‭【NEWS RELEASE】‬‭June 27, 2024‬‭KADOKAWA CORPORATION‬[‭ Third Report]‬‭The Current Status of System Failure‬‭and Business Activities of KADOKAWA Group‬‭ KADOKAWA CORPORATION (Headquarters: Chiyoda-ku, Tokyo; Chief Executive Officer: Takeshi Natsuno;‬‭hereinafter “KADOKAWA”) expresses deep apologies for the significant inconvenience and trouble caused to its‬
‭readers, users, writers, creators, business partners, shareholders, investors and other stakeholders by the‬‭system failure currently affecting the KADOKAWA Group. ‬‭ On Saturday, June 8, the servers located in the KADOKAWA Group’s data center experienced a significant‬‭cyberattack including ransomware, targeting‬‭Niconico‬‭and the related services.‬‭ KADOKAWA is currently considering solutions and workarounds quickly on a company-wide basis in order to‬‭normalize its systems and business activities. The current status of the key businesses affected by the system‬‭failure, workarounds, and the progress of the investigation of information leakage are as follows.‬‭1. Update on the progress of restoring systems and business activities‬‭ In response to the system failure, KADOKAWA is working on building a secure network and server‬‭environment. Its top priority is to restore the accounting functions, which are fundamental to its business‬‭activities, and to normalize the manufacturing and distribution functions in the publication business, which‬‭generate considerable revenue. The accounting functions, owing partly to measures in an analog manner, are‬‭expected to be restored in early July.‬‭ In the production of publications, reprints of publications are done in order of priority. New publications are‬‭produced at the usual level. Looking at the distribution of publications, the number of shipped copies of existing‬‭publications, which is heavily affected by KADOKAWA’s own systems, is about one-third of the normal level, but‬‭shipped copies of new publications are at the normal level. KADOKAWA intends to implement measures to‬‭minimize the impact on its businesses caused by the incident, by developing alternative arrangements that do‬‭not solely depend on systems, such as increasing human resources, for some time to come, while expediting the‬‭restoration of systems related to the production and distribution of publications.‬‭2. Current status of major businesses affected‬‭●‬ P‭ ublication business:‬‭<Manufacturing>‬‭○‬ ‭KADOKAWA is developing arrangements that are not solely dependent on systems, and working‬‭to minimize the impact on manufacturing.‬‭○‬ ‭In the production of domestic paper-based books, reprints of books are done in order of priority.‬‭New publications are produced at the usual level.‬‭○‬ ‭The distribution of certain e-books was delayed immediately after the system failure. Currently,‬‭the production of e-books is unaffected.‬‭●‬ ‭<Distribution>‬‭○‬ ‭KADOKAWA is developing arrangements that are not solely dependent on systems, and working‬‭to minimize the impact on distribution.‬‭○‬ ‭Shipments of existing and new KADOKAWA books each account for approximately 50% of the‬‭total value of shipments. The shipment of new books is at the normal level.‬‭○‬ ‭Shipments of existing books heavily rely on KADOKAWA’s own systems. It is currently fulfilling‬‭1‬‭ rders from bookstores as far as possible, with support from sales companies. However,‬o‭shipments are at about one-third of the normal level at the moment.‬‭ hile working to restore systems as early as possible, KADOKAWA will strive to provide its titles‬
W‭continuously using all available means.‬‭●‬ ‭Web Services business:‬‭○‬ ‭All‬‭Niconico‬‭family services are still suspended. Users remain unable to log into external‬‭services through their‬‭Niconico‬‭account.‬‭○‬ ‭Meanwhile, KADOKAWA has started providing provisional services to users, including‬‭Niconico‬‭Video (Re: tmp)‬‭,‬‭Niconico Live Streaming (Re: tmp)‬‭,‬‭and‬‭Niconico Commons (Re: tmp)‬‭.‬‭Additionally, it has resumed existing services, such as the‬‭Niconico Manga smartphone version‬‭and‬‭NicoFT‬‭. KADOKAWA plans to restart an existing‬‭service,‬‭Niconico Channel Plus‬‭on Friday,‬‭June 28.‬‭○‬ ‭KADOKAWA will gradually restart its services as they become available.‬‭●‬ ‭Merchandise business:‬‭○‬ ‭The impact on the wholesale of merchandise is limited. The shipping function has been restored‬‭and is working at the usual level.‬‭○‬ ‭The status of online shops operated by KADOKAWA is as follows:‬‭■‬ ‭The account authentication function provided by KADOKAWA has failed, and users who‬
‭have these accounts are unable to log into the online shops where this function is‬‭implemented. Certain online shops are considering and preparing to implement‬‭alternative authentication functions.‬‭■‬ ‭KADOKAWA is creating temporary pages on its working online shops for users who are‬‭unable to access online shops.‬‭3. The status of the investigation into a potential information leakage‬‭ KADOKAWA is investigating the possibility for information leakage with the support of external professional‬‭organizations.‬‭ KADOKAWA does not retain any credit card information of the Group’s customers, including‬‭Niconico‬‭service‬‭users, in its system, and therefore, no credit card information will have been leaked.‬‭ More accurate information based on the investigation results is expected to be available in July. KADOKAWA‬‭will announce the information as soon as it is obtained.‬‭4. Impact on business performance‬‭ The impact of this matter on KADOKAWA Group's business performance in the current fiscal year is currently‬‭unclear at this moment. KADOKAWA will examine the impact carefully and will make an announcement promptly‬‭if any matter that should be disclosed occurs.‬‭ KADOKAWA Group will provide further updates on the status of recovery or countermeasures if more detailed‬‭investigation discovers new facts that ought to be shared.‬‭ Aiming to restore systems as quickly as possible, the KADOKAWA Group will continue joining forces and doing‬‭everything in its power to get systems and business activities running normally again.‬‭ KADOKAWA reiterates its deepest apology to its customers and all those concerned for the considerable‬‭inconvenience and trouble this matter has caused.‬‭End of document‬‭For media inquiries, please contact:‬‭Investor and Public Relations Division, KADOKAWA CORPORATION‬‭Email:‬‭pr-dept@kadokawa.jp‬‭2‬