by KADOKAWA has announced its third-quarter financial results for the fiscal year ending March 2026, revealing that its anime and live-action video business segment fell into the red during the April–December period. However, the company forecasts a recovery beginning in the fourth quarter, supported by major upcoming releases such as Oshi no Ko and Re:Zero − Starting Life in Another World.
Below is a detailed, beginner-friendly breakdown of what happened—and why recovery is expected.
Financial Overview: Revenue Down, Operating Loss Reported
According to KADOKAWA’s third-quarter results:
- Cumulative sales (April–December): ¥31.632 billion
- Operating income: ¥904 million loss
- Same period last year: ¥4.75 billion operating profit
This marks a significant year-on-year decline.
Why Did Profits Drop?
The primary reason was a rebound effect from the previous fiscal year. Last year, the company benefited from strong performance by several blockbuster anime titles, leading to unusually high revenue.
This year, without similarly large-scale hits in the same period, revenue normalized—resulting in what appears to be a sharp decline.
Anime Segment: Secondary Revenue Slows
Anime accounts for roughly 70% of the total segment revenue, making it the core driver of performance.
The biggest impact came from a decline in so-called “secondary use” revenue, which includes:
- Domestic and overseas streaming licenses
- Merchandise sales
- Game adaptations
- Blu-ray and DVD sales
- Overseas distribution rights
In the anime industry, these secondary revenue streams are often more profitable than initial broadcast income. When major global hits are absent from the lineup, this revenue can fluctuate significantly.
Live-Action Performance: Mixed but Improving
The live-action division also saw a year-on-year decrease overall. However, third-quarter performance improved thanks to:
- New theatrical releases
- Secondary use revenue from first-half projects
While still below last year’s levels, the live-action side showed more stability heading into the fourth quarter.
Recovery Expected in Q4 (January–March 2026)
KADOKAWA projects improvement starting in the fourth quarter, supported by several high-profile titles.
Major Upcoming Titles Driving Optimism
- Oshi no Ko
- Medalist
- Re:Zero − Starting Life in Another World
- Classroom of the Elite
These franchises have historically generated strong licensing income, particularly from overseas streaming platforms and merchandise markets.
With new installments or related projects scheduled, KADOKAWA expects:
- Increased licensing revenue
- Stronger merchandise performance
- Growth in international distribution deals
Focus on In-House Animation Production
The company also emphasized that progress in internal animation production within the group is “smooth.”
This strategy includes:
- Expanding in-house studio capabilities
- Sharing resources across subsidiaries
- Strengthening recruitment efforts
- Improving production efficiency
By reducing reliance on external studios and optimizing internal workflows, KADOKAWA aims to stabilize production costs and improve long-term profitability.
Industry Context: Rising Costs, Global Opportunities
The anime industry continues to face rising production costs due to:
- Higher labor expenses
- Increased animation quality standards
- Growing demand for global distribution
However, global demand for Japanese anime remains strong, especially in North America, Europe, and Asia.
KADOKAWA’s strategy moving forward includes:
- Expanding overseas licensing
- Increasing revenue per intellectual property (IP)
- Leveraging popular franchises across multiple platforms (anime, games, merchandise, publishing)
Long-Term Growth Strategy
For the next fiscal year, KADOKAWA plans to:
- Release sequels to major anime franchises
- Expand popular IP series
- Strengthen global distribution networks
- Maximize cross-media development
The company aims to return to a sustainable growth trajectory by focusing on strong IP management rather than relying solely on individual blockbuster hits.
What This Means for Anime Fans
For viewers, this financial dip does not signal trouble for upcoming anime releases. Instead, it reflects the cyclical nature of the entertainment industry, where blockbuster-driven revenue can fluctuate year to year.
With major titles like Oshi no Ko and Re:Zero returning, the fourth quarter is expected to deliver stronger performance.
Conclusion
KADOKAWA’s anime business reported a third-quarter operating loss due to reduced secondary-use revenue and the absence of major hit titles during the April–December period. However, recovery is anticipated in early 2026, supported by high-profile releases and expanded global licensing efforts.
Despite rising production costs, the company remains focused on strengthening in-house production and maximizing the value of its major intellectual properties.
If the upcoming lineup performs as expected, KADOKAWA could quickly return to profitability in the anime and live-action segment.
Stay tuned for further financial updates as new titles launch in the coming months.
