AMUSE INC.

If a key artist suspends or discontinues activities, or if an exclusive contract is not renewed, this may directly affect the Group's business performance. In addition, if a contracted artist violates laws and regulations, engages in conduct that damages credibility, or is subject to reputational damage, this could affect performance through deterioration in the reputation of the artist and the Group. As a countermeasure, the Group is promoting expansion of its artist portfolio and diversification of its revenue base, but complete prevention is considered difficult.

Revenue from large-scale concerts, films, music works, and video content tends to be concentrated in specific periods, and performance can fluctuate significantly depending on whether such content becomes a hit. Given the unpredictable nature of this business, planned investment recovery may be difficult, which could impair the stability of performance. The Group strives to secure stable revenue through a broad artist portfolio and a large number of titles, but seasonal performance fluctuations are considered unavoidable.

If concerts or outdoor businesses cannot be held due to abnormal weather or disasters, or if events must be cancelled due to requests from the government or local authorities in connection with an infectious disease outbreak, costs such as ticket refunds, production cost burdens, and customer compensation will arise, affecting performance. Although preventive measures are in place, complete avoidance is difficult, and the Group seeks to mitigate the impact through active use of online live streaming.

Competition for the acquisition of and investment in promising content such as video works, stage productions, and musicals is intense, and there is no guarantee that such content can always be secured. If the box office or sales performance of acquired content falls short of expectations, this may result in a prolonged investment recovery period or losses. The Group strives to improve its investment recovery rate by setting upper limits on investment amounts, diversifying risk with partners, and utilizing video and streaming rights.

In pursuing new businesses utilizing technology including generative AI, risks may materialize after the fact, such as difficulty in securing necessary personnel, sudden changes in the business environment due to technological innovation or the emergence of competitors, and the absence of applicable laws and regulations or unpredictability in their official interpretation. These risks may affect performance, and complete prevention is considered difficult.

If malware or unauthorized access resulting from increasingly sophisticated and advanced cyberattacks, or system or communication failures caused by server overload or employee error, occur, this may lead to a decline in revenue, loss of customer trust, and damage to brand image. The Group strives to maintain a high level of information security, but because the human resources of external system vendors are limited, there is a risk that recovery may take time.

As the Group handles customers' personal information, if an information leak occurs, this may affect performance through damages and reputational harm. Even in the absence of a leak, the costs of prevention may affect performance. The Group is working to improve security awareness and information literacy through the establishment of personal information handling regulations and employee training.

Manufacturing costs and other costs are rising against a backdrop of increasing labor costs, surging crude oil prices, yen depreciation, and unstable international conditions. Due to competitive conditions and other circumstances, there is no guarantee that these cost increases can be passed on through pricing in a timely and sufficient manner, which may affect performance.

Yokichi Osato, the founder and Representative Director, Chairman and President, is a major shareholder and plays a central role in formulating and deciding management strategy and in contracts with key business partners and artists. If he were to leave the company for any reason, this could disrupt the continuity of management strategy and the maintenance of important business relationships, potentially affecting performance.

The Group is subject to a wide range of domestic and international laws and regulations, including the Companies Act, Copyright Act, Act on the Protection of Personal Information, Freelance Act, and the Act on Promotion of Fair Trade with Regard to Consumption Taxation, and stricter regulation through legal amendments or the enactment of new regulations may constrain business activities. The Group has implemented measures such as establishing a compliance system and introducing an internal whistleblowing system, but there is no guarantee that these will necessarily function effectively.