J-Stream Inc.

The proportion of video usage is high in specific industries such as pharmaceuticals and media, and a decline in video usage or competitiveness due to factors such as Pharmaceutical Affairs Law regulations, yen depreciation, the declining global weight of the Japanese pharmaceutical market, and the Broadcast Act, among others, may affect business performance. In response, in the pharmaceutical field, the Company is promoting diversification of revenue sources through marketing platform-related content and integrated data provision, while in the media field, it is working to strengthen customer relationships through its track record and provision of new functions.

While video viewing habits have become firmly established, particularly among Generation Z, if the Company's major customers, domestic broadcasters and content providers, fail to acquire users satisfactorily, this may affect the growth of the Company Group. Although the momentum of content provision and viewing is expected to continue, there is an inherent risk that deterioration in customers' business environment could indirectly spill over into the Company's sales.

There are diverse competitors, including major foreign CDN operators, cloud infrastructure operators such as Amazon, Microsoft, and Alphabet, and video streaming platform operators, and if the Company falls behind in delivery scale or comprehensive response capability, it may be unable to maintain its competitive advantage. There is also a risk that being forced into low-price competition could reduce profitability; the Company is addressing this through differentiation based on video streaming-specialized know-how and ancillary services, but there is no guarantee of success.

If broadcasters and content providers bring streaming in-house, growth in the content delivery market may no longer directly translate into increased sales for the Company. There is also a risk that unfavorable results in bidding competitions with major competitors could affect Group sales; the Company is addressing this by building on its track record with existing customers and providing new services for monetization and promotion.

If the network system stops or malfunctions due to power supply shortages, natural disasters, hardware failures, human error, or other causes, this may disrupt customer activities and have a significant impact on the business. The Company has established a 24-hour monitoring system, system redundancy, and a rapid recovery framework, but there are also risks beyond its direct control, such as failures at data centers it uses.

Managing information such as paid content and member-only data entrusted by customers is important, and if information leakage or service outages occur due to unauthorized access, targeted attacks, denial-of-service attacks, or human error, there are concerns about a decline in the Company Group's trustworthiness and a major impact on the business. In response, the Company conducts vulnerability testing by external organizations, has obtained Privacy Mark certification, and conducts surprise tests and training by its internal CSIRT, but it cannot guarantee complete protection against increasingly sophisticated attacks.

The Company utilizes external contractors for live event support, filming, web production, encoding, and other tasks, and if development delays occur due to communication discrepancies, or if information leakage or illegal content diversion occurs at a contractor, this may damage the Company Group's reputation and disrupt business operations. The Company enters into non-disclosure agreements and outsourcing agreements and selects highly reliable contractors, but the risk of delays in transitioning to alternative contractors remains.

If investments made to strengthen the business fail to achieve the expected results, this may have a significant impact on the Company's financial position and business performance. There is also a risk that early obsolescence of owned equipment and facilities due to technological innovation, or disruption of the supply route and sharp increases in procurement prices due to political trouble, disasters, or sudden exchange rate fluctuations, could result in additional investment burdens and impact profits.

Amid a labor shortage across the IT industry as a whole, recruiting and developing specialized personnel in programming, network technology, live streaming event production, and other areas involves considerable difficulty, and a decrease in personnel may affect business expansion and operational management. On the other hand, even if recruitment and development of personnel proceed smoothly, there is a risk that increased labor, training, and management costs could raise fixed costs and reduce profit margins.

Transcosmos Inc. is the parent company holding 50.36% of voting rights and may exert significant influence on resolutions at shareholders' meetings, among other matters. The Company maintains independent management as the only Group company engaged in video streaming services, but future changes in Group policy could potentially affect the business development of the Company Group.