Sony in talks to buy Kadokawa

In an article posted this morning, Forbes columnist Ollie Barder has reported that Sony is in talks to buy publishing giant Kadokawa. This news comes by way of Reuters who exclusively revealed that Sony is looking to add to its entertainment portfolio, which is in line with its acquisition of both Funimation and later Crunchyroll to control anime distribution. The company is also developing a system called AnimeCanvas, an anime production software suite designed to increase efficiency in production.

Sony already owns a 2% stake in Kadokawa, as well as a 62% stake in their subsidiary software house FromSoftware (the developer of Elden Ring). 

The talks aim to conclude in the next few weeks, which has seen Kadokawa's shares closed up 23% at their daily limit.

Who are Kadokawa?

The company began as a publisher in 1945 named Kadokawa Shoten. Over the years they have published magazines, books, video games (they own Spike Chunsoft and FromSoftware, the latter being responsible for Dark Souls and Elden Ring), films and tabletop RPG's. They own around 70% of anime IP's and release around 40 new shows a year through their raft of studios, which include ENGI (Uzaki Chan Wants to Hang Out) and Kinema Citrus (Shield Hero, My Happy Marriage). One of the most popular titles from this year was Delicious in Dungeon.

The last 10 years have seen the company reorganised multiple times, merging with Dwango Co Ltd in 2014, re-organising in 2019 and Sony's involvement began in 2021 when they, along with CyberAgent (a digital marketing company) formed a Capital Alliance.

Kadokawa also owns a lot of Western outlets such as the website Anime News Network and Book Walker. 

What would this takeover mean?

Essentially Sony would control more than 70% of the anime market (they already own Aniplex) from creation and IP to distribution via Crunchyroll.

Much like Disney, Sony recognises the inherent value of popular IP, with merchandise being a key revenue generator, not to mention licensing deals to theme parks, restaurants and other entertainment avenues. Sony will be looking at the adaptation of IP into live action as well, with the likes of One Piece, The Last of Us and Fallout all becoming very popular in a market that has grown weary of Marvel and interest in alternatives is at an all-time high. Since Sony also owns studios such as Affirm Films, Columbia Pictures, Screen Gems and Tristar, they have the means to develop all these IP in-house under Sony Pictures.

The takeover might also calm the rather choppy waters that Kadokawa has found itself in recently, with a cyberattack on multiple sites (including streaming site NicoNico) this year that resulted in a data leak and their ex chairman Tsugohiko Kadokawa indicted two years ago on bribery charges related to the Tokyo Olympics.

Obviously this is a large amount of studios and companies to manage under one roof, and Sony have shown themselves to be particularly ruthless, having shut down Japan Studio despite their exemplary body of work which includes Gravity Rush, LocoRoco, The Last Guardian and Patapon. Time will tell if the same aggressive drive will be aimed at anime and manga studios that would be under their control. 

There's some concern that Sony's recent run of developing IP's hasn't all been gold, with the recent Concord debacle that was so bad the company issued refunds.

We'll follow up as talks continue.