NEWSLETTER

March 2018

BANDAI NAMCO Holdings Inc.
Management
Interview with the President

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

New Mid-term Plan of the BANDAI NAMCO GroupIn accordance with our Mid-term Vision — CHANGE for the NEXT: Empower,
Gain Momentum, and Accelerate Evolution — we will aim to be a groupthat continually changes as we move forward toward the next stage
under our new Mid-term Plan.
BANDAI NAMCO Holdings Inc. recently announced the details of
its new Mid-term Plan, which starts from April 2018. In this issueof the newsletter, BANDAI NAMCO Holdings’ President Mitsuaki
Taguchi discusses the new Mid-term Plan, including the main­strategies, the organizational framework to advance those­strategies, and his thoughts about the formulation of the plan.
The results for the third quarter of
FY2018.3 have been announced.
Taguchi: In the first nine months of FY2018.3(April to December, 2017), we recorded net
sales of ¥483.1 billion and operating incomeof ¥53.4 billion.
In the Toys and Hobby business, established
IP* products remained popular in Japan, including the KAMEN RIDER series and the DRAGONBALL series. In the Network Entertainment
business, network content for Japan and overseas
markets continued to register strong results,
and a solid performance in home video games
was supported by the new Tekken7 and by
repeat sales in Europe and the Americas. In
the Visual and Music Production business,
continued popularity was enjoyed by the Love
Live! series and the GIRLS und PANZER series.
In this way, products and services based oncore IP were popular in each business field,
and our sales increased from the same periodof the previous year. However, in terms of
profits, we did not reach the level achieved in
the corresponding period of the previous fiscal
year. This was due to differences in the launchtiming of core products and in the product mix,
as well as to upfront costs associated with the
opening of VR and other new facilities.
For the full-year forecast, we considered
the results in the first nine months and thecurrent business trends. Network content

continues to record solid
results, both in Japan andoverseas, and accordingly werevised our sales forecast.
While the previous forecast
BANDAI NAMCO Holdings’ President Mitsuaki Taguchi explains the newcalled for net sales of ¥620.0
Mid-term Plan (February 9)
billion and operating income
Would you provide an overview ofof ¥57.0 billion, the current forecast is for net
the current Mid-term Plan?
sales of ¥63.0 billion and operating income of
Taguchi: Under the current Mid-term Plan,¥57.0 billion. The new Mid-term Plan starts
which started from April 2015, we aimed toin April. To ensure that it gets off to a solid
further strengthen the IP axis strategy, whichstart, we will do our utmost to reach operating
is our strength, and to expand our operations
income of ¥60.0 billion, which was the initialin global markets. We faced challenges inobjective for the current plan’s final year atcertain areas, but through the hard work of our
the time the plan was launched. We will work
employees we were able to make progress thattenaciously toward that goal.
was basically in line with our expectations,both quantitatively and strategically. Specific
The forecast for the FY2018.3 year-end
results included progress with established IP,
dividend has been revised.
such as the Mobile Suit Gundam series and the
Taguchi: I will explain the details later, but
DRAGON BALL series, for which were ablefrom the new Mid-term Plan, which starts into achieve new roll-outs through innovation
April 2018, we will introduce a new approachin products and services.
to providing shareholder returns. We have also
We also worked to nurture new IP into
decided to apply this approach in advance toestablished IP, including the Love Live! series
the year-end dividend for FY2018.3. Conseand IDOLiSH7. Furthermore, we expanded
quently, the forecast for the year-end dividend
business for the mature fan base in Japan and
for FY2018.3 is ¥83 per share (base dividend
overseas, and we also substantially expandedof ¥20, performance-based dividend of ¥63),
IP outlets, such as live events, network content
and the forecast for the annual dividend is ¥95
in Japan and overseas, and home video games
per share (base dividend of ¥32, p­ erformanceoverseas.
based dividend of ¥63).

*IP: Characters and other intellectual property

March 20181

Management

Interview with the President

New Mid-term Plan of the BANDAI NAMCO GroupWe will introduce a capital policy emphasizing
cost of capital, and to drive rapid strategic
advancement we will transition to system offive business units.
Would you discuss any issues thatremain from the current Mid-term Plan?
Taguchi: One issue was that I think we could
have done even more in regard to creating new
IP. Under the new Mid-term Plan, we will
implement aggressive initiatives to drive thecreation of new IP. In addition, looking overseas,
the Toys and Hobby businesses faces someremaining challenges in Europe and the­Americas. Furthermore, in Asia we conducted
aggressive initiatives and were able to expand
our business. In China, however, we have notyet made a full-blown entry into the market.
We will take steps to change our approach inoverseas markets, in line with the characteristics
and situations in each region.
On the other hand, I believe that there arealso new opportunities. Combinations of our

IP axis strategy and new technologies, such as
VR, will continue to foster unprecedented new
possibilities. Also, the spread of online visual
product distribution is expanding the popularityof Japanese IP on a worldwide basis. In China,
where we have not yet implemented a fullblown roll-out, the entertainment market isrecording significant growth. Under the new
Mid-term Plan, we will strengthen the IP axis
strategy from all perspectives, including IP
outlets, areas, and targets, and we will strive
to further increase our opportunities.
What was the focus of attention in theformulation of the new Mid-term Plan?
Taguchi: Currently, the operating environmentis undergoing dramatic change on a global
scale, and the players and rules in the

Numerical Targets of the New Mid-term Plan

Net Sales

FY2018.3 forecasts

FY2021.3 targets¥630.0 billion¥750.0 billion

Operating
Profit¥57.0 billion¥75.0 billion

Operatingprofit margin

9.0%

10.0% or more

ROE

11.4%

10.0% or more

Capital Policy (Shareholder Returns Policy)
Revise shareholder returns policy to place more emphasis on capital costs and ROE
Existing­policyNew­policy

Provide a return to shareholders that targets a payout ratio of
30% in accordance with consolidated operational results andbased on stable annual dividend payments of ¥24 per share.

Provide a return to shareholders that targets a total return ratioof 50% or more and based on stable dividend payments of 2%
of DOE*Implement revised policy ahead of schedule, starting with theyear-end dividend for FY2018.3

2

BANDAI NAMCO NEWS

entertainment field are themselves changing.
We have reached a stage where simply following
the previous models will not be enough. We
have a strong sense of crisis because we will
not be able to survive if we simply extend ourprevious ways of doing things. In formulating
the new plan, we worked with the strong belief
that we had to change as we targeted the nextstage. First, we considered and discussed where
the Group should aim to be in 10 years. We
determined that, as a leading entertainment
company, in 10 years we would like to be theworld’s most inspiring entertainment groupfor children and other fans around the world.
We all agreed that we would like to be a groupof companies and employees that draw onabundant individuality to meet expectations,
not only in terms of volume but also in theareas as we aim for the next stage and strive
to create new entertainment that meets the
expectations of fans. In accordance with thisidea, we will advance 4 main strategies — theIP axis strategy, business strategy, region strategy, and personnel strategy.
Would you explain the numerical­targets under the new Mid-term Plan?
Taguchi: Under the current Mid-term Plan, we
have aimed to establish a business foundationthat can continue to generate, in a stable manner,
net sales of ¥500.0 billion and operating incomeof ¥50.0 billion, without regard to whether or
not we have hit products at that time. Under
the new Mid-term Plan, we will strive to further
reinforce our business foundation and to achieve
continued growth. In FY2021.3, the final year

quality and appeal of our products and services.
We formulated the new Mid-term Plan fromthe viewpoint of what we have to do over the
next three years in order to make progress
toward that vision.

of the new plan, we are aiming for record-highsales and profits, with net sales of ¥750.0
billion, operating income of ¥75.0 billion,
operating income margin of 10% or more, andROE of 10% or more.

Would you explain the new­Mid-term Plan vision?
Taguchi: The vision of the new Mid-term Plan
is CHANGE for the NEXT: Empower, Gain
Momentum, and Accelerate Evolution. In orderto make progress toward becoming the leading
entertainment company that we want to be in
10 years, and to demonstrate our industry
presence, I would like to make the next three
years a period of “CHANGE.” This visionencompasses a range of meanings, including
the following. (1) Change to an IP-creatingcompany — We will aim to further strengthen
the IP axis strategy and drive the increased
creation of new IP. (2) Change to a new businessmodel — In the midst of a changing businessenvironment, we will change to a businessmodel appropriate for the time. (3) Change toa unifying ALL BANDAI NAMCO concept— To achieve further penetration and expansionof the IP axis strategy, in each region Group
members will work together and take theinitiative on a regional axis basis. (4) Change
to a corporate group centered on people — We
will encourage employees to leverage theirwide-ranging individuality, work energetically,
and take on challenges. We should strive to
make the three-year period of the new Mid-term
Plan be a time for implementing change in all

Would you describe the capital policy?
Taguchi: In preparing for the start of the new
Mid-term Plan, we considered our capital
policy from various perspectives, such as the
direction the Group will take and the type ofmanagement we should implement. As a result,with increased attention to cost of capital and
ROE, we changed to the following policy for
returns — Provide a return to shareholders thattargets a total return ratio of 50% or more andbased on stable dividend payments of 2% of
DOE. We added DOE as an indicator in order
to increase awareness of the cost of capital,
and we adopted the total payout ratio as anindicator because it will facilitate a flexible
shareholder return policy with an emphasis on
capital efficiency and ROE, which are of
considerable interest to stakeholders.
We will consider the acquisition of our own
shares as necessary. In that regard, we will givecomprehensive consideration to such factors
as the share price trends, investment projects,
and business trends. We have also establishedstandard internal rules based on multiple indicators. On this basis, we will look at the overallsituation.

Please discuss the organizationalframework.
Taguchi: From April, the name of the aggregatedbusiness companies will change from “SBUs”
to “Units,” and the Group will shift from a
3-SBU structure to a 5-Unit structure. This
will enable swifter advancement of the main
strategies. The Network Entertainment businesswill be reorganized into the Network Entertainment Unit and the newly established RealEntertainment Unit. In the Real Entertainment
business, the core company will be BANDAI
NAMCO Amusement Inc., which combines
NAMCO LIMITED and the amusement machine
business of BANDAI NAMCO Entertainment
Inc. The Real Entertainment Unit will utilize
real-world venues to provide settings andcontent that leverage the distinctive strengths
of BANDAI NAMCO. In Visual and Music
Production, the core company will be BANDAI
NAMCO Arts Inc., which combines BANDAIVISUAL CO., LTD. and Lantis Co., Ltd. The
unit will work to strengthen IP production with
more-thoroughly integrated visual products,

music, and live events. The IP Creation Unit,a new independent unit that was established
as a spin-off from Visual and Music Production,
will focus on the creation of new IP, withSUNRISE INC. as the core company.
After the Ordinary General Meeting of
Shareholders in June, the presidents of theUnits’ core companies will serve concurrently
as directors of the holding company. In thisway, we plan to implement Group managementfrom the viewpoints of both overall Group
optimization and the growth of each business.
The holding company will change from thecurrent system of two representative directors
to one representative director. Chairman and
Representative Director Shukuo Ishikawa will
become Chairman and Director from April.
After the Ordinary General Meeting of Shareholders in June, Mr. Ishikawa will become
Advisor and will continue to provide a wide
range of management advice.

New Organizational Framework(As of April 1, 2018)

Five-Unit structure

Toys and Hobby Unit
Core company: BANDAI CO., LTD.
President and Representative Director

Masaru Kawaguchi

Network Entertainment Unit
Core company: BANDAI NAMCO Entertainment Inc.
President and Representative Director

Satoshi Oshita

Real Entertainment Unit
BANDAI NAMCO
Holdings Inc.

Chairman and
Director

ShukuoIshikawa

Core company: BANDAI NAMCO Amusement Inc.
President and Representative Director

Visual and Music Production Unit
Core company: BANDAI NAMCO Arts Inc.
President and Representative Director

President andRepresentative
Director

Mitsuaki
Taguchi

Hitoshi Hagiwara

Kazumi Kawashiro

IP Creation Unit
Core company: SUNRISE INC.
President and Representative Director

Yasuo Miyakawa

Affiliated Business Companies

March 20183

Management

Interview with the President

New Mid-term Plan of the BANDAI NAMCO GroupWe are stepping up investment in IP creation
and working to expand overseas business fields,such as in China, Europe, and the Americas.
Would you discuss the main strategy“accelerate evolution in IP axis strategy”?
Taguchi: In “accelerate evolution in IP axis
strategy,” we will work to “boost capability tocreate IP (structural changes)” and “invest
aggressively in IP creation.” In working toboost capability to create IP (structural changes),the front lines throughout the Group will givethe highest priority to creating and nurturing
IP, and will continue to pursue innovation inestablished IP through products and services.
We will strive to create IP not only within theGroup but also through open cooperation witha wide range of external partners. In addition,
the most important mission of the newly established IP Creation Unit will be the creation andnurturing of new IP. Working in close cooperation with Group businesses, the unit will
advance the creation of IP coordinated withproducts and services. We will also bolster
investment in IP creation, such as visual production, cooperation with other companies, andenhancement of our technical capabilities in
production. Moreover, we will establish systems
so that we can secure talented human resourcesin a stable manner to facilitate the ongoing,steady provision of high-quality products.
In investing aggressively in IP creation, on
top of normal investment, we will invest ¥25.0
billion in IP creation over the three years of
new Mid-term Plan (other than investment in
partner companies). Our plans for this ¥25.0
billion include investment in original IP creationin each unit; Groupwide investment throughthe IP Strategy Headquarters; and investment
to support a wide range of challenges within
the Group, such as new businesses. This will
include certain short-term investment, but the
majority will be investment aimed at planting
seeds for the medium to long term, with a focus
on where we want to be in 10 years. Throughthis investment over a period of three years,
we would like to make sure that the IP axis
strategy remains strong in the years ahead.
Would you discuss the business­strategy “empower push into newentertainment”?
Taguchi: Under the business strategy “empower
push into new entertainment,” we will establish

and enhance our business infrastructure, expandand strengthen our business fields, and promote
incubation. To establish and enhance business
infrastructure, first, we established the RealEntertainment Unit. This unit will provide realentertainment that utilizes real-world venues,
which are points of customer contact; technological development capabilities; and expertisein leveraging IP worldviews. We will draw on
our strength in having one value chain that
extends from the development of machinesand content to the provision to customers, andwork to implement efficient operations. In
addition, we will focus on the roll out of venues
that are differentiated through BANDAI­NAMCO’s distinctive strengths in VR andother areas, and of new types of venues coordinated with Group businesses.
Also, targeting the creation of new digital
services, we will concentrate functions andstrengthen and enhance platforms. First, we
will promote recognition of the Group’s IP andproducts by concentrating video distributionfunctions in Japan into one company andstrengthening distribution of animations andpromotional images, Next, through BXD Inc.,
which was established through joint investment
by BANDAI NAMCO Entertainment Inc. andDrecom Co., Ltd., in the spring we will launcha new platform — enza — and commence

distribution of browser games for smartphones.
In addition to game distribution, we plan toroll out initiatives that leverage our strengths
and are coordinated with Group businesses.
Furthermore, we will enhance the fan clubbusiness and deepen connections with IP fans.
The Group is also working to expandand strengthen its business fields.
Taguchi: Under the new Mid-term Plan, we
will energetically roll out business initiatives
for fields and targets that offer significant
opportunities. Moving forward, we will continue working to strengthen our products forthe mature fan base, which has substantial
growth potential in Japan and overseas. To
that end, we established BANDAI SPIRITS
CO., LTD., and we will concentrate the maturefan business of the Toys and Hobby Unit inthis new company, including plastic models,collectable items, and lottery-related products.
In particular, we will focus on overseas expansion. For example, in North America, we will
strengthen our sales network, and in China
we will expand Gundam plastic models andaggressively utilize e-commerce. Moving
forward, we will continue aiming to be theworld’s number one comprehensive hobby
entertainment company. To that end, we willdevelop products that will meet the needs offans and accelerate our business operations.
The live event market continues to record
growth in Japan and overseas. BANDAI
NAMCO Arts Inc. combines BANDAI VISUAL
CO., LTD. and Lantis Co., Ltd. Through thisinitiative, we will further reinforce IP production
with more-thoroughly integrated visual products,
music, and live events. In addition, we will stepup live events, live viewings, and sales of goods
for IP fans in overseas markets as well as inJapan. Also, e-sports events are drawing attention
around the world as a new genre of live event,and we will work in cooperation with industry
organizations and companies to implement
full-blown initiatives in this area, centered on
BANDAI NAMCO Entertainment Inc.
Moreover, “venues” are also an importantelement in the enhancement of live events. We
recently acquired a 3,500 square meter site in
Shibuya-ku, Tokyo, where we plan to build an
integrated facility that will offer venues for live
music, theater productions, and other events.
After it is completed, we will utilize this facility
for a wide range of the Group’s live events.

Would you discuss the region strategy “Gain momentum with ALL
BANDAI NAMCO”?
Taguchi: Each region will form a unifying ALL
BANDAI NAMCO concept and aim to advancestrategies autonomously on a regional axis
basis. In Japan, we will continue striving to benumber one in each market and business. In
Europe and the Americas, we will focus onachieving growth in the network content andhome video game businesses, and we willchange our approach in the Toys and Hobby
business. In Asia, we will move forward with
the implementation of detailed business initiatives in line with regional characteristics.
China is positioned as a key region in the
new Mid-term Plan. There are many fans ofJapanese IP in China, and the entertainment
market is expected to record continued growth.
Accordingly, we will make a full-blown entry
into China. To that end, we established a holding
company in Shanghai in December 2017.
Moving forward, we will strengthen collaboration with local partners, and we will advancea strongly localized IP axis strategy incorporating
both Japanese and locally originated IP.

Overview of subsidiaries after reorganization
BANDAI SPIRITS CO., LTD.
Establishment
February 15, 2018
Location
Komagata, Taito-ku, Tokyo
Representative	Masaru Kawaguchi President and Representative Director
Common stock	¥100 million (wholly-owned subsidiary of BANDAI NAMCO Holdings Inc.)
Description of business	Planning, development, manufacture and sales of toys, plastic m­ odels,
prizes for c­ onvenience stores and so forth for mature fan base
Number of employees
About 450

Outline of the New Mid-term Plan
Corporate Philosophy

Dreams, Fun and Inspiration
The Leading Innovator in Global Entertainment

BANDAI NAMCO Amusement Inc.

Mid-term Vision

IP axis strategy
Main Strategies

Business strategy
Region strategy
Personnel strategy

4

BANDAI NAMCO NEWS

Accelerate evolution in IP axis strategy
Invest aggressively in IP creation

Boost capability to create IP (structural changes)

Empower push into new entertainment
Establish and enhance business infrastructure

Expand and strengthen business fields

Promote incubation

Gain momentum with ALL BANDAI NAMCO
Make full-blown entry into Chinese market

Establish system for ALL BANDAI NAMCO

Make personnel the core of the Group
Establish environment to optimize employees’ performance by tapping their individual strengths, and to empower new ventures

Change in trade name
April 1, 2018
Location
Mita, Minato-ku, Tokyo
Representative	Hitoshi Hagiwara President and Representative Director
Common stock	¥10,000 million (wholly-owned subsidiary of BANDAI NAMCO Holdings Inc.)
Description of business	Real entertainment business, including p­ lanning, production, and sales of ­amusement machines, and planning and operation of amusement facilities andfacilities incorporating virtual reality (VR) and IP
Number of employees
About 750

BANDAI NAMCO Arts Inc.
Change in trade name
April 1, 2018
Location
Ebisu, Shibuya-ku, Tokyo
Representative	Kazumi Kawashiro President and Representative Director
Common stock	¥2,182.5 million (wholly-owned subsidiary of BANDAI NAMCO Holdings Inc.)
Description of business	Planning, production, and sales of visual and music content and package s­ oftware;planning, production, sales, and management, etc., of music m­ asters and musical works
Number of employees
About 240

March 20185

Management

Interview with the President

New Mid-term Plan of the BANDAI NAMCO GroupWe are focusing Group capabilities to take onchallenges and establish a presence that is
indispensable to fans around the world.
In China, we are already offering network
content services, which have become popular,
and during the period of the new Mid-term
Plan, we will consider the establishment ofbusiness companies for the Toys and Hobby
business and the Visual and Music Production
business. Through the implementation of arange of Groupwide initiatives, we will workto achieve expansion in the scale of the Group’s
operations in China.
To advance these initiatives under the ALL
BANDAI NAMCO concept, we will consider
taking steps to build a system to further reinforce
collaboration, such as moving toward an integrated office in each region. In addition, tobolster our presence around the world and toenhance Group unity, we will consider efforts
to promote the BANDAI NAMCO brand on
a worldwide basis.

6

BANDAI NAMCO NEWS

Please explain the personnel strategy.
Taguchi: In advancing all of our strategies, theGroup’s human resources are our greatest asset.
I believe that the BANDAI NAMCO Groupshould seek to be “a group centered on humanresource management, with a focus on entertainment and imagination,” where employeeswith various individual characteristics can workwith motivation and energy. We have beenworking for some time on such initiatives as
training the necessary global personnel, enabling
personnel exchange within the Group, andestablishing systems for promoting healthy,
energetic working styles for employees. In
addition, under the new Mid-term Plan, we willtake steps to advance systems that help employees
to take on challenges, such as frameworks thatprovide support in IP creation, and we willbuild a foundation that enables employees totake the initiative on the front lines.

Do you have a message for ourreaders?
Taguchi: I believe that a key strength of the
BANDAI NAMCO Group is the advancementof shared values across our various businessdomains under the ALL BANDAI NAMCO
concept, in accordance with the IP axis strategy.
I think we should strive to achieve a presence
that is indispensable to fans around the world.
To that end, we should take a sincere approachto IP and fans, leverage our experience, andaim to be a group that can draw out and maximize the appeal of IP through products andservices. However, our environment is now
undergoing dramatic change, and to give shape
to this idea, we need to do more than simply
rely on previous ways of doing things. I think
we need to transition to a new IP axis strategy
in line with the times. At this point, if we do
not change, BANDAI NAMCO Group will
not be able to survive in the future. With thatsense of crisis, and without being bound by
previous ways of doing things, we will approach
this change as an opportunity to take on new
challenges. I would like to ask for your continued support as everyone at the Group works
together to take on new challenges with boundless curiosity.