NEWSLETTER

November 2018
BANDAI NAMCO Holdings Inc.

Interview with the President

BANDAI NAMCO Mirai-Kenkyusho
5-37-8 Shiba, Minato-ku, Tokyo 108-0014

Mitsuaki Taguchi
President & Representative Director,
BANDAI NAMCO Holdings Inc.

Record-High Results in First Half of FY2019.3
Strengthening the Creation of New IP in
Collaboration with a Wide Range of Partners
In the first half of FY2019.3 (April to September 2018), the BANDAI NAMCO Group
achieved record-high results in both consolidated net sales and operating profit. In
this issue of the newsletter, BANDAI NAMCO Holdings’ President Mitsuaki Taguchi
discusses the trends in each Unit, highly anticipated products and services that will
be launched in the second half of the fiscal year, and the future outlook.
Results were favorable in the first half.
Taguchi: Looking at our consolidated resultsin the first half of FY2019.3, net sales were¥334.6 billion and operating profit was ¥43.9
billion. We have gotten off to a good start in
the first fiscal year of the Mid-term Plan. In
particular, the Toys and Hobby Unit and theVisual and Music Production Unit recorded
significant gains year on year. The Network
Entertainment, Real Entertainment, and IP
Creation units also got off to solid starts. Key
IP* and other products and services turned ingood performances, and all units achieved thefirst-half plans that we announced at the beginning of the fiscal year. I think that these results
are an indication of how we have successfully
strengthened the Group’s portfolio.
What were the factors behind thegrowth in the Toys and Hobby Unit andthe Visual and Music Production Unit?
Taguchi: In the Toys and Hobby Unit, favorable
results were registered in all categories, including
toy-related items. In particular, Gundam plastic
models recorded significant sales gains in Japanand overseas, and solid performances wereregistered by figures and other collectible items
and by lottery-related products. We are starting
to see the results of our measures to strengthenbusinesses for the mature fan base, which isone of our main strategies under the Mid-term
Plan. In the Visual and Music Production Unit,visual and music packaged products for Love
Live! Sunshine!!, THE IDOLM@STER, IDOLiSH7, and other IPs were popular, and live
events and related activities also enjoyed solid*IP: Characters and other intellectual property

popularity. Moreover, we saw synergy effects
with initiatives that integrated the three elementsof visual, music, and live.
What about the influence on full-year
forecasts?
Taguchi: Thanks to everyone’s hard work, we

had good results in the first half, but at thispoint we have not revised or reevaluated thefull-year forecasts. In the second half, the Toysand Hobby business will have the busy Christmas and New Year sales period, which is its
largest sales period, and we will also launch
multiple major home video game titles. Moreover, the operating environment and consumerpurchasing trends are undergoing dramaticchange, and in this setting it will be difficult
to reach our forecasts simply by extending ourcurrent performance, especially in the digitalcontent business. We will carefully reexamine
this situation when the influence of these trends
on our results becomes clear. Moving forward,
I would like everyone to do their utmost andaim for record-high results while implementing
forward-looking investments and initiatives.
As for dividends, our interim dividends willbe ¥18 per share. We will consider our annual
dividends in accordance with our basic policyof providing a return to shareholders that targets
a total return ratio of 50% or more and basedon stable dividend payments of 2% of DOE.
How is the progress with the
Mid-term Plan?
Taguchi: CHANGE is the major theme of the

Mid-term Plan, and we have clarified our

mission with the change from three SBUs to
five Units. On that basis, we are continuing
to take on challenges. Going forward, we willleverage this approach and strive to establish
a new style for the Group.
We still face many challenges. In particular,
we must do even more in the creation of new IP
in order to strengthen the IP axis strategy, which
is our most important task. However, we are notaiming just to increase numbers. We need to foster
collaboration among Group businesses and propose a deep and extensive range of new IP thatcan be rolled out over the medium to long term.
In the creation process, we will need to work
together with a wide range of partners rather
than trying to do everything within the Group.
This type of IP creation will also require considerable strength, and accordingly there will
be challenges that are difficult for a single
division or company to tackle on its own. That
is why we created the BANDAI NAMCO
Content Fund as one framework for providing
support for people on the front lines as theytake on challenges. We plan to start full-scale
investment in the next fiscal year, but currently
we are making selections from among morethan 50 proposals. I am sensing a trend throughout the Group, as an increasing number ofpeople want to plant new seeds.
In addition, in China, which we have positioned as a key market, we are working tofurther strengthen operations that are alreadyunder way. To advance the ALL BANDAI
NAMCO concept, we are also making steadyprogress with preparations for full-scale rollouts in other businesses.
November 20181

Interview with the President

Advancing Initiatives in Japan and Overseas
to Strengthen Our Business for the Mature
Fan Base
Would you discuss the trends in each
Unit?
Taguchi: In the Toys and Hobby Unit, broadcastsof KAMEN RIDER Zi-O started in September,and the launch was favorable. This marks aturning point as the 20th series in Heisei KAMENRIDER. Generations of RIDERs make appearances, and as a result KAMEN RIDER Zi-O ispopular with fans across a wide range of age
groups. Related products are also enjoying goodresults, including the transformation belt, which
is a core item. These are key products for boys,
and we expect them to do well in the busy
Christmas and New Year sales period.
For girls, we launched Tamagotchi Meets,a new Tamagotchi model. This product provides
the enjoyment of taking care of characters, andin addition a new application that links Tamagotchi Meets units enables users of the newmodel to enjoy communicating with each other.
The Toys and Hobby Unit is starting to createa growing number of products that incorporate
digital functions. In December, we will launch
UNLIMITIV shoes for elementary school students. By digitizing information obtained
through communication with a smartphone
application, these shoes will enable users toincrease their athletic ability while having fun.
In addition, in 2019 we will launch AI CARDDASS, a brand of card games that utilize AI.
We plan to introduce ZENONZARD, an original
IP that originated from AI CARDDASS.
What is the Toys and Hobby Unit
doing for the mature fan base?
Taguchi: To further strengthen and expand ourbusiness for the mature fan base in North America, we cooperated with a local partner in theestablishment of a new company, BANDAI
NAMCO Collectibles LLC, which uses
the brand BLUEfin. Moving forward, we
will leverage the new company’s broad
distribution infrastructure as well as its
marketing know-how, which is alignedwith the preferences of local fans. In thisway, we expect to boost our sales of products in North America.
In China, we opened THE GUNDAM
BASE SHANGHAI in August. This is
our flagship Gundam plastic model

2

BANDAI NAMCO NEWSfacility. We are seeing a very favorable response,
and the Chinese market is showing signs of
future potential that exceeds our previous expectations. We will utilize THE GUNDAM BASE
SHANGHAI to do more than just sell Gundam
plastic models. We will also use it as a basefor the comprehensive provision of information
to Chinese fans about Gundam works and otherproducts and services.
In addition, the DRAGON BALL tradingcard game is popular with the mature fan base,especially in North America. Moving forward,
we will take steps to build interest in North
America, such as holding nationwide tournaments in the U.S., and we will also work to
expand our business in Europe, South America,and other regions.
What is the situation in the Network
Entertainment Unit?
Taguchi: In game applications and other network

content, key titles maintained high levels of
popularity, including DRAGON BALL Z
DOKKAN BATTLE, ONE PIECE, and THE
IDOLM@STER. In addition, a new title —DRAGON BALL Legends — got off to afavorable start. I believe that these successes
are a result of our focus on holding effective
events and taking steps to build interest. In
these ways, we are encouraging fans to enjoy
playing for long periods of time. Going forward,
we will continue working to further enhance
the quality of our titles and operations.
Is the Company making progress withnew platforms?
Taguchi: For enza, up to this point we havefocused on stability, but moving forward we

THE GUNDAM BASE SHANGHAI©創通・サンライズ

will bolster promotions to increase awareness.
In addition, we will leverage the distinctive
strengths of BANDAI NAMCO to enhance
the provision of value. For example, withDRAGON BALL BUCCHIGIRI MATCH, collaborative initiatives with other Units havealready been initiated. These include DRAGONBALL Dragon Potato, a confectionary food thatis being sold by BANDAI. We plan to continue
to implement collaborative initiatives withcompanies and products inside and outside theGroup. Also, looking at our efforts to strengthen
game titles, we recently held a presentation fordevelopers, and more than 120 people participated. We will implement a variety of measures
as we work to build platforms, such as advancing
preparations for title development.
What are the trends in home video
games?
Taguchi: In home video games, after the launchof SOULCALIBUR VI in October, we plan to
introduce a series of major, high-potential titlesin the second half, including GOD EATER 3,
ACE COMBAT7: SKIES UNKNOWN, and
JUMP FORCE. In the future, in addition todeveloping high-quality games that earn strong
evaluations from fans, we will also take steps
to add even more value, such as facilitating
the enjoyment of additional download content.
In this way, we are working to implement
measures that encourage fans to play for long
periods of time.
Furthermore, in August we participated in
EVO 2018, a fighting game tournament thatwas held in the U.S. Looking at the number ofregistered entrants, DRAGON BALL FighterZ
was the No. 1 title, and TEKKEN7 was No. 3.
This demonstrates the high degree of compatibility between our titles and e-sports. We arealso moving forward with a variety of measures
in Japan, and in the future we will continue toaggressively implement initiatives in the

IDOLiSH7 live events©BNOI/アイナナ製作委員会

J­ apanese market, such as developing compatible
titles and sponsoring tournaments.
What is the situation in the RealEntertainment Unit?
Taguchi: Following Yokohama in November,

we will open a Hamleys retail-tainment mallin Fukuoka in December. This is a collaborative
initiative with Hamleys, which is England’s
oldest toy store. It will bring together a wide
range of features, including real and digital
performances, attractions that draw on BANDAI
NAMCO’s distinctive strengths, and gamecorners. We are positioning this mall as a new
type of venue. By incorporating performanceswith abundant entertainment value, we will
work to enhance our hospitality skills and create
new forms of entertainment.
In arcade games, we launched Mobile Suit

Gundam: Extreme Vs. 2, which has earned
strong reviews. In Osaka, we have opened
VR ZONE OSAKA as a new-format facility.
We have started to operate new models
of Godzilla VR and other games at thisfacility, and VR ZONE OSAKA has gotten
off to a solid start.
Furthermore, in July we opened thesecond TONDEMI, a next-generationindoor athletic facility, and in October
we launched Indoor Adventure Island
Docodoco, which enables visitors to enjoy
attractions using projection mapping.
Both of these new facilities have enjoyedsolid popularity. Moving forward, we willcontinue to aggressively provide these typesof new venues that leverage the distinctive
strengths of BANDAI NAMCO.

We will take the initiative to transform ourselves into a company from which consumers
expect great things, even in a future marked
by ongoing technical innovation.
What is the situation in the Visual andMusic Production Unit?
Taguchi: IDOLiSH7 has turned in favorable

results. The live event that was held in Julywas popular, and the tickets sold out. THE
IDOLM@STER and Love Live! Sunshine!!
also continue to record strong results. We
are taking steps to maximize appeal of mainstay IPs throughout the visual, music, andlive fields. In particular, live events are startingto play a central role in the Group’s businessactivities. This is something that we did not
anticipate 10 years ago. Both the scale andthe geographic scope of live events are
expanding, and accordingly we will step up
our focus on this growing business.
Looking at IP creation, we plan to launch
The Magnificent KOTOBUKI. This is a newGroupwide IP that reflects collaboration initiatives including animations, game applications,and toys and hobby products. Furthermore, we
are working aggressively in IP creation froma variety of angles, including collaboration withexternal partners.
Please discuss the latest activities at
the IP Creation Unit.
Taguchi: Currently, the TV animation Gundam

Build Divers is one of the major factors behindthe solid results of Gundam plastic models in
the Toys and Hobby business. This is because
the animation has stimulated demand for theplastic models. Gundam Build Divers featuresappearances by generations of Gundam plastic
models, and it is popular not only in Japan but
throughout Asia. In November, Mobile Suit
Gundam Narrative was released in theaters,and I think that the buzz surrounding this productwill also have a positive knock-on effect instimulating further demand for other Group
products and services. Mobile Suit Gundam
will reach its 40th anniversary in 2019, andwe are preparing a wide range of initiatives tocommemorate this milestone, including visual
products and events. For 2020 we are alsoplanning the Gundam GLOBAL CHALLENGE,
which will involve making a full-scale Gundam
actually move. We have high expectations forthis initiative.
Furthermore, broadcasts of DOUBLE
DECKER! Doug & Kirill, a new TIGER &BUNNY animation series project, have been
started, and we also plan to release a theatricalversion of Love Live! Sunshine!!. We have anumber of exciting projects in the pipeline.
In production, we made an equity investment

in Sublimation Inc., a computer graphics production company. The industry has reached
the point where computer graphics are indispensable in animation production. Through thisinvestment, we will strengthen our computer
graphics production capabilities and enhance
our production skills for both hand-drawn andcomputer-graphic animations.
Do you have a message forshareholders?
Taguchi: We were able to achieve a solid per-formance in the first half of the fiscal year, andI think this performance was attributable tothe high evaluations that our products andservices received from customers. However,
we cannot sit back and relax just because ourresults are strong right now. We must continue
striving to create new IP and strengthen established IP as we make further progress toward
the construction of a balanced IP portfolio.
BANDAI NAMCO wants to be a groupfor which consumers have high expectations,even in a future operating environment marked
by ongoing technical innovation. To that end,in line with our Mid-term Vision of CHANGE,
we must work to transcend previous ways of
doing things and conventional wisdom, anticipate changes in the times and in our fans, andtake steps to adapt accordingly. A major themeof the Mid-term Plan is CHANGE for the future.
On that basis, the BANDAI NAMCO Groupwill strive to approach change as an opportunity
rather than something to be afraid of. We want
our fans around the world to expect great thingsfrom BANDAI NAMCO.

November 20183

Closeup

Leveraging abundant human resources andstrong technologies and production
capabilities to create diverse entertainment
BANDAI NAMCO Studios Inc. was established in 2012 when the development
function was split off from BANDAI NAMCO Games Inc. (currently, BANDAI
NAMCO Entertainment Inc.). Today, BANDAI NAMCO Studios is a group of
professional creative engineers that handle content planning, production,
development, and operation. The company continually takes on the challengesof researching and creating new technologies, without limiting itself to existing
titles. In this section of the newsletter, Hajime Nakatani, president of BANDAI
NAMCO Studios, discusses the company’s strengths and future outlook.

Would you describe BANDAI NAMCO
Studios’ business activities?
Nakatani: BANDAI NAMCO Studios conducts

planning and development of network content,
home video games, arcade games, and otherproducts. We principally work with titles
launched by BANDAI NAMCO Entertainment.
In October 2018, our research, planning, anddevelopment functions in the areas of amusement facility content and amusement machines
were split off to establish BANDAI NAMCO
Amusement Lab Inc. Both companies willcontinue working together closely as we advance
content development initiatives. We will implement multifaceted activities, such as developing
home video games, arcade games, network
content, and other products for a single title,
as we did with TAIKO: DRUM MASTER and
the Mobile Suit Gundam: Extreme Vs. series.

of scale. We have a workforce of more than
1,000 people with a wide range of know-how.
From planning and production to hardware/
software prototyping and sound, visual, andart production, we can address diverse needs
with comprehensive, flexible proposal andimplementation capabilities.
A number of attention-getting titles
have been launched.
Nakatani: Looking at this fiscal year, in home

video games SOULCALIBUR VI from BANDAI
NAMCO Entertainment was launched in

October, and starting in December there areplans for multiple launches of major numbered
titles, such as GOD EATER 3 and ACE COMBAT
7: SKIES UNKNOWN. We hope that fans will
enjoy experiencing the enhanced expression
and game play that these titles offer. These are
titles that will be rolled out worldwide, andaccordingly our objective was to offer leading-edge
content that can address global demand. To that
end, the development of these games involved
a wide range of engineers and companies.
Looking at titles from outside the Group,
we were in charge of the development of Super
Smash Bros. Ultimate, a major Nintendo title
for the Nintendo Switch that is scheduled forlaunch in December 2018. This title reflects
the full use of our technical and production
capabilities.
Are there other products that incorporate distinctive ideas from BANDAI
NAMCO Studios?
Nakatani: We conducted the planning anddevelopment for two attractions opened by
BANDAI NAMCO Amusement Inc. —Nigekiru at the VS PARK amusement facility,
which was opened in April at EXPOCITY in
Osaka, and Indoor Adventure Island Docodoco,On the front lines of production activities at BANDAI NAMCO Studios

What the key strengths of BANDAI
NAMCO Studios?
Nakatani: In markets around the world, we

4

BANDAI NAMCO NEWS

Developing home video games

Motion capture

Live event for THE
IDOLM@STER using
technologies fromBANDAI NAMCO Studios©窪岡俊之 ©BANDAI NAMCO

are seeing a large number of products andservices that leverage new technologies, suchas artificial intelligence (AI), the Internet ofThings (IoT), augmented reality (AR), andvirtual reality (VR). In addition to the gamedevelopment that we have been implementing,
we are also responding to this trend by conducting R&D to further enhance and extend
leading-edge technologies that are entirely
new. This is one of our strengths. In addition,
we have established an environment that enables
us to implement thorough development activities that are focused on the production ofhigh-quality content. For example, our in-housefacilities include specialized sound effect andmotion capture studios.
Moreover, we also have an edge in terms

Entertainment Inc.

which was opened in October at Tachikawa
Takashimaya S.C. in Tokyo. Both of these
attractions utilize projection mapping technology. The people working on these projects
discussed how to use projection mapping,which is a visual technology, in order to maximize the fun of the attractions. We built a
prototype of the attractions in-house, whichwere used for a cycle of repeated testing andimprovement. In this way, we aimed to create
fun attractions that can be enjoyed by a wide
range of users.
In addition, the BanaCAST (BANDAI
NAMCO Character Streaming Technology)

developed by BANDAI NAMCO Studios wasused at a number of events. For example,
BANDAI NAMCO Entertainment held a mixed
reality (MR) live event at the DMM VR THEATER for THE IDOLM@STER. Also, Ryo
from the creators group supercell produced alive event by the virtual artist EGOIST. Our
BanaCAST technology enabled the characters
to be faithfully reproduced, so that it was almost
as if they were really on the stage. By utilizing
motion capture techniques and adding realtime character movements and voices, we wereable to implement realistic interaction withcustomers at the venues.

Leveraging future-focused ambitions andideas to take on the challenge of manufacturing products with distinctive strengths
What is the source of BANDAI
NAMCO Studios’ diverse technologies
and ideas?
Nakatani: I think it is our strong spirit ofinquiry. Our mission includes searching aroundthe world for new technologies without limiting
ourselves to Japan. This is also one of theobjectives of the BANDAI NAMCO Accelerator project, under which BANDAI NAMCO
Studios advances projects. (BANDAI NAMCO
Accelerator is a project that recruits and supports business ideas from startups.) New
technologies are rapidly being created one
after another, and we are always taking steps
to foster the proposal of new projects. We arecontinually working to find interesting newthings, research them, and figure out how tobest match them up with the Group’s multiple
content outlets. I think that those initiatives
have taken shape.
What issues does BANDAI NAMCO
Studios face?
Nakatani: The Group is now implementing

full-scale overseas development initiatives. In
this setting, we face the urgent task of building
a foundation for the development of productsthat can capture the interest of customers aroundthe world. To that end, in planning and development we need to work together with others
in Japan and overseas who have high levels oftechnical skills, ideas, and planning capabilities.
We will also strive to achieve further improvement
in manufacturing. Rather than aiming for 100

small hits, we will strive to create 10 mega-hits.
By increasing the precision of mega-hit creation,
we will be able to reduce manufacturing costs,
and the funds that are freed up in that way
can then be used for new development andmarketing initiatives. To establish that typeof favorable cycle within the company, we
will implement the PDCA cycle and work to
implement manufacturing that offers true value
to customers, that is, manufacturing productswith distinctive strengths.

Hajime Nakatani
President and Representative Director
BANDAI NAMCO Studios Inc.

through the accumulation of smaller ideas. I
believe that we should aim to cultivate a corporate culture in which people are always actively
discussing the ideas that fuel that process.

What is your policy regarding work?
Nakatani: To give shape to the seeds of ideas
and technologies, I think we must have ambitious,
forward-looking objectives and then work energetically to realize those objectives. I think it
is often the case that ideas which can be achieved
easily don’t amount to very much in the end.

Ideas are put through to a process of trial anderror, which in turn results in the generation of
new ideas and improvements that we can utilize.
In this way, I think that for the first time we will
be able to implement manufacturing in a mannerthat delights customers.
When BANDAI NAMCO Studios wasestablished, we announced that our motto would
be Innovation through Creativity. This mottoincorporates the idea that we want to leverage
everyone’s creativity and foster innovation.
When people hear the word innovation, theyfrequently think of large-scale reforms, but
actually there are many historical examples ofsituations in which innovation was fostered
November 20185