KADOKAWA Posts 60% Profit Drop as Anime Business Falters

KADOKAWA Corporation reported a sharp 59.7% drop in operating profit for the nine months ended December, highlighting the challenges facing Japan's traditional media companies as they grapple with rising costs and shifting consumer habits.

The Tokyo-based publisher and entertainment company posted operating profit of 6.38 billion yen ($41.7 million) for the nine months ended December, down from 15.8 billion yen ($103.5 million) a year earlier. Revenue fell just 1.7% to 203 billion yen ($1.33 billion), revealing severe margin compression across its core businesses.

The divergence between relatively stable sales and plummeting profits points to a cost structure problem rather than a demand issue. Publishing and anime operations bore the brunt of the decline.

KADOKAWA’s Anime Unit swings to loss

The anime and live-action film segment posted an operating loss of 904 million yen ($5.9 million), compared with a 4.71 billion yen ($30.8 million) profit a year earlier. Sales dropped 16.6% to 31.6 billion yen ($206.8 million).

The shift reflected a weaker slate of anime titles. The company said first-time anime adaptations made up a higher proportion of its lineup, generating less revenue per production than established franchises. This compared unfavorably with the prior year, when sequels of popular series drove results. KADOKAWA's top-earning anime franchises in 2024 included Oshi no Ko, Re:Zero, KonoSuba, and Overlord. 

Live-action film revenue declined despite contributions from new theatrical releases, as the business lacked the secondary licensing income from previously released titles that boosted the year-earlier period.

Gaming business cools after Elden Ring peak

KADOKAWA's game division, home to FromSoftware and the blockbuster Elden Ring franchise, saw sales fall 11.6% to 23.4 billion yen ($152.8 million). Operating profit declined 7% to 8.05 billion yen ($52.6 million).

The company released Elden Ring Nightreign in May, followed by its downloadable content in December, both of which sold well domestically and internationally. However, results couldn't match the prior year, when sales of the Elden Ring: Shadow of the Erdtree expansion and continued strong demand for the original game drove exceptional performance.

FromSoftware, which KADOKAWA owns 70% of, is also known for the Dark Souls series and other critically acclaimed action games. Sony recently acquired a 10% stake in KADOKAWA as part of a strategic alliance, making the PlayStation maker the company's largest shareholder.

KADOKAWA Publishing unit squeezed by labor costs

KADOKAWA's publishing and intellectual property division saw segment profit collapse 90.2% to 623 million yen ($4.1 million), even as sales held steady at 111.7 billion yen ($729.9 million).

The company attributed the profit decline to "ongoing deterioration of marginal profit from the downscaling of titles in domestic paper-based books and e-books" combined with higher personnel expenses. The business published more titles than the previous year but generated less revenue per title, diluting profitability.

International expansion provided some relief. Overseas sales increased due to strong performance in North America and Asia, along with contributions from newly established regional offices. The division also recovered from a cyberattack that disrupted operations during the same period last year.

In December alone, domestic print book sales showed strength, and the company said it made "steady progress" on business reforms announced in the second quarter.

Not all divisions struggled. Web services revenue jumped 21.5% to 16.2 billion yen ($106.2 million), swinging to a 2.19 billion yen ($14.3 million) operating profit from a 712 million yen ($4.7 million) loss a year earlier. The segment benefited from recovery after last year's cyberattack, successful events including Niconico Chokaigi 2025 and Animelo Summer Live 2025, and reduced IT infrastructure costs.

Education and EdTech revenue rose 13.4% to 12.8 billion yen ($83.9 million), with operating profit up 10.9% to 2.51 billion yen ($16.4 million). Student enrollment increased at Vantan's creative schools, including the newly opened KADOKAWA Anime and Voice Actor Academy, and at Dwango's N High School, S High School, and R High School networks.

For the fiscal year ending March 2026, KADOKAWA expects revenue of 278.2 billion yen ($1.82 billion), up just 0.1% from the prior year. Operating profit is forecast to fall 38.1% to 10.3 billion yen ($67.3 million), with net income declining 33.7% to 4.9 billion yen ($32.0 million).

Through the first nine months, the company has achieved 73% of its full-year sales target but just 61.9% of its operating profit forecast, suggesting continued margin pressure in the final quarter.