Media Kobo,Inc.

A substantial portion of business revenue depends on fortune-telling content, creating a risk that contraction of the fortune-telling market (estimated at ¥99.7 billion in FY2023) or changes in consumer preferences could directly impact business performance. The Company is diversifying its business portfolio by expanding into adjacent areas such as BtoB Data Marketing & Data Utilization Service, but the high level of dependence continues.

The Company distributes content under contracts with platform providers such as ISPs and mobile telecommunications carriers, and some platforms have already discontinued or reduced distribution of fortune-telling content or raised distribution fees. If content is increasingly brought in-house or distribution restrictions/discontinuations expand going forward, this could materially affect the Group's business performance and business development. The Company is working to reduce this risk by expanding its own media.

Advertising revenue is susceptible to economic conditions and may decline due to budget cuts by advertisers. In addition, algorithm or policy changes by Google, which accounts for the majority of domestic search share, could affect SEO and reduce traffic to the Company's own media, thereby lowering advertising revenue. The Group is working to reduce this risk through diversification of revenue formats, but dependence on external factors remains.

Content supervised by well-known fortune-tellers has a sales advantage, but if the popularity of such fortune-tellers declines or their image is damaged, this would directly affect sales of the supervised content. Competition to secure well-known fortune-tellers is intense, and if royalty rates (a fixed percentage of sales) are raised, this could pressure operating profit of the relevant content and the Group's overall business performance.

Kazuo Nagasawa, Representative Director and President, is a major shareholder holding a combined 64.29% of issued shares personally and through an asset management company, and exerts significant influence over management policy, strategic decisions, and matters resolved at shareholders' meetings. The Group's management is highly dependent on his judgment, planning ability, and execution capability, and if he becomes unable to carry out his duties for any reason, this could materially affect business performance and business development.

The Company accumulates personal information of content users and merchandise purchasers in its database, and if data is leaked due to issues with internal management systems or unauthorized external intrusion, this could result in damage claims and loss of social credibility. The Company has implemented measures such as access restrictions, intrusion prevention systems, use of an external data center, and acquisition of the Privacy Mark, but the risk cannot be completely eliminated.

To reduce dependence on fortune-telling content, the Company is developing new businesses in adjacent areas such as BtoB Data Marketing & Data Utilization Service, but many challenges exist, including establishing business foundations, understanding customer needs, securing personnel, and ensuring legal compliance. If new businesses fail to gain traction and losses occur, this could adversely affect the Group's business performance, and there is also a risk of policy changes or business withdrawal.

The Company actively considers M&A as a means of business expansion and conducts due diligence including the use of specialists, but if significant changes occur in the market environment after acquisition, the target company fails to achieve its business plan, or financial issues that are difficult to detect during due diligence come to light, recovery of invested funds may become difficult, potentially affecting business performance.

The Group's content is centered on mobile phones, PCs, and tablet devices accessed via the internet, and the pace of technological innovation in hardware and networks is remarkable. If the technology used in content changes significantly, the Group's technology could become obsolete, leading to increased response costs and delays in service launch due to development delays, which could affect business performance.

The Group's internet mail-order business is subject to regulations such as the Act against Unjustifiable Premiums and Misleading Representations, the Act on Specified Commercial Transactions, and the Act on Regulation of Transmission of Specified Electronic Mail. If future amendments or abolition of related regulations, or enactment and enforcement of new laws, restrict business operations or require new compliance measures, this could affect business performance and business development.