The buyout – which, according to Reuters, could be completed in a matter of weeks – would significantly bolster the Japanese giant's entertainment empire, granting it control of a catalogue of high-profile intellectual property.
It'd also include a controlling stake in Elden Ring developer FromSoftware, a legendary Tokyo-based studio which PlayStation has worked with many times in the past.
On this page, we're going to explore the reasons Sony would want to acquire Kadokawa, what it would mean for game developers like the aforementioned FromSoftware, and why the conglomerate would want to sell in the first place.
Who Is Kadokawa?
Kadokawa was first formed in 1945 as Kadokawa Shoten, a publisher dedicated to "revitalising Japanese culture" in the post-war period.It eventually merged with telecommunications company Dwango in 2014, before becoming the media conglomerate we recognise today.
Sony has a long-running relationship with the company, and in 2021 it bought a 2% stake in the company as part of a capital alliance aimed at strengthening existing intellectual property and creating new ones.
What Does Kadokawa Do?
As a media conglomerate, Kadokawa oversees a number of subsidiaries, with the majority of its businesses focused on games, anime, and manga.Kadokawa owns companies such as ASCII Media Works and Enterbrain, the latter of which publishes the popular Delicious in Dungeon manga and anime. It also has a commanding stake in the US-based manga publisher, Yen Press.
Perhaps of most pertinent interest to PlayStation fans, Kadokawa owns a controlling stake in Elden Ring developer FromSoftware, as well as Danganronpa maker Spike Chunsoft and Acquire, the studio most recently behind Mario & Luigi: Brothership.
Why Would Sony Want to Buy Kadokawa?
Sony is best known, historically, for its electronics. However, in recent years it's slowly transitioned into an entertainment business, with Sony Interactive Entertainment, Sony Pictures Entertainment, and Sony Music Entertainment its flagship subsidiaries.Specifically, the Japanese giant has been making moves to capitalise on the growing popularity of anime.
In 2021, the company acquired Crunchyroll, one of the biggest worldwide streamers of anime content. This was a shock because it already owned rival Funimation, which it eventually consolidated into Crunchyroll in 2022.
Purchasing Kadokawa would significantly tighten its grip on the anime and manga market, giving it access to hundreds of new franchises and properties, which it could leverage to strengthen other areas of its business.
Sony has gone on record as saying it needs more IP to grow its entertainment footprint. Speaking to investors earlier in the year, CFO Hiroki Totoki pointed out "whether it's for games, films or anime, we don't have that much IP that we fostered from the beginning".
While sceptics would argue that acquired IP is still not content created from the beginning, there's no doubt that buying Kadokawa would effectively solve the issue Totoki was talking about here.
Why Would Kadokawa Want to Sell to Sony?
Kadokawa's business has been buffeted by a number of high-profile problems recently.In 2022, the company's chairman Tsuguhiko Kadokawa – the son of founder Genyoshi – was embroiled in a sponsorship scandal pertaining to the 2020 Tokyo Olympics. While he denies the allegations, he ultimately retired from his role of chairman as the company.
Meanwhile, earlier this year, a number of the firm's website were the target of a ransomware attack, resulting in the loss of 1.5TB of data.
There has been some online speculation that Kadokawa could be the target of a hostile takeover from a South Korean company, and it wants to remain a Japanese organisation. While unproven, it could perhaps help explain why it's willing to negotiate with Sony so suddenly.
Would Sony Make FromSoftware's Games Exclusive to the PS5?
While we don't think Sony is buying Kadokawa specifically for FromSoftware, exactly what it does with the developer will be the biggest question on the lips of gamers should this acquisition go through.It's important to remember that PlayStation and FromSoftware have a long-running relationship. Sony already owns a 15% stake in the studio, and has been a publisher of its games for many years.
The original Armored Core was published by Sony in 1997, for example, and it's a relationship that was rekindled in 2009 with Demon's Souls. The manufacturer famously decided not to localise the now legendary game, although it did remake it for the PS5 in 2020.
PlayStation also published fan favourite Bloodborne for the PS4, as well as the lesser-known PSVR exclusive Deracine.
Of course, FromSoftware's fortunes have rocketed in recent years thanks to the success of Elden Ring, which sold over 25 million copies.
Our guess is that FromSoftware would be handled similar to Bungie, and would continue to operate independently, releasing multiformat games.
We don't think Sony will interfere too much in Kadokawa's operations, and while there will certainly be opportunities for strategic alliances, we can't imagine it'll suddenly integrate FromSoftware within its PS Studios infrastructure.
It's possible PlayStation may become the publisher of FromSoftware's games on the PS5 and PC, as opposed to Bandai Namco, which published Elden Ring and Demon's Souls. But that will depend on existing contracts.
We'd apply the same logic to Spike Chunsoft and Acquire as well; there may be marketing advantages for Sony to exploit here, but we don't think much will change in terms of the daily operation of the subsidiaries and the platforms they release on.
It's worth noting that Sony does own other third-party game developers, such as Aniplex, which sits under the leadership of Sony Music Entertainment as opposed to Sony Interactive Entertainment. This division often releases games on the Nintendo Switch and not the PS5, so it wouldn't be unprecedented for the likes of Spike Chunsoft and FromSoftware to retain their autonomy.
Do you think Sony's acquisition of Kadokawa will go through? Does this purchase make sense for the Japanese giant's portfolio? Are you against big business mergers in general? Let us know in the comments section below.
Why Would Sony Want to Buy Kadokawa?
We explore why alleged talks may be taking place
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