Nippon BS Broadcasting Corporation

The BS Digital Broadcasting Business, which accounts for the majority of net sales, is dependent on advertising revenue. If a sudden change in the domestic or overseas economic environment or a slowdown in production activity occurs, this could affect the Company's financial position and operating results through a contraction of the advertising market. In addition, structural changes in advertisers' marketing strategies (such as a shift to digital) could also become a factor in revenue decline. As a countermeasure, the Company is working to enhance media value through the promotion of "Value4" and to thoroughly control costs.

The spread of smartphones and tablet devices and the penetration of digital media via broadband have changed viewers' viewing habits. If TV broadcast viewing time and the number of viewers continue to decline, this would lead to a decline in media value and a reduction in advertisers' spending. The same risk would also materialize if the Company is unable to expand its audience rating share within the free-to-air BS digital broadcasting industry. As a countermeasure, the Company is promoting differentiation as an independent operator not affiliated with terrestrial key station networks.

The Company has received certification as a satellite basic broadcasting business operator under the Broadcast Act (obtained in December 2005) and a radio station license under the Radio Act (obtained in November 2008). If these certifications or licenses were to be revoked, it would become impossible to continue business operations. In addition, if new regulations imposed by the National Association of Commercial Broadcasters in Japan or relevant government ministries and agencies were to be implemented, this could have a material impact on the Company's business policy. At present, there are no facts indicating a violation of laws and regulations, and the Company will continue to ensure thorough compliance.

If the total voting rights directly held by foreign nationals, etc. come to account for one-fifth or more of the Company's voting rights, the Company's certification as a BS digital broadcasting business operator could be revoked under the provisions of the Broadcast Act. If the voting rights ratio held by foreign nationals, etc. reaches 15%, an obligation to make a public announcement every six months arises; however, as of the end of the current consolidated fiscal year, the Company is not in a situation requiring such an announcement. If certification were to be revoked, there is a risk that the Company would lose the foundation of its business.

The Company's revenue is heavily weighted toward shopping, drama, anime, and horse racing programs. If any of these core revenue-generating programs were to be discontinued for any reason, this would have a material impact on the Company's financial position and operating results. As a countermeasure, the Company is promoting diversification of its revenue base by expanding into non-broadcasting fields, such as operating video streaming sites and online shopping sites, investing in anime production committees, and hosting and organizing various events.

Purchased programs such as overseas dramas, for which broadcasting rights are purchased from distributors and rights holders, have seen an upward trend in broadcasting rights fees in line with the expansion of the viewer base. A significant rise in these fees could affect the Company's financial position and operating results. As a countermeasure, the Company strives to reduce this risk by selecting program content across a wide range of genres and diversifying its sources of procurement.

The Company holds non-listed and listed stocks, as well as held-to-maturity bonds for fund management purposes. If impairment processing becomes necessary due to a deterioration in the performance or bankruptcy of an issuer, or if an invested amount becomes unrecoverable, this would affect the Company's financial position and operating results. As a countermeasure, the Company works to reduce this risk by regularly monitoring market value and financial conditions, and by limiting held-to-maturity bonds to only those with high credit ratings.

Broadcasting equipment, broadcasting facilities, and broadcasting satellites may fail due to natural disasters such as earthquakes or man-made accidents. If program broadcasting becomes impossible as a result, this would affect the Company's financial position and operating results through the loss of advertising revenue. As a countermeasure, the Company maintains backup broadcasting equipment and has established a system that allows immediate switchover to an alternative system in the event of a failure.

To secure revenue sources outside of the BS Digital Broadcasting Business, the Company actively invests in domestic animation productions, etc. Since the returns depend on DVD/BD sales and the sale of broadcasting rights for the works, if the initially planned returns are not achieved, this would affect the Company's financial position and operating results. As a countermeasure, the Company conducts careful analysis of expected effects and revenue/expenditure patterns prior to investment, and manages revenue and expenditure for each work to inform future investment decisions.

The parent company, BIC CAMERA Inc., held 61.35% of the Company's issued common shares as of the end of the current consolidated fiscal year, and holds decision-making and veto power over fundamental matters such as the appointment and dismissal of directors and corporate auditors, organizational restructuring, amendments to the Articles of Incorporation, and dividends of surplus. In addition, if the business relationship with the BIC CAMERA group, centered on advertising placements, were to end or change, this could affect the Company's financial position and operating results. There are no matters requiring prior approval from the parent company, and the Company makes its own management decisions independently under a check-and-balance system provided by the Board of Directors.