NEWS LETTER

September 2016

BANDAI NAMCO Holdings Inc.

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

Management
Interview with the President

Results of the Mid-term Plan basically in linewith expectations, record high sales andprofits in the first quarter
We have started the second year of the Mid-term Plan, and we are approaching
the plan’s turning point. The recently announced consolidated results for the
first quarter of FY2017.3 were basically favorable, including record high levelsof sales and operating income. In this issue of the newsletter, BANDAI NAMCO
Holdings’ President Mitsuaki Taguchi discusses the progress with the Mid-term
Plan and the situation with each of the Group’s businesses.
How were the results in thefirst quarter?
Taguchi: In the first quarter of FY2017.3, theNetwork Entertainment SBU and the Visualand Music Production SBU got off to favorable
starts, and the Toys and Hobby SBU implemented aggressive initiatives. The Group’s net
sales were ¥144.7 billion and its operating
income was ¥23.4 billion. Both of these figures
represent record highs for the Group.
On the business front, DARK SOULS III,a home video game software product that was
launched in April, became a major hit, withsales of 3.5 million units in Europe and theAmericas. Network content also continued
to record favorable results, including The
IDOLM@STER Cinderella Girls: StarlightStage in Japan and NARUTO MOBILE andDRAGON BALL Z DOKKAN BATTLE overseas.
Furthermore, the GIRLS und PANZER IP
enjoyed a significant gain in popularity, withhit products including music software coordinated with the launch of movie- version
package software. Moreover, music package
software for Love Live! Sunshine!!, a newentry in the Love Live! School idol project
series, and visual package software for Mobile
Suit Gundam THE ORIGIN earned solid
popularity.
What are the results forecasts for the
first half and the full fiscal year?
Taguchi: Considering the results in the firstquarter, for the first half we are forecasting
net sales of ¥290.0 billion and operating income* IP: Intellectual property, such as charactersof ¥32.0 billion. These are upward revisionsof the forecasts released at the beginning of
the fiscal year. For the full fiscal year, however, we have not changed the forecasts released
at the beginning of the fiscal year because thedramatic changes in the operating environment
and the uncertain situation make it difficult toforecast the year ahead. Under the current
Mid-term Plan, through the promotion of our
focus strategies, we are working to become agroup that can continue to steadily generate
net sales of ¥500.0 billion and operating incomeof ¥50.0 billion, and then to aim for the nextstage. In FY2016.3, we aimed to achieve net
sales of ¥500.0 billion and operating incomeof ¥50.0 billion for two consecutive years, but
we missed the operating income target by asmall amount. In FY2017.3, we will once
again take on this challenge, and we consider
the initial forecasts of net sales of ¥580.0
billion and operating income of ¥50.0 billion
to be the minimum targets that we must achieve.
The Group is reaching a turning point
under the Mid-term Plan. Would you
discuss the progress of the plan?
Taguchi: We are strengthening the IP axis
strategy and making favorable progress withthe strategy of expanding our business overseas.
In the first quarter, exchange rates had theeffect of reducing net sales by ¥4.5 billion. In
real terms, we are making favorable progress.
However, even if we make good progress up
to the turning point, we do not know what will
happen after that, due in part to changes in

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

the operating environment, and accordingly
we will have to carefully tighten the reins.
The reason why results are favorable at thispoint is that our employees have not beensatisfied with the status quo. Rather, they havecontinued to take on challenges and foster
innovation. Moving forward, rather than simply carrying on with what we have done in
the past, I think we need to continue to focus
on challenge and innovation, in IP as well asin products and services.
What is the situation in the Toys andHobby SBU?
Taguchi: In Japan, our portfolio of established
IP is producing solid results, with favorable
performances being turned in by such products
as Mobile Suit Gundam, KAMEN RIDER,
PRETTY CURE!, and DRAGON BALL. At
this point, our IP portfolio is well balanced,
and moving forward I would like to reinforce
our portfolio even further. For preschool children, Ultraman Orb has gained popularity
since broadcasts started in July, and broadcastsof KAMEN RIDER Ex-Aid, a new entry in the
KAMEN RIDER series, will start in October.
The motif of KAMEN RIDER Ex-Aid is “TVgames,” and the hero incorporates entirely
new innovations. BANDAI will sell theTransformation Belt, which is an establishedproducts, as well as transformation products.
September 20161

Management

Interview with the President

Further strengthening the IP portfolio
in Japan and overseas
In addition, for elementary school students,
broadcasts of Heybot!, a new program produced
by BANDAI NAMCO Pictures. In this animation, the hero is a robot. There are manyjokes, and it is also enjoyable for adults towatch. We have high expectations for Heybot!
Moreover, since broadcasts began in
1999, Digimon has been popular with a wide
range of age groups for many years. Broadcastsof Digimon Universe App Monsters will startfrom October. For both Heybot! and Digimon,
we plan to create products through Groupwide
initiatives, such as facilitating entertainment
through the coordinated use of toys and games.
Formerly, Digimon was also very popular
overseas. I think that Digimon has the potential to succeed not only in Japan but also
overseas, and accordingly we will work to
carefully nurture this IP.
What is the situation for the Toys andHobby business overseas?
Taguchi: In Europe and the Americas, thePower Rangers series is our core IP, and Power
Rangers Super Dino Charge, which is a remake
of Zyuden Sentai Kyoryuger, continues torecord favorable results, centered on North
America.
A Power Rangers movie is also plannedfor March 2017, and we are currently making
preparations for that release. In addition, thisyear we will roll out toys, stuffed toys, sundries,
and a wide range of other products in in conjunction with the opening of Disney/Pixar’s
Finding Dory film in many countries. Other
new IP includes Miraculous, an animation forgirls that is currently being broadcast in North
America, South America, Europe, and othermarkets and is achieving top-class viewershiprates for a children’s program. We plan tolaunch a range of toys from summer, and wehave very high expectations for Miraculous.
In Asia, Mobile Suit Gundam continues torecord favorable results. In addition to online
distribution of visual products from GUNDAM.
INFO, which is a Gundam information site,
we are holding events that are finely tuned tothe characteristics of each region. In theseways, the world of Gundam is reaching customers in local communities, and we are
fostering the identification of the Gundam IP
with Gundam plastic models. I believe that
this is one of the reasons why the market
continues to steadily expand.

Addressing the diverse needs of customers
by taking on challenges from a variety of angles,
including IP and virtual reality
What is the status of the Network
Entertainment Business?
Taguchi: In home video game software inEurope and the Americas, DRAGON BALLXENOVERSE was launched in February 2015
and continues to enjoy repeat sales. DRAGONBALL XENOVERSE 2 product, will be launchedin fall 2016. The announcement of this launch
has also garnered substantial attention overseas,demonstrating how DRAGON BALL fan groups
continue to expand overseas. DRAGON BALL
also has a smartphone game application thatis distributed worldwide and is earning support.
Moving forward, we will continue to firmly

provide products and services for this established IP, both in Japan and overseas.
In game applications and other network content, there is growing demand overseas forgames using Japanese IP, and this is an opportunity for us to open up significant markets.
Accordingly, in addition to our title lineup,
we will also work to expand the regions inwhich we provide online distribution.
Moreover, for Tekken, we recently introduced
Tekken 7 FATED RETRIBUTION, an arcade
game machine. In home video game software,
we plan to release a new Tekken title in spring
2017, and moving forward we will continue

Products that made a contribution in the first quarter

2

Mobile Suit Gundam series plastic models have earned
continued popularity under the implementation of
initiatives at the same time in Japan and the rest of Asia.

DARK SOULS III has become a major hit
overseas, with sales of 3.5 million units.

GIRLS und PANZER has achieved
strong popularity, centered on visualpackaged software.

©創通・サンライズ©BANDAI NAMCO Entertainment Inc.
©2011-2016 FromSoftware, Inc.

©GIRLS und PANZER Film Projekt

BANDAI NAMCO NEWSworking to build up this IP.
In addition, in conjunction with the launchof the PS VR, which is scheduled for October,we will launch Summer Lesson: Hikari
Miyamoto Seven Days Room and THE
IDOLM@STER CINDERELLA GIRLS: Viewing
Revolution. These titles will be launched at
the same time as the PS VR. Summer Lesson
will utilize virtual reality to enable users tocommunicate with characters as if they werereally there, and it is already the focus of highexpectations. Moreover, IDOLM@STER
enables users to experience a life stage overflowing with realism while they are in theirown homes.
Moving forward, the BANDAI NAMCO
Group will continue to take on the challenge
of development in the field of virtual reality.

Project i Can, a Topic of Conversation
Taguchi: In Odaiba, Tokyo, we have opened
the VR ZONE Project i Can as a laboratory
for the enjoyment of virtual reality. This
project has been opened on a limited-timebasis, from April to October 2016, and all of
the available times have already been reserved.
The project offers different types of VR activities, such as walking along a board protruding from a high-rise building and piloting arobot. Each of these is highly immersive andthe play experience is fun not only for thoseplaying the game but also for those watching
the player.
The technologies and know-how that we
cultivate through this project will be used ina variety of business development initiatives
in the future and will help us to remain at theforefront of the industry.

Doing our utmost to advance the Mid-term Planand meet the expectations of the Group andits IP fans
What is the situation in theamusement facilities business?
Taguchi: Performance has been favorable atexisting facilities in Japan, and results are up
year on year. I believe that this performanceis the result of our efforts to continually provide fresh, new things, such as prizes andevents. This applies to the VR experiencefacility I mentioned a moment ago, andNAMCO is also implementing a range ofinitiatives, such as providing cola-flavored
potato chips and potato-chip-flavored cola ona limited-time basis and launching Indoor
Seaside Kid’s Beach, which uses BANDAI
NAMCO Entertainment’s latest technology
to enable customers to experience seashore
amusement. These initiatives have been madepossible by implementing trials from a variety
of directions, including IP and virtual reality,
and reproducing customers diverse needs infacilities, and we will make more proposalsof this type in the future. Arcade game machines
are an important type of content for amusement
facilities, and moving forward we will strive
to offer initiatives that combine places andcontent and leverage the distinct strengths of
the BANDAI NAMCO Group. The Act onControl and Improvement of Amusement
Business, etc. (Amusement Businesses Law)
was recently revised, and it is now possible
for children to enter amusement facilities up
to 10:00 pm if they are accompanied by aparent or guardian. Previously, they could notenter after 6:00 pm, so for the industry thiswill be a definite improvement. There is noquestion that there are needs for families whowant to enjoy entertainment after they eat
dinner, and accordingly we will consider safe,
secure, user-friendly services that become apart of modern lifestyles.
How about Visual and Music
Production SBU?
Taguchi: Love Live! School idol project has
become a major hit, and the new TV animation
Love Live! Sunshine!! has been started. It hasreceived an extremely favorable evaluation,
including from existing fans. Music package
software is already on sale, and support fromusers is so strong that it would not be an
exaggeration to say that it has taken off likea rocket. The quality of the TV broadcasts has
also been highly evaluated, and I think thatthe new Love Live! School idol project series

has made an excellent start.
For Mobile Suit Gundam, we have implemented target strategies in line with various
customer groups, and for older customers weare providing Mobile Suit Gundam Unicorn
and Mobile Suit Gundam THE ORIGIN. For
younger customers, broadcasts of the second
season of Mobile Suit Gundam: Iron-Blooded
Orphans will start from October, and we will
strive to capture Gundam fans in Japan andoverseas. In addition, in the visual and music
products field, the media window for enjoyment
of IP is rapidly diversifying from the conventional packaged software to a wide range ofoptions, including online distribution, live
events, stage versions, and live viewings.
Moving forward, we will implement media
window strategies without limiting ourselves
to existing models.
Do you have a message forshareholders?
Taguchi: At the recent shareholders’ meeting,I had a strong sense that our shareholders werefans of the BANDAI NAMCO Group and of
our IP. We will do our utmost to advance theMid-term Plan so that everyone can realize
their expectations and their dreams. I would
like to ask for your continued support as wemove forward.

September 20163

Business Angle
Introduction of Group Officers

Overseas Strategy in the Network Entertainment Business

Advancing a sales strategy that fully
leverages IP value based on our strengths
in local marketing and distribution
The Network Entertainment business is recording favorable progress
overseas, and an especially strong contribution is being made by salesof home video game software that leverages IP, such as DRAGON BALL
and the NARUTO series. In this section, Masaaki Tsuji, who is a director
and in charge of overseas business at BANDAI NAMCO Entertainment,
and who also serves as representative director at five companies in
Europe and the Americas, discusses the current situation and outlook
for overseas business, centered on Europe and the Americas, as well as
promising products.
Would you describe your backgroundand the scope of your current
responsibilities?
Tsuji: Ever since I entered BANDAI in 1984
as a mid-career hire, I have been responsible
for overseas business. When I was at BANDAIAMERICA INC., I was involved with thelaunch of Power Rangers, which has now
become a major IP for the Toys and Hobby
business in Europe and the Americas.
Subsequently, I moved to the U.K., where I
worked as president and representative director of BANDAI U.K. LTD. At that point,
I was 40, and that was also when I first becamea president. My experiences during that period have had a very strong impression on me.
Since that time, I have continually been
involved with the Toys and Hobby and home
video game software businesses, centered on
Europe and the Americas. Currently, I am adirector and in charge of overseas business at
BANDAI NAMCO Entertainment, and I am
also a representative director at five companies,
including BANDAI NAMCO Holdings UK

LTD. and BANDAI NAMCO Entertainment
America Inc. I work on the overseas development of all businesses, including the Network
Entertainment business and the Toys andHobby business, and have overall responsibility for business in Europe.
The home video game software
business faced difficult conditions in
the past, but the situation has
improved. What factors have led tothis improvement?
Tsuji: Results were challenging in FY2010.3,
but we steadily implemented thorough improvement measures related to management.
We implemented a rigorous approach of
returning to the fundamentals, with a focus
on methods of business that leverage ourstrengths, investment that was appropriate forour operational scale, dynamic communications,and an organizational structure that could
make steady advances in the future. Rather
than simply working on defensive measures,
we also discussed what we needed to do for

future growth. Overseas competitors spent
substantial amounts on the development ofhighly anticipated software and promoted andsold their products through large-scale promotional initiatives. In this setting, our products had a strong advantage — our ability toleverage IP. To communicate the appeal ofthat IP, we strengthened our local marketing.
Specifically, we transitioned from general,
untargeted marketing using TV to direct communication with users who are IP fans throughevents and websites. As a result of these
initiatives, DRAGON BALL XENOVERSE,
the DARK SOULS series, and other products
became major hits due to synergies between
the appeal of titles themselves and our efforts
to formulate targeted strategies and implement
pinpoint marketing. I think that this led to
improvement in the home video game software
business.
What are the strengths of the
in-house sales network?
Tsuji: Key strengths include our ability todifferentiate ourselves from competitors throughthe IP axis strategy, as well as our in-housesales network. Download sales have replaced
the previous packaged product sales as thedriving force behind growth. In this setting,there is a trend in the game industry toward
the closure of bases in regions around theworld. However, I do not think that packaged
products will disappear. We have received
high evaluations for the strength of our sales
network, which extends around the world, andfor our local marketing capabilities, which arealigned with regional characteristics. As aresult, we have been given responsibility forthe sales of many leading products from othercompanies. The success of our in-house titles
and the fact that we are in charge of the sales

Left: DARK SOULS III, a full-scale RPG,has achieved cumulative overseas
shipments of 3.5 million units.
Right: DRAGON BALL Z DOKKAN
BATTLE, a smartphone gameapplication that is being distributed
around the world.
©BANDAI NAMCO Entertainment Inc.
©2011-2016 FromSoftware, Inc.

BANDAI NAMCO NEWSThe network content business is also
recording growth.
Tsuji: We developed local marketing capabilities through home video game software, andwe are now leveraging those capabilities in
network content marketing, such as for
DRAGON BALL Z DOKKAN BATTLE, a gameapplication that is being distributed from Japanto regions around the world. In network content, I believe that there are opportunities not
only for Japanese IP titles but also for IP titles
from overseas. By providing support for IP
titles originating in Japan, we will accumulate
know-how for business development initiatives
for network content originating in Europe andthe Americas. Taking on the challenge of newthings also helps employees to grow. Moving
forward, I would like to support employee
development by providing space for employees to take on new challenges.

Further expanding the scale of overseas businessdevelopment initiatives that reflect anunderstanding of regional characteristics
Moving forward, which products
look promising for overseas markets?
Tsuji: Overseas shipments of DARK SOULS
III surpassed 3.5 million units within threemonth of the launch. Overseas, popular titles
have the characteristic of maintaining highlevels of sales for extended periods of time,and accordingly I think we should continue
to focus on this area. In addition, from thisfall, the second version of DRAGON BALLXENOVERSE is scheduled for a worldwide
sales launch. DRAGON BALL XENOVERSE,
a home video game software product, hasrecorded favorable sales, centered on Europe
and the Americas. The new version maintains
the concept of the previous version while
powering up the content, and we have highexpectations. Moreover, the Tekken series ofarcade game machines is very popular overseas,
and there have been global tournaments forthese machines. Next spring, we plan to launch
Tekken 7 home video game software as a newtitle in this series.
What is the future outlook?
Tsuji: Under the previous Mid-term Plan, we
worked to rebuild the Network Entertainment
business in Europe and the Americas, andunder the current Mid-term Plan, we havebeen taking steps to build a foundation forgrowth. Having established a foundation, as
we move forward we will consider a wider
range of business development initiatives.

Game-related products andservices being rolled out overseas

4of multiple hit titles from other companies
have contributed to our favorable results inhome video game software in Europe and theAmericas.

First, we will formulate sales and marketingstrategies closely tied to regions, and we will
aim to further expand our operational scale.
In addition to languages and legal systems,
consumer preferences also vary by region. A
strategy that has been successful in one region
will not necessarily be successful in another.
Different regions in Europe have different
preferences. For example, Japanese IP is
accepted more quickly in France and Spain
than in other regions in Europe. Sales methods
are also different. In some areas download
sales account for nearly 50% of sales, whilein other areas packaged product sales play thecentral role and download sales contributeless than 10%. Based on an understanding ofthese regional differences, we will aim toestablish systems aligned with regional characteristics and strive to become a company
with even stronger marketing capabilities. In
addition, to expand the scale of our operations,
it is necessary to invest in the development or
acquisition of new products and to build aframework for autonomous, independent
business management. Entertainment is anindustry marked by overall acceleration in
global trends and dramatic change. Gamecontent will continue to offer significant possibilities in the years ahead, while transmission
methods and platforms will change. Moving
forward, we will strive to respond flexibly
without holding on to fixed concepts for ourbusiness models.

Masaaki Tsuji
Director
BANDAI NAMCO Entertainment Inc.

President and Representative Director
BANDAI NAMCO Holdings UK LTD.
Chairman and Representative Director
BANDAI NAMCO Entertainment America Inc.
BANDAI NAMCO Entertainment Europe S.A.S.
BANDAI NAMCO Entertainment France S.A.S.
Executive Vice President and Representative Director
BANDAI S.A.S.

What is your favorite saying?
Tsuji: My favorite saying is “Handle minor
matters with emotion, decide serious matterswith reason.” This means that small, everyday
matters should be handled with human feelings,
while logical judgment should be given priority in making major decisions. Businesspeople in Europe and the Americas may havea logical, business-like image, but actually
they give an extremely high priority to humanconnections. Moving forward, I will strive to
make important decisions, such as decisions
about company management, in a calm manner while reflecting the wishes of employees
to the greatest extent possible. In this way, I
will work to further reinforce our overseas
foundation.

©バードスタジオ／集英社・フジテレビ・東映アニメーション©BANDAI NAMCO Entertainment Inc.

September 20165