WOWOW INC.

With the spread of smartphones and the rise of low-cost video streaming services, lifestyles and content consumption styles among consumers have diversified, creating a risk of customer attrition and a decline in net subscriber numbers. As the primary source of revenue is subscription fee income, changes in the number of subscribers directly affect revenue and profit. If it becomes necessary to strengthen subscriber acquisition activities, the resulting cost increases could adversely affect business performance.

In the event of a cyberattack, which has become an increasing threat in recent years, there is a risk not only of leakage of customer personal information but also of service suspension or access restrictions due to system downtime. This risk covers functional failures resulting from attacks not only on internal systems but also on external business partners, and difficulty in providing services could adversely affect business performance.

The Group's broadcasting facilities are heavily concentrated in Tatsumi, Koto-ku, Tokyo. If this area were to suffer severe damage from a large-scale earthquake, storm, flood, or other natural disaster, there is a risk that facility damage could cause a prolonged service suspension. Combined with disruption to transportation and communication infrastructure and employees being affected by the disaster, company-wide business activities could be restricted, potentially causing severe adverse effects on business continuity and performance.

There is a risk that desired content may become unobtainable due to large-scale disasters or infectious disease outbreaks domestically or overseas, exclusive rights acquisition by competitors, rights holders halting sales, or litigation. If it becomes difficult to continue broadcasting or streaming, dissatisfied subscribers may increasingly cancel their subscriptions, which could adversely affect business performance.

Some content is purchased from overseas in foreign currencies. Although currency hedging transactions are conducted, there is a risk that content procurement and other costs may remain elevated or increase further due to a sharp and significant depreciation of the yen or a rapid rise in inflation. This could adversely affect the Group's business performance and financial condition.

While the program scheduling and broadcast operation system, the streaming operation system, the customer management system, and other systems have backup systems in addition to the active systems, there is a possibility that a system failure at the company, a failure at a service provider such as a communications carrier, or an operational error could cause a functional failure, resulting in suspension of broadcasting/streaming services or interruption of customer management operations. Depending on the scale, this could adversely affect business performance.

The company manages personal information, including customer information and contract information, obtained from subscribers to broadcasting/streaming services and users of various businesses. While measures such as establishing and operating a personal information protection management system are in place, in the event of an information leak, the company could bear legal liability under subscription contracts. Loss of trust due to social criticism could adversely affect business operations and performance.

The broadcasting business is subject to certification or licensing from the Minister of Internal Affairs and Communications, and compliance with various laws and regulations, including the Act on Promotion of Subcontracting Small and Medium-sized Enterprises, is also required. If applicable laws or license conditions are not followed, or if a serious legal or compliance violation occurs, social trust could decline and adversely affect business operations and performance. Although rules such as the "WOWOW Code of Conduct" have been established and thoroughly communicated, this risk also covers misconduct or insider trading by officers, employees, temporary staff, or contract staff.

As the fundamental transformation of the existing business structure proceeds amid an intensifying competitive environment, there is a risk that the company's appeal and employee motivation could decline, leading to a mass outflow of talented personnel such as skilled producers. This could impair the ability to secure talent, leading to a decline in business execution capability and adversely affecting business performance.

For listed stocks, a decline in market prices, and for unlisted stocks, a deterioration in the financial condition of the investee company, may necessitate recording valuation losses on securities held. Additionally, M&A activities aimed at expanding new services involve various risks related to finance, legal matters, management, and human resources, which could adversely affect the Group's business operations and performance.