SM ENTERTAINMENT JAPAN Co.,Ltd.

Business Details

This segment handles the exclusive Japan management of SME artists, providing an integrated business spanning dome- and arena-scale concerts, music production and distribution, merchandise (MD) sales, fan club operations, and advertising appearances. It also supports event and fan club operations for Korean artists affiliated with other agencies. The segment is pursuing multifaceted monetization measures including exclusive broadcasting rights sales and live viewings, while working to transition to a high-profitability business model through the development and in-house production of original IP. This is the core business, accounting for approximately 82% of consolidated net sales.

Recent Overview

Successive large-scale performances drove a 61.2% year-on-year surge in Q1 segment net sales

In the first quarter of FY2026 (ending December 2026), large-scale performances were concentrated, including SMTOWN LIVE at Mizuho PayPay Dome Fukuoka (approx. 70,000 attendees), SUPER JUNIOR's 20th anniversary tour at Belluna Dome (approx. 60,000 attendees), and RIIZE's solo Tokyo Dome concert (120,000 attendees, the fastest ever for a male K-POP artist). A total of 21 performances were held with a combined audience of approximately 340,000, and the MD business, advertising appearance business, exclusive broadcasting rights sales, and live viewings worked in tandem to boost results. The segment profit margin improved from 8.1% in the same period of the prior year to 11.8%. The in-house IP "GPP" also achieved its CD debut, and fan base expansion is progressing.

Key Products

Growth Drivers

• Continued staging of large-scale performances, including RIIZE's solo Tokyo Dome concert (120,000 attendees), and expansion of attendance figures
• Multifaceted monetization measures for performances combining exclusive broadcasting rights sales and live viewings
• Solid trend in advertising appearance contracts in the beauty and apparel sectors, driven by rising recognition and popularity of aespa, RIIZE, and NCT WISH
• Expanding revenue contribution from concert-linked venue and e-commerce merchandise sales in the MD business
• Fan base expansion and future monetization from the CD debut of the first original in-house IP, "GPP"
• Expansion of revenue base beyond concerts, including the music business and travel business, and margin improvement through internalization of operations
• Continued rollout of large-scale festival-style performances leveraging the SMTOWN brand

Risks

• Continued sharp rises in production costs and personnel expenses amid global inflation and yen depreciation
• Risk of earnings dependence on the activity status (timing, scale, and frequency of concerts) of specific artists
• Intensifying competition in the live entertainment market, including K-POP, and diversification of fan needs
• Risk of revenue concentration with major customer Avex Live Creative Inc. (¥3,389 million in FY2025, ending December 2025, 33.2% of total net sales)
• Burden of upfront investment costs required to develop and monetize new IP (such as GPP)
• Risk of quarter-to-quarter earnings volatility due to concentration of large-scale performances in Q1 (full-year earnings forecast calls for net sales of ¥9,089 million, a 10.8% year-on-year decrease)

Business Details

This segment consists of two pillars: the Rights Business, which acquires rights such as drama broadcasting rights and film distribution rights and commercializes them on an all-rights basis, and the Media Business, which provides pay broadcasting services through the company's own TV station, KNTV (via SKY PerfecTV!, CATV, and IPTV). It broadcasts Korean terrestrial dramas as well as K-POP and variety programming, and also handles TV commercials, Japanese subtitle production, and secondary usage sales. In recent years, the company has also been expanding its platform into online streaming.

Recent Overview

Net sales rose 5.7% year on year, but segment profit declined 13.8%, reflecting lower profitability

In the first quarter of FY2026 (ending December 2026), the Rights \u0026 Media Business posted modest sales growth, with net sales of ¥588 million (up 5.7% year on year), while segment profit declined 13.8% year on year to ¥51 million. The Rights Business focused on acquiring new content and strengthening sales of archived works. The Media Business broadcast a total of nine premium content titles in an effort to maintain its customer base, but cost increases from the global rise in production costs and yen depreciation weighed on profitability.

Key Products

Growth Drivers

• Securing stable revenue through continued strengthening of external sales of archived works
• Diversification of sourcing through genre diversification, including Chinese-language dramas and variety programs
• Improved investment efficiency through a shift to a risk-diversified sourcing structure via co-investment with partner companies
• Optimization of content distribution through expansion of online streaming platforms
• Maintaining viewers and preventing cancellations through the supply of premium content leveraging strong in-house group IP

Risks

• Continued shrinkage of the multichannel market and decline in TV viewership amid accelerating shift to OTT services
• Rising procurement costs due to supply constraints on Korean dramas and intensifying competition for rights acquisition
• Rising content procurement costs due to yen depreciation and exchange rate fluctuation risk
• Sluggish growth in viewing fee revenue amid a declining trend in satellite broadcasting subscribers
• Risk of year-to-year earnings volatility due to factors such as market pricing and distribution timing of major drama rights

Business Details

The "Other" segment was the category that had handled the karaoke app business, which is not included in the reportable segments (Entertainment Business and Rights \u0026 Media Business). The business was discontinued in FY2024 (ended December 2024) (the previous consolidated fiscal year), and in the current consolidated fiscal year (FY2025, ended December 2025), no net sales, segment profit, or segment assets were recorded for this segment (shown as "－"). Segment assets stood at ¥1,497 million at the end of the prior fiscal year, but had disappeared by the end of the current fiscal year.

Recent Overview

The karaoke app business was fully discontinued as of FY2024 (ended December 2024)

According to the segment information notes, the "Other" category had handled the karaoke app business, but this business was discontinued in the previous consolidated fiscal year (FY2024, ended December 2024). As a result, in the segment information for the current consolidated fiscal year (FY2025, ended December 2025), net sales, profit, and assets for "Other" are all shown as "－," effectively causing the segment to disappear. In the prior fiscal year, net sales were ¥0 million, segment loss was ¥4 million (△¥4,379 thousand), and segment assets were ¥1,497 million.

Key Products

Growth Drivers

Risks

• The business was already discontinued in FY2024 (ended December 2024), and no revenue contribution from this segment is expected from the current consolidated fiscal year (FY2025, ended December 2025) onward.
• Segment assets of ¥1,497 million were recorded as of the end of the previous consolidated fiscal year, but these had disappeared by the end of the current fiscal year following the discontinuation of the business, and the details of the asset disposition have not been disclosed.