induced impacts** | • Used a **custom multiplier** built on Canada’s **marginal propensity to consume (MPC)** and **marginal propensity to import (MPI)**.<br>• Estimated household re‑spending of earnings generated in the direct and indirect stages. | • Quantified the additional employment, income, and GDP generated when workers and suppliers spend their wages locally. | **Overall economic contribution (direct + indirect + induced):** - The combined effect demonstrates that the video‑game sector’s footprint extends well beyond the firms themselves, creating **significant ancillary jobs and income** throughout the Canadian economy. - The methodology ensures that **import leakages are subtracted**, providing a realistic picture of net domestic impact. --- ### 3. Implications 1. **Policy Validation** – The high satisfaction scores and strong growth expectations confirm that the tax‑credit regime is achieving its intended objectives: fostering project development, retaining talent, and boosting sector visibility. 2. **Economic Multiplier Effect** – The I‑O‑based analysis shows that every dollar of direct video‑game revenue generates additional economic activity across multiple industries, reinforcing the argument for continued or expanded fiscal support. 3. **Strategic Recommendations** (derived from the findings): - **Maintain or enhance tax‑credit levels** to sustain the momentum in project creation and revenue growth. - **Streamline administrative processes** further to keep the cost‑benefit ratio favorable.

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ESAC – Entertainment Software Association of CanadaJul 2013