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2012 Investors’ Guide11.04.01–12.03.31
Accelerating Sensational Growth
Founded in 1988, the Avex Group has grown over the years by consistently transforming its business model. The vision guiding the Group today is to become a company that delivers emotional experiences to create value. To this end, the Group is shifting from a conventional record company business geared mainly to music package sales and music distribution to a unique business model that comprehensively develops various businesses surrounding the artist and content. These include everything from video package sales, video distribution, artist management, live concerts, and the sale of goods, to the operation of fan clubs. In this way, the Group is determined to realize sustainable growth in the entertainment industry, where change never stops.
Creating Sensational Value
MAnAGeMenT MeSSAGe
02 To Our Shareholders and Other Investors
Contents GROwTH STRATeGIeS
08 Strategy 1 360-Degree Business Strategy10 Strategy 2 Avex Growth engine12 Strategy 3 Redefining Our Asia Strategy
012012 Investors’ Guide
OperatIOnal revIew
14 at a glance16 review of Operations 16 Music Business 17 video Business 18 Management/live Business 19 Other Business
ManageMent OrganIzatIOn
20 the avex group’s Csr activities22 Corporate governance25 Directors, auditors and
Corporate executives
FaCts & FIgures
26 Market Data28 Core Business Data30 Consolidated Financial highlights32 Business and Other risks33 Corporate Data and Investor Information
to Our shareholders and Other Investors
ready to Deliver sensational valueCreative energy and Flexibility Carry avex Into a new stage of growthThe Avex Group’s business domain extends beyond that of a traditional recording company. In addition to the sale of music content, either as packages or as digital downloads, our operations include artist man-agement and live entertainment production, as well as areas such as merchandising and fan club manage-ment. In short, we cover every type of business related to artists and content as an entertainment group that pursues a 360-degree Business Model. The fact that we possess publication rights, master licensing rights and other rights in connection to our content stands as a big advantage of the Avex Group.
The market for music packages in Japan has been shrinking since 1998. Due to the Avex Group’s high dependency on such sales, this trend caused growth to stagnate briefly. Around 2005, we took steps to expand our 360-degree Business Model, in a move that drove net sales higher once more. However, the aggressive attempt to tackle new businesses caused profitability and our financial position to worsen.
This situation prompted the Avex Group in April 2010 to radically alter its entire management struc-ture in order to enhance corporate governance and achieve both swifter and more efficient Group man-agement. In December that same year, we formulated “Next Era 2014,” our medium-term business plan, and announced our medium-term vision of becoming a company known for “creating value through emo-tional experiences,” with the Avex Group to grow net sales to JPY140 bn by fiscal 2013.
During fiscal 2011, the plan’s initial year, we restructured the Music Business to focus on producing new hits, expanded our live entertainment business, offered and enhanced new online video distribution services that take advantage of smartphone functionality, and switched the focus of our business model in the Asian market outside Japan. These actions resulted in record-high net sales, as well as operating income built on leaner operations than ever before. These outcomes are good indicators that our push in recent years to improve the Group’s corporate structure was a successful one.
Going forward, the Avex Group will harness this characteristic momentum and flexibly transform its busi-ness style to create value through new emotional experiences. Our goal remains to become a corporate group that shareholders, investors and our many other stakeholders will consistently feel they know and trust.
Your continued support will be vital to our success.
August 2012 Representative Director, CEO Masato Matsuura
Representative Director, CSO Ryuhei Chiba
Representative Director, CFO Shigekazu Takeuchi
Representative Director, CBO Shinji Hayashi
02 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
MasatO MatsuuraRepresentative Director, CEO
shIgekazu takeuChIRepresentative Director, CFO
ryuheI ChIBaRepresentative Director, CSO
shInjI hayashIRepresentative Director, CBO
032012 Investors’ Guide
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
Overview of Fiscal 2011The entertainment industry is in the midst of a
dramatic change, as the rapid market spread of
smartphones and their related infrastructure
create new genres of entertainment and new
modes of consumption. The changes can be
seen particularly clearly in the music distribution
business. As an increasing number of consum-
ers purchase smartphones, users not only find
it easier to access music content; they also
have access to a wider selection of entertain-
ment. On the other hand, the ease of access
has meant a steady decline in the overall
number of music downloads.
During fiscal 2011, the Avex Group saw a
drop in revenues from online music distribution,
reflecting the impact of the current market envi-
ronment. On the other hand, music package
sales climbed due to a strong title lineup. As a
result, the Music Business as a whole enjoyed an
increase in sales. The Video Business, mean-
while, saw explosive growth in the number of
subscribers to our “d Market Video Store pow-
ered by BeeTV” (“Video Store”) service, which
distributes video content to smartphone custom-
ers, and by strong sales of video packages, par-
ticularly animated series. Changing trends in the
marketplace have also spurred demand for live
entertainment. By taking steps to expand our live
event and music concert business, the Avex
Group has been able to increase attendance
dramatically, sparking sharp revenue growth in
the Management/Live Business.
These factors contributed to the highest
revenue figure in the Group’s history. Consoli-
dated net sales rose 8.5% year on year, to
JPY121,027 mn. Even in a breakdown by busi-
ness segments, the Music Business, Video
rOe Over 15% 14.7%
Fiscal 2011
net sales Over jpy140 Bn jpy121 Bn
OperatIng InCOMe MargIn Over 10% 10.1%
MeDIuM-terM target guIDelIne
net sales
jpy
121,027Mn
04 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
Business, Management/Live Business and Other
Businesses segments all posted higher sales
than in the previous fiscal year. This contributed
to an 8.1% year-on-year increase in operating
income, to JPY12,263 mn.
On the other hand, changes in the statutory
corporate tax rate in Japan led to a reversal in
deferred tax assets, and the Group booked losses
from the lump-sum amortization of goodwill con-
nected to affiliated companies. These and other
factors caused net income for the term to decline
by 7.1%, to JPY4,934 mn.
3. prOvIDIng value tO sOCIety thrOugh exCItIng entertaInMent
Famous performing artists, actors and producers have the ability and
opportunity to make a significant impact on society. Music and film can
influence people emotionally, giving them a sense of energy, comfort and
courage. The Avex Group always seeks opportunities to use the entertain-
ment experience to make a positive contribution to society.
1. DevelOpIng exCItIng new entertaInMent experIenCes
The entertainment industry is no longer confined to the conventional products
and media that were typical in the past. We will create a multitude of exciting
new experiences, as well as new ways to access them.
2. CreatIng new ways tO share experIenCes
The Avex Group believes that the essence of entertainment is a communion
of feelings, ideas and emotions between individuals. For example, social
networking services allow fans today to interact with performing artists, and to
build a rapport with people whom they have never met, by listening to the
same music or attending the same concert.
Create value thrOugh eMOtIOnal experIenCes
Create value through emotional experiencesThe general objective outlined in the Avex
Group’s current medium-term business plan,
“Next Era 2014,” is to “create value through
emotional experiences.”
By this, we mean that the Avex Group will
seek to develop new types of entertainment and
emotional experiences, offer better ways for
people to share their experiences, and strive to
provide value to society in general, through the
experiences and entertainment we create.
052012 Investors’ Guide
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
Medium-term Business plan progressAlthough fiscal 2011 was nominally the first year
of our medium-term business plan, the Avex
Group made strides in meeting the targets set for
the fiscal year ending March 31, 2014—sales of
JPY140 bn and an operating income margin of
10% (which corresponds to JPY14 bn in operat-
ing income). Fiscal 2011 was also a year in which
the Group made enormous strides in its online
video distribution business, the opening move in
the digital and alliance strategies outlined in the
medium-term business plan. We enabled BeeTV
to offer users higher and larger screen resolutions
for video on smartphones (Android devices from
NTT DOCOMO only) compared with conventional
mobile phones, and membership increased
steadily. In November 2012, we sought to
broaden the online video distribution business
further by complementing our existing BeeTV
service with the launch of Video Store, a service
offering access to over 5,000 movies, TV dramas
and other content titles. With the start of Video
Store, we successfully developed a customer
base different from that of BeeTV, a point that is
accelerating membership growth. By further
expanding both content and services, we are
targeting additional growth in the customer base
and ARPU going forward.
Furthermore, to meet our quantitative targets
for fiscal 2013, the Avex Group will need to main-
tain sales in existing businesses at current levels
in the face of ongoing contraction in the market
for music distribution. To offset the likely drop in
music revenues, we intend to focus on other
existing businesses with potential for growth, such
as live performances, merchandising, and the
market for animated series and other video pack-
ages. In order to generate growth, the Group will
focus on new businesses, particularly the video
distribution platform, which has currently attracted
over 3 million fee-paying members (including
subscribers to Video Store).
vIDeO DIstrIButIOn servICe Fee-payIng suBsCrIBers
Over 3MIllIOn
OvervIew OF the MeDIuM-terM BusIness plan
From the “Next Era 2014” medium-term business plan announced in 2010
COnCerts, MerChanDIsIng, vIDeO paCkages, Others
MusIC paCkages, MusIC DIstrIButIOn
vIDeO DIstrIButIOn, Others
Net sales
Current level
Time framereInFOrCeMent OF ManageMent struCture
DIg
Ital s
trate
gy
New
ExistingrestruCture
OF CreatIve struCture
hIgh-value aDDeD
strategy
allIanCe strategy
06 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
During fiscal 2012, we will continue strength-
ening initiatives to meet targets while laying the
groundwork for medium-term growth.
refocusing strategy for the asian MarketThe Avex Group started its push into overseas
markets in 2006, focusing on the potential for
growth in Asia. While these efforts have yet to
yield significant success, we continue to pursue
an active overseas growth strategy, albeit with a
major shift in focus.
During the fiscal year under review, the Avex
Group formed a capital alliance with BASE
Entertainment, a company with a strong presence
in the entertainment business. We also made
progress on preparations to transfer the head-
quarters of our overseas business from Beijing to
Shanghai. This business will now focus mainly on
live entertainment, rather than music packages
and online distribution, as we aim for growth in
overseas markets.
Refer to “Strategy 3—Redefining Our Asia Strategy” on page 12 for more specific details.
Issues to addressThe surrounding market environment in enter-
tainment and users’ consumption habits are
changing rapidly. The Avex Group’s overarching
mission to create new hits, however, remains
unchanged. In recent years, though, the Group
has struggled to produce a stream of hit artists
under management. Devising a mechanism for
creating both artists and content has thus
emerged as a pressing issue. Addressing it will
entail doing away with the underlying
approaches, methods and concepts crafted
during the heyday of music packages as we
seek to create hits that perfectly mesh with the
needs and lifestyles of today’s users.
returning profits to shareholdersOne of our most important management tasks is
to ensure long-lasting and comprehensive profit
distribution to our shareholders. Specifically, it is
our basic policy to pay an annual dividend of
JPY40 per share to our shareholders, and to
achieve a dividend payout ratio of more than
30% on a consolidated basis. When determining
the amount of the dividend to be paid from
retained earnings, we also make a comprehen-
sive evaluation of factors such as consolidated
performance, cash flows and future funding
requirements. The year-end dividend is decided
at the General Shareholders’ Meeting, while
interim dividends are determined by the Board of
Directors. Under this basic policy, we paid an
annual dividend of JPY40 per share in fiscal
2011, consisting of interim and year-end divi-
dends of JPY20 per share, respectively. The
Avex Group is also contemplating a shift to a
profit-linked dividend system in the near future.
Going forward, we will continue to explore a
comprehensive range of options for returning
profits to our shareholders.
Cash DIvIDenDs per share
jpy 40
072012 Investors’ Guide
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
strategy 1
360-Degree Business strategy
Developing an Integrated Music Business ModelIn fiscal 2011, the avex group posted record high revenue, thanks to the success of strategic initiatives laid out in the medium-term business plan. amid music market contraction driven by changing consumer behavior among users, music packages now account for around 30% of avex sales, down from more than 80% a decade ago. this section introduces our 360-degree Business Model, the growth strategy that will complement the avex group’s conventional record company business model driven by music package sales.
Manage-Ment
OnlIne DIstrIBu-
tIOn
lIve COnCerts
MerChan-DIsIng
Fan CluBspaCkages MusIC
08 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
Discover artist by
downloading music
purchase merchandise
at concert venue
attend live concert
want to attend live concert
and join fan club
like artist and purchase
music package
appearances by avex artists only
The Avex Group was the first in the industry to introduce a 360-degree Business Model, whereby we
are engaged in all types of music-related businesses. In addition to CD and DVD sales, we are now
involved in a wide range of entertainment businesses, including online music distribution, fan clubs,
merchandising, and live concerts. These businesses have contributed to our operating performance.
In promoting the 360-degree Business Model, we sought to construct a value chain built on more
robust coordination between products and services. For example, as shown in the flow chart below, we
are moving to maximize revenues in each business area by designing pathways that will draw in users.
Also, rather than having a closed-loop business model featuring only Avex content and artists, we
have bolstered our capabilities to enable participation from outside players as well. As a result, rather
than simply having an internal infrastructure for each business, we are expanding business using an
open platform approach that will make consistent earnings possible.
Open BusIness platFOrM
DrawIng In users
appearances by many artists from other labels
lineup of many products from other companies
a-nation
sales of avex songs and products only
Now:
Now:
At launch:
At launch:
Online music distribution site
mu-moe-commerce site
mu-mo shop
Outdoor live
092012 Investors’ Guide
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
Movie tv Drama Music
d Market video store
Movie tv Drama
Beetv
Beetv
d Market is a content store for smartphones offered by NTT DOCOMO. It includes content from five categories: videos, books, music, applications and reviews, and an anime store.
avex growth engine
As consumers’ video content needs grow with the spread of smart-
phones and ever faster data loading speeds, to complement BeeTV
we launched Video Store, a paid mobile video distribution service
that boasts one of the largest collections of titles in Japan.
With Video Store, users can watch or listen to as many movies
and dramas, or as much animation and music from Japan and over-
seas, and original titles from BeeTV as they want, choosing from
more than 5,000 titles and some 20,000 episodes for a monthly fee
of JPY525 (tax included), making it a very price-competitive service.
BeeTV is a popular mobile-only service, featuring original con-
tent based on careful marketing that is easy to view and enjoy. In
September 2011, we set a target of 1.8 million subscribers by the
platform strategyIn november 2011, we launched d Market video store powered by Beetv (“video store”) in collaboration with ntt DOCOMO, InC. we will carry out aggressive business development, leveraging our strength as a pioneer in the paid video distribution market.
strategy 2
10 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
Music
avex growth engine
approx. 5,000tItles
approx. 20,000epIsODes
end of March 2012, a goal which was reached ahead of schedule.
Video Store subscribers growth has also been strong, topping
700,000 subscribers in just 3 months following the launch of the
service. With some 80% of the subscribers being new to the ser-
vice, we believe that we are able to target a market that is even
larger than the one for BeeTV.
By adding Video Store, with its movies and TV dramas, to
BeeTV, which offers primarily original content, we have been able to
reach a wider range of users. Going forward, we will expand the
range of users and grow the ARPU by offering a broader spectrum
of content and services.
Beetv + video store suBsCrIBers
2.4 MIllIOn subscribers in fiscal 2011 4.0MIllIOn subscribers in
fiscal 2012 (projection)
112012 Investors’ Guide
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
strategy 3
the avex group began its business operations in asia in hong kong in 1996, and in 2006 established a goal to evolve into the entertainment brand company with the strongest creative and communication capabilities in asia. since then, business efforts overseas have been focused in east asia.today, to adapt to the contraction in the music market, we are working to capture business opportunities by re-establishing our approach based on three keywords: business bases, business focus, and business alliances.Instead of simply exporting japanese artists and songs to asia, we are building a platform to create content that will be popular throughout the region.
redefining Our asia strategy
Create the Next Hit Sensation to Become Asia’s Biggest Name in Live Entertainment
1. establish avex shanghai3. Consider partnerships
with industry players from europe and the u.s.
2. Create an active base for artists developed by avex taiwan
1 Base relOCatIOnshift From Beijing to shanghai
The Avex Group had been primarily basing its Chinese operations in Beijing, but we will relocate our base to Shanghai, the hub of both China’s economy and live entertainment business. Many people in Shanghai hold a positive view towards Japanese culture, and Shanghai is also a good base for performances by artists devel-oped by Avex Taiwan.
In the summer of 2012, we launched operations at Avex Shanghai Co., Ltd., which primarily produces and manages live events in China. With this Shanghai subsidiary, we have our sights set on fully advancing artists from Japan, South Korea, Taiwan and Hong Kong into the mainland China market, holding performances throughout Asia as well as developing partnerships with Western players in the entertainment industry.
12 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
FOCus untIl nOw FOCus gOIng FOrwarD
Music packages/distribution live entertainment
• Development of theatrical content from Base entertainment
• Access to BASE Entertainment business base
• Joint development in East Asia
2 Change OperatIOnal FOCusshift From Online Distribution of Music packages to live entertainment
Up until this point, our focus had been on the Japanese success model centered on music packages and online distribution, but this model is plagued by a number of problems overseas, including widespread illegal content, differences in business practices, as well as various regulatory issues.
On the other hand, there is strong demand for live concerts and television appearances from dynamic artists and other entertainers. As we anticipate revenue to be at least as high as in Japan, we will focus on the live entertainment field in the future. We will also offer theatrical content such as musicals and plays.
In tandem, we will endeavor to continuously develop artists capable of working on the global stage, as we aim to be Asia’s largest live entertainment company.
3 allIanCesjoint Development of live entertainment Business with top players Overseas
In January 2012, we formed a business and capital tie-up with New York-based BASE Entertainment, one of the leading entertainment companies in the promotion of musicals and theatrical management worldwide.
We will leverage the content, business bases, and know-how of BASE Entertainment, and jointly develop business operations with them in the East Asia market. This collaboration will allow for joint performances featur-ing content such as Avex Group music concerts from Japan, as well as content jointly produced by both compa-nies. Also, we will collaboratively work to tailor content to match the special characteristics of Japan and other parts of Asia.
Meanwhile, we are making progress on forming alliances with key players in countries throughout the world, with one example being a business tie-up with Media Asia, the largest Chinese visual content company.
Baseentertainment
132012 Investors’ Guide
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
at a glance
the avex group is a comprehensive entertain-ment company with a broad range of opera-tions. today, the avex group is expanding its earning streams further by optimally drawing out the appeal of its artists and other talent.
Music BusinessThis business involves the production of music content, sales of packages and digital distribution, music publication business, and operation of the Company’s own “mu-mo” music distribution site.GROUP COMPANIESn Avex Entertainment Inc.n Avex Marketing Inc.n Avex Music Publishing Inc.
sales COMpOsItIOn
video Business
15%
Management/ live Business
27%
Other Businesses
3%
Music Business
55%
14 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
video BusinessThis business covers the production of video content, sale of pack-ages and film distribution, and the operation of BeeTV, a video distribution service for mobile phone users.GROUP COMPANIESn Avex Entertainment Inc.n Avex Marketing Inc.n Avex Broadcasting & Communications Inc.
Management/live BusinessThis business involves the management of artists and talent, mer-chandising, operation of fan clubs, and the planning, production, and operation of concerts and events. GROUP COMPANIESn Avex Management Inc.n Avex Marketing Inc.n Avex Live Creative Inc.
Other BusinessesEfforts here focus on development and nurturing of new artists, school businesses (Avex Artist Academy), and restaurant businesses.
GROUP COMPANIESn Avex Planning & Development Inc.
152012 Investors’ Guide
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
Fiscal 2011 OverviewIn fiscal 2011, the Avex Group faced a difficult business environment as the online music distribution market continued to contract and the number of downloads declined. This trend was negated, however, by an increase in sales of music packages from new artists and performers signed from other labels, coupled with new hit album releases by the group EXILE and other key artists. Sales increased by 4.3% year on year, to JPY70,643 mn, while operating income rose 5.1%, to JPY8,439 mn.
Initiatives going ForwardThe Music Business currently accounts for roughly half of the Company’s total sales. However, this segment is likely to continue to decline as a shifting industry structure in Japan and changing consumption trends among customers drive continued
review of Operations
contraction in the music package and online distribution markets. Based on anticipated market trends and the product mix of planned releases for the current period, we are projecting sales for fiscal 2012 to decline by JPY3,423 mn, to JPY67,220 mn, while operating income is likely to fall by JPY1,019 mn year on year, to JPY7,420 mn.
We are now restructuring our business model to take advantage of changes in consumer behavior. This includes pursuing greater selectivity and focus in items slated for release and the development of new business models. The Avex Group is also stepping up efforts to streamline its organi-zation and relocate personnel, coupled with a financial-side push to use expenses more efficiently. Taken together, these measures should help minimize the decline in sales and profits.
Music Businesssales
OperatIng InCOMe
(JPY mn)
(JPY mn)
20,000
40,000
60,000
80,000
0 09 10 11 (FY)
0
3,000
6,000
9,000
(FY)09 10 11
16 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
Fiscal 2011 OverviewIn fiscal 2011, sales of DVDs were brisk, supported by the release of the movie “Life” and the “ONE PIECE Log Collection” animated series. The Company also teamed up with NTT DOCOMO in online video distribution to launch and manage a new service called “Video Store” for smart-phone subscribers in November 2011. The number of smartphone subscribers to this service has risen steadily.
The fiscal year under review saw the release of many more highly profitable video packages than in fiscal 2010. Furthermore, steady growth in the number of subscribers to our video distribution service led to a reduction in the cost of sales. Consequently, sales increased by 13.8% year on year, to JPY18,791 mn, and operating income rose to JPY2,496 mn, a 15.3% increase over the previous fiscal year.
Initiatives going ForwardIn fiscal 2012, we expect to expand the release of video packages, particularly ani-mation, while further increasing the number of subscribers to online distribution services. The Company is projecting sales for the year of JPY31,080 mn, representing an increase of JPY12,289 mn year on year.
Operating income is projected to increase by JPY1,044 mn, to JPY3,540 mn.
Growth in demand related to video distribution services for smartphones is projected going forward. Through BeeTV and Video Store, the Company will establish a presence in the creation of content unique to smartphones. By the end of March 2013, the goal is to capture a dominant No. 1 position with a total membership for both services surpassing 4 million users.
video Businesssales
OperatIng InCOMe (lOss)
OnlIne vIDeO DIstrIButIOn servICe MeMBershIp
(JPY mn)
(JPY mn)
(Thousands of people)
0 (FY)
5,000
10,000
15,000
20,000
09 10 11
–5,000 (FY)
0
1,000
2,000
3,000
09 10 11
’113
’116
’119
’1112
’123
0
500
1,000
1,500
2,000
2,500
172012 Investors’ Guide
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
Fiscal 2011 OverviewSales for the Management/Live Business rose 12.7% year on year, to JPY34,810 mn. Among other factors, business benefit-ted from an increase in the number of large-scale concert tours by in-house art-ists, as well as live performances by artists represented by non-Avex Group manage-ment. Efforts to utilize sales promotion and advertising expenses, as well as general expenses, more efficiently greatly boosted profitability, with operating income climbing 64.3% year on year, to JPY1,475 mn.
During the second quarter, membership fees for some fan clubs were eliminated, reducing the number of fee-based mem-berships. However the launch of many new fan clubs kept total revenues and operating income from this business at roughly the same level as in the previous year.
Initiatives going ForwardThe Company is pursuing a vertical integra-tion model, which maximizes the appeal and impact of Avex Group artists and per-formers. Concerts, merchandising and fan club management are all key points of emphasis for this model. Looking ahead, we aim to leverage rights and platforms for each artist in ways that will transform every element of the artist’s identity—including fashion and hobby interests—into commer-cial opportunities. At the same time, we intend to further develop our planning and production capabilities for live performances and entertainment events in ways that only the Avex Group can.
In fiscal 2012, we expect growth in the merchandising business, coupled with an increase in fan club memberships, to boost sales to JPY35,980 mn, a year-on-year increase of JPY1,170 mn. Operating income is expected to rise JPY605 mn year on year, to JPY2,080 mn.
Management/live Businesssales
OperatIng InCOMe
(JPY mn)
(JPY mn)
10,000
20,000
30,000
40,000
0 (FY)09 10 11
0 (FY)
1,000
2,000
3,000
09 10 11
18 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
Fiscal 2011 OverviewStrong performance in the Group’s school businesses, among others, lifted sales 3.7% year on year, to JPY3,958 mn. However, SG&A costs increased sharply with the opening of Avex Artist Academy’s new Fukuoka campus, contributing to an operat-ing loss of JPY148 mn, reversing JPY253 mn in operating income a year earlier.
Initiatives going ForwardIn fiscal 2012, sales are projected to decline by JPY98 mn year on year, to JPY3,860 mn. Operating loss is expected to be JPY340 mn.
The Avex Group views the creation of new hits as a priority issue, and intends to reorganize its infrastructure for developing new artists to this end. For example, the Artist Development Division opened last year within the holding company should prove a powerful tool in helping the Group to develop and cultivate new talent swiftly. In April 2012 we took another step for-ward, with the launch of an international artist class at Avex Artist Academy. Hope-fully this will sow the seeds for a new crop of talented global performing artists.
Other Businessessales
OperatIng InCOMe (lOss)
(JPY mn)
(JPY mn)
1,000
2,000
3,000
4,000
0 (FY)09 10 11
0
150
300
450
–150 (FY)09 10 11
192012 Investors’ Guide
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
Official merchandisePublic viewing of “a-nation” festival
taking Full advantage of what we Offer as an entertainment Company to Contribute to society
the avex group’s Csr activities
The theme that guides the Avex Group’s CSR activities is expressed in our slogan: “Building joy through entertainment.” The Group takes part in a wide variety of CSR activities designed to make this slogan a reality for people everywhere. Avex Group artists take part in many charity events and promotional campaigns designed to boost aware-ness, particularly among young people, of problems of global signifi-cance, from environmental protection and the eradication of famine to AIDS prevention.
response to the great east japan earthquakesupport for recovery efforts by “a-nation”The Avex Group was involved in numerous projects again in fiscal 2011, both in-house and in cooperation with outside groups, to support the recovery effort in the Tohoku region following the Great East Japan Earthquake.
One of the most high-profile of these efforts was the dedication of our tenth annual “a-nation” festival to the overarching theme “for Life.” Through this event, the Avex Group, through its core enter-tainment business, sought to bring joy and optimism to the lives of those affected by the disaster, and to convey the energy, enthusiasm and emotion of artists and concertgoers alike to those most in need of comfort and encouragement. Other activities included the following:
1. Free public viewing of the eventFree public viewing sites were set up at six Ito-Yokado stores in
Iwate, Miyagi and Fukushima prefectures, allowing over 13,000 people in the disaster-struck region to view the concerts live on large-screen displays.
2. Contributions to the Japanese Red Cross SocietyAvex contributed a share of the revenues from ticket sales and merchandising to the Japanese Red Cross Society’s relief opera-tion, which supports rebuilding in areas hit by the earthquake and tsunami.• Contributed JPY100 from the Group and JPY100 from the customers from the price of each ticket, for a total of around JPY54 mn.• In addition, we contributed a portion of the profits generated from official merchandise sales, as well as the proceeds from a charity auction of stage outfits worn by the performing artists. This generated a further donation of around JPY4 mn.
3. Electric power conservation effortsAt the concert venue, power generator trucks were provided to supply all of the power needed for each stage event (roughly 1500 kW for each performance). LED lights were used for a portion of the stage lighting to conserve power usage. We also set up “aerobike” human-powered electric generators. This allowed concertgoers to provide some of the electricity for perfor-mances, while raising awareness of the need to conserve energy.
20 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
Workplace visit by studentsPower generator truck
accepting workplace visits by junior and senior high school studentsIn recent years, an increasing number of schools have begun orga-nizing company visits by students as a way of giving young people experience in social skills and human relations, while helping them plan future careers. The Avex Group has actively taken part in these efforts, accepting visits by junior and senior high school students.
During the visits, we provide a studio tour, describe typical work activities, and allow students to watch Avex Group artists perform. By giving students a taste of what work is like at our company, we try to convey the attraction of a career in the entertainment industry.
Another aspect of these visits is to explain to young people the need to protect copyrights and the rights of performers, songwriters and recording companies. In cooperation with the Recording Indus-try Association of Japan, we try to discourage students from visiting illegal downloading websites and making illegal copies of music.
providing vaccinations to people in developing countriesTo raise awareness of environmental protection and social contri-bution efforts among Avex Group employees, we conduct in-house ECOCAP bottle cap collection activities. Avex performing artists also take part in these activities. In fiscal 2011, the third year of this program, we collected 78,840 individual caps, which provided enough funding to supply polio vaccines to nearly 100 people*. The contributions are provided to a certified nonprofit organization,
the Japan Committee for “Vaccines for the World’s Children” (JCV)**, which offers vaccinations to people in developing countries.
* For every 800 bottle caps collected (worth around JPY20), enough funds are provided to vaccinate one child against polio.
** JCV provides vaccines and preventative medicines that help protect children around the world from infectious diseases.
promoting a balance between work and personal lifeThe Avex Group strives to create conducive workplace conditions and foster the individual attitudes needed to promote a healthy balance between work and personal life.
During the fiscal year ended March 31, 2012, the General Affairs & Personnel Administration Division launched a “Work-Life Fusion Promotion Project,” conducting in-house interviews and discussions to identify issues that might interfere in the ability of employees to balance childrearing with the demands of their careers, and seek solutions. In addition, we conducted “Life Design” seminars aimed at female employees, to help them deal with such issues.
The Avex Group strives to create an enjoyable workplace that can attract the talented human resources needed to produce and distribute entertainment, and motivate them to work effectively.
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OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
Overview of Corporate governance structureAvex Group Holdings (“the Company”) uses the
corporate auditor system. There is a Board of
Auditors with four members, including two out-
side auditors, who monitor the performance of
Corporate governance
the avex group (“the group”) is determined to achieve the targets outlined in its “next era 2014” medium-term business plan. In parallel with moves to heighten group management efficiency and transparency, this effort requires that the group enhance corporate governance to ensure it promotes business in a proper manner. Our fundamental approach to corporate governance is to go beyond sustaining and improving the group’s compliance structure to promote information sharing centered on stronger monitoring functions. knowing the status of the group’s diverse operations and how they intertwine allows for the early discovery of management concerns and faster responses to changes in the business environment. these, in turn, are ultimately linked to additional growth for the avex group.
struCture OF COrpOrate gOvernanCe unIts anD Internal COntrOl systeM
the directors. In addition, there is a Board of
Directors with seven members, including two
outside directors, which meets once a month, as
a general rule, to decide on the main issues
facing the Company and its Group companies.
The Executive Board Committee, comprised of
the four representative directors and charged with
ensuring the control and flexibility of Group man-
agement, as a general rule meets weekly to
discuss management matters significant to the
Company and its Group companies.
Compliance CommitteeThe Compliance Committee, which counts the outside directors and audi-tors among its members, deliberates on the main compliance-related issues facing the Company. The Committee also strives to effect improvements by checking and discussing the content of the reports made to the internal Helpline system.
Investment advisory CommitteeThe Investment Advisory Committee, composed mainly of the director of the Management Information Administration Division and other division heads, strives to ensure the effectiveness and soundness of investments made by the Company and its Group subsidiaries by objectively examining the positive and negative aspects of the investment decisions made and by verifying the post-investment situation and results.
production ethics CommitteeThe Production Ethics Committee is comprised of members of the Executive Board Committee and deliberates on any doubtful points and problems that arise with regard to the presentation and reproduction of the music and visual images handled by the Group, in addition to considering the response guidelines to be followed.
Compensation CommitteeThe Compensation Committee consists mainly of outside directors, who exam-ine the propriety of executive compen-sation from an objective standpoint.
general shareholders’ Meeting
tactical Digital strategy Office of the CeO
new Business project promotion DepartmentBusiness process reengineering room
Board of Directors
executive Board Committee
CeO
Independent accountant
general affairs & personnel
administration
Management Information
administrationBusiness
administration
helpline
group Companies
Compliance Committee
Director for Compliance
Compliance Committee Office
Instructions
Instructions
Report
Report
Report
Opinions and reports
Questions/consulting
Oversight of performance
Opinion and report of investment judgment
Report of ethical judgment of products and content
Confirms suitability of compensation for directors and corporate auditors
Report
Financial auditing
Report
Board of auditors
Internal affairs
Investment advisory Committee
production ethics Committee
Compensation Committee
Monitoring
artist Development
Extensive collaboration
strategic planning
administration
22 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
Furthermore, to ensure proper business
operations by the Company and its Group com-
panies, the Internal Affairs Department conducts
monitoring in the form of operational audits.
Management control staff members, meanwhile,
are dispatched to all Group companies to carry
out appropriate monitoring of the state of their
business activities in an effort to maintain and
improve the Group’s governance system.
Furthermore, with the aim of ensuring the
effectiveness and soundness of business
operations, the Group has established the
following bodies.
Internal Control systemsThe Group has a system of internal controls for
increasing the effectiveness and efficiency of its
business operations and ensuring the reliability of
its financial reporting. In accordance with its
“Fundamental Policy for Internal Controls,” the
Group checks the status and configuration of its
system of internal controls every fiscal year.
Moreover, to maintain and improve its system, the
Group sets a compliance policy that underlies its
corporate ethics stance, and all executives and
employees are made aware of and fully under-
stand the importance of strict compliance with
laws and regulations. Furthermore, the Group has
established an Internal Reporting System and
allocated external lawyers and industry counselors
to a Helpline to continually strive to guard against
infractions of laws and regulations, unfair prac-
tices, and ethical transgressions occurring within
the Company.
The Group has developed a risk management
structure by establishing risk management regula-
tions, specifying divisions bearing executive
responsibility for risk, and appointing directors with
responsibility for risk control to manage the com-
prehensive risks that face the Group as a whole.
To enhance information security, tests were
conducted to inspect Group system vulnerability in
order to mitigate the potential for information leaks
and other issues. In parallel, training regarding
personal information was instituted for all employees,
coupled with a revision of the Group structure for
managing personal information. These steps were
taken to further advance the Avex Group’s internal
structure for personal information management.
Furthermore, the Internal Affairs Department
conducts audits of the risk control situation facing
the Company and its Group companies and reports
its findings to the president and to the auditors.
When potential issues are found, the department
takes steps to resolve them in partnership with
relevant divisions. This system ensures that the
risk control structure remains robust, and is con-
stantly maintained and improved.
Outside Directors and Outside auditorsThe Company appoints two outside directors and
two auditors. These outside officers are selected
on the basis of their experience and insight, in an
effort to help strengthen the management and
corporate governance of the Company. The
current outside officers hold qualifications as
certified public accountants or lawyers, and
possess the knowledge required to execute their
professional duties. These attributes serve the
officers well in their work to bolster and enhance
the Company’s management and corporate
governance structure.
The outside directors attend the meetings of
the Company’s Board of Directors, which are
held once a month as a general rule. Along with
monitoring the status of management, the direc-
tors render advice and exchange opinions when
necessary with respect to business decisions.
The outside auditors also attend the monthly
meetings of the Board of Directors and the Board
of Auditors meetings, which are also held once a
month as a general rule, and so are aware of the
situation regarding business execution by directors
of the Company and its Group companies. The
outside auditors also verify the results of internal
audits carried out by the Internal Affairs Department,
as well as the audit reports made by the accounting
auditor and of the structural condition of the system
for internal controls. This knowledge enables them
to liaise with the relevant departments to ensure
that the necessary actions are taken to make
corrections to and ensure the appropriateness of
the Group’s business operations.
Pursuant to Article 427, Paragraph 1 of the
Companies Act of Japan, the Company has
entered into contracts with all of the outside direc-
tors and outside auditors to limit the liability of each
outside director / outside auditor to the Company
under Article 423, Paragraph 1 of the same act.
The amount of liability set forth in each contract is
the minimum liability stipulated by Article 425,
Paragraph 1 of the Companies Act. These limita-
tions of liability are prefaced on good faith on the
part of the outside directors and auditors, as well
as the absence of any substantial losses pertaining
to their respective duties. There are no significant
financial or personal relationships between the
Company and its other directors and auditors and
the outside directors and auditors.
policy and Determination Method regarding the amounts of remuneration and Other payments and Method of CalculationThe Company adopts a three-person Compensa-
tion Committee chaired by an outside director and
with an additional outside director and the
232012 Investors’ Guide
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
representative director and CFO as members.
The committee is in line with a review of the
executive compensation system and procedures
for determining compensation. The new commit-
tee has resulted in a highly transparent executive
compensation system that incorporates an objec-
tive, external viewpoint.
Under the system, executive compensation
is composed of basic remuneration, profit-
linked salary, and stock options. Profit-linked
salary is linked to consolidated net income for
each business term. The Company also offers
stock options for directors (excluding part-time
and outside directors) to motivate management
guided by a medium-term perspective, and a
stronger awareness of the Company’s business
performance and share price.
Publicly listed companies have come under increasing pressure today to reinforce and enhance
their corporate governance. Outside directors play a vital role in meeting this need.
Beyond sustaining and improving the Avex Group’s compliance structure, we promote
information sharing centered on stronger monitoring functions. Knowing the status of the
Group’s diverse operations and how they intertwine allows for the early discovery of manage-
ment concerns and faster responses to changes in the business environment.
As outside directors, we stand between the Group and ordinary shareholders as inde-
pendent officers with no conflicts of interest with the Avex Group. Individually, we
bring our specialized experiences and insights to bear in ensuring the propriety and
appropriateness of decisions by the Board of Directors, all from an objective,
outsider point of view. In so doing, we hope to contribute meaningfully to the
sound development of the Avex Group.
Comments From the Outside Directors
payment of profit-linked salaries to DirectorsOn May 25, 2011, the Company’s Board of
Directors passed a resolution authorizing the
payment of a profit-linked salary to the Company’s
representative directors pursuant to Article 34,
Paragraph 1 (iii) of the Corporation Tax Act from
the fiscal year ending March 31, 2012.
The method of calculation of profit-linked
salaries is based on documented methodology
that all of the Company’s auditors have judged to
be appropriate.
Financial auditsThe Company has a contract with Deloitte
Touche Tohmatsu LLC to conduct financial audits
as stipulated in the Companies Act and Japan’s
Financial Instruments and Exchange Law.
tOMOhIrO tOyaMaOutside Director, Member of the Compliance Committee and the Compensation CommitteeAttorney at Law
From left
yuIChI satO Outside Director, Chairman of the Compensation Committee Certified Public Accountant
tOtal aMOunt OF reMuneratIOn FOr DIreCtOrs anD auDItOrs (FIsCal 2011)
ClassificationTotal
remuneration (JPY mn)
Remuneration breakdown (JPY mn)Total number
of payeesBasic remuneration Stock options Bonus
Directors (Excluding outside directors) 1,004 598 25 380 5
Auditors (Excluding outside auditors) 39 36 — 3 2
Outside directors and auditors 19 19 — — 4
24 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
*1 Currently Avex Planning & Development Inc.*2 Currently Aniplex Inc.*3 Currently Avex Marketing Inc.*4 Currently Deloitte Touche Tohmatsu LLC
H The assignment of independent officers tasked with safeguarding the interests of ordinary shareholders is mandated by the Tokyo Stock Exchange.
Directors, auditors and Corporate executives
MasatO Matsuura | Representative Director, CEO |
Apr. 1988 Joined the company; named DirectorMar. 1991 Named Senior Managing DirectorSep. 2004 Named Representative Director, PresidentApr. 2005 Named Representative Director,
President of Avex Entertainment Inc. (current)Jan. 2009 Named Representative Director,
President of Avex Management Inc. (current)Apr. 2010 Named Representative Director, President and CEO,
Avex Group Holdings Inc. (current)
ryuheI ChIBa | Representative Director, CSO |
Jul. 1995 Joined White Atlas Inc.*1 as Representative Director, PresidentSep. 2004 Named Representative Director, Vice President, Avex Group Holdings Inc.Apr. 2005 Named Representative Director, Vice President,
Avex Entertainment Inc. (current)Jan. 2009 Named Representative Director, Vice President,
Avex Management Inc. (current)Apr. 2009 Named Representative Director, President, Avex Broadcasting &
Communications Inc. (current)Apr. 2010 Named Representative Director, CSO, Avex Group Holdings Inc. (current)
shIgekazu takeuChI | Representative Director, CFO |
Jun. 2000 Corporate Executive Officer, Sony Music Entertainment (Japan) Inc.Oct. 2002 Representative Director, SME Visualworks Co., Ltd.*2
Jun. 2006 Representative Director, Chairman, Sony Pictures Entertainment (Japan) Inc.Oct. 2009 Joined Avex Group Holdings Inc. as Corporate ExecutiveApr. 2010 Named Corporate Executive, CFO
Named Compliance Committee Chairman (current)Jun. 2010 Named Representative Director, CFO,
Director in charge of risk management (current)May 2011 Compensation Committee member (current)
shInjI hayashI | Representative Director, CBO |
May 1990 Joined the companyApr. 1993 Named DirectorJun. 1996 Named Managing DirectorApr. 2005 Named Representative Director, President,
Avex Marketing Communications Inc.*3
Apr. 2010 Named Representative Director, CBO, Director in charge of compliance, Avex Group Holdings Inc. (current) Named Representative Director, President, Avex Marketing Inc. (current)
tOru kenjO | Director (Part-time) |
Nov. 1993 Gentosha Inc. established, named Representative Director, President (current)
May 2009 Named Chief Advisor, Avex Broadcasting & Communications Inc. (current)Jun. 2009 Named President & CEO, Gentosha Inc. (current)Jun. 2010 Named Director, Avex Group Holdings Inc. (current)
yuIChI satO | Director (External) | Certified Public Accountant |
Jun. 1988 Representative, Chuo Auditors Co., Ltd.Mar. 2000 Joined Chuo Consulting Co., Ltd.Nov. 2006 Opened Sato Yuichi Accounting Firm (current)Jun. 2010 Outside Auditor, Shimojima Co., Ltd. (current)
Named Director, Avex Group Holdings Inc. (current)May 2011 Compensation Committee Chair (current)
shInkIChI Iwata | Auditor (Standing) |
Apr. 1993 Joined the companyMar. 1995 Named DirectorJun. 2002 Named Representative Director, President, Avex Network Inc.*3
Jun. 2005 Named Auditor, Avex Group Holdings Inc. (current)
kenjI nOMura | Auditor (Standing) |
Jun. 1999 Joined Howdy International Co., Ltd.*3, named Senior Managing DirectorJun. 2002 Named Representative Director, President, Howdy International Co., Ltd. *3
Jun. 2005 Named Auditor, Avex Group Holdings Inc. (current)
akIhIrO taMakI | Auditor (External) | Certified Public Accountant in the U.S. |
Apr. 2005 External Auditor, Essentia Corp. (current)Jun. 2006 Establishment of PSY-fa Co., Ltd., Representative Director (current)Jun. 2008 Auditor, Avex Group Holdings Inc. (current)Jun. 2010 Outside Director, SBI Holdings Inc. (current)
tOMOhIrO tOyaMa | Director (External) | Attorney at Law |
Oct. 1990 Co-founding partner of TMI Associates (current)Nov. 1999 Named External Auditor, Nippon Shikizai Inc. (current)Jun. 2010 Named Director, Compliance Committee member,
Avex Group Holdings Inc. (current) Named External Director, Sosei Group Corporation (current)
May 2011 Compensation Committee member (current)
tOshIakI katsushIMa
Feb. 1990 Representative, Deloitte Touche Tohmatsu*4
Oct. 2003 Opened Katsushima Toshiaki Certified Public Accountant and Tax Accountant Office as Principal Proprietor (current)
Jun. 2006 Named Auditor, Avex Group Holdings Inc. (current)Apr. 2007 Corporate Auditor (Non-Standing), SKY Perfect JSAT Holdings Inc. (current)Jun. 2007 Named Compliance Committee member, Avex Group Holdings Inc. (current)Sep. 2007 External Director, Japan Post Insurance Co., Ltd. (current)
| Auditor (External) || Certified Public Accountant, Certified Tax Accountant |
252012 Investors’ Guide
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
Apr. to Dec. 2011
Data from the Recording Industry Association of Japan
DOwn 17.8%
paID DOwnlOaD sales
Apr. 2011 to Mar. 2012Data from the Recording Industry Association of Japan
DOwn 1.2%
prODuCtIOn value OF MusIC sOFtware
the environment surrounding the entertainment industry is moving headlong toward a major transition. japan’s online music distribution market, centered on services for conventional mobile phones such as full- and partial-song ringtones, was one of the few successful examples of its type in the world. In recent years, though, the rapid spread of smartphones has radically altered how users access the entertainment they seek. at the same time, the opposing end of the digital spectrum, the market for live entertainment, continues to expand each year. this trend suggests that users want something more than just the data that digital content offers alone.
Market Data
26 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
26 Avex Group Holdings Inc.
Apr. 2011 to Mar. 2012
Data from the Motion Picture Producers Association of Japan, Inc.
DOwn 13.7%
tOtal revenue
FrOM western anD
japanese MOvIes
Apr. 2011 to Mar. 2012Data from the Japan Video Software Association (JVA)
DOwn 1.0%
Apr. to
Dec
. 201
1
Data fr
om th
e ALL
JAPA
N CONCERT &
LIVE E
NTERTA
INMENT P
ROMOTERS C
ONFERENCE
up 24
.7%
nuMBer OF
COnCertgOers /
sales
Overall vIDeO sOFtware sales
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
272012 Investors’ Guide
In the digital area, due to the issue of illegal downloading and considerable changes in the way users enjoy their music, business conditions have become quite challenging, particularly in the paid music download market. however, we expect the mobile Internet field in particular, aided by the rapid increase in the use of smartphones, to spark new ways of enjoying entertainment and demand for content. Furthermore, at the opposite end of the spectrum from digital, in the area of live entertainment, user needs around sharing the same moment with each other and with their favorite artists are likely to continue increasing.
Core Business Data
MusIC paCkages sOlD annually* (millions)
mu-mo suBsCrIBers (millions)OnlIne MusIC DOwnlOaDs (10 million downloads)
In fiscal 2011, the number of packages sold and the total amount of sales increased, due to growth in new artists from other labels, as well as albums released.*New releases only
similar to music downloading, the increase in the use of smartphones has resulted in a decline in subscribers of music content distribution site mu-mo.
although there was an increase in the number of downloads through pC distribution, growth in the use of smartphones resulted in a significant decline in full- and partial-song ringtone downloads.
2010/3 2011/3 2012/3
15.4 13.0 17.3
2010/3 2011/3 2012/3
1.3 1.1 0.72010/3 2011/3 2012/3
9.0 8.4 6.5
28 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
28 Avex Group Holdings Inc.
vIDeO DIstrIButIOn suBsCrIBers (millions)
COnCertgOers (millions)
Fan CluB MeMBershIp (millions)
key BusInesses arpu (jpy)
In addition to Beetv, we launched video store in november 2011, and video distribution subscribers has been strong.
In fiscal 2011, there was an increase in concertgoers attrib-utable to major tours and an increase in performances by artists belonging to other artist agencies.
In fiscal 2011, there was a drop in paying members as some fan clubs went from being paid to free, but we expect the number of members to once again grow due to the launch of multiple new fan clubs.
Because entertainment is strongly a matter of preferences and tastes, we do not believe in simply lowering prices to increase sales volume. rather, we think that users are glad to pay premium prices as long as they receive value-added products and services in return. as a result, arpu is rising.
2010/3 2011/3
1.1 1.52012/3
2.42010/3 2011/3 2012/3
0.9 1.0 0.8
2010/3 2011/3 2012/3
1.2 1.2 1.4 2010/3 2011/3 2012/3300
Video distribution average unit price
300 315
2,194 2,108 2,470
7,852 7,6018,375
Concert ticket average unit price
Music CD albums average unit price
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
292012 Investors’ Guide
sales
(JPY mn) (JPY mn) (%) (JPY mn) (%)
OperatIng InCOMe / OperatIng InCOMe MargIn
net InCOMe (lOss) / net InCOMe MargIn
Consolidated Financial highlightsAvex Group Holdings Inc. and Consolidated Subsidiaries Fiscal Year
(JPY mn)2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
For the year:Sales 82,455 80,983 73,896 75,418 89,783 101,626 104,639 117,819 118,142 111,561 121,027 Operating income 9,797 7,154 7,015 4,269 8,650 8,691 8,510 6,480 5,566 11,343 12,263 Net income (loss) 4,443 3,118 3,648 836 4,478 3,063 909 (905) 975 5,308 4,934 Cash flows from operating activities 7,428 4,629 4,813 5,867 3,450 1,210 7,293 1,718 9,093 11,335 13,171 Cash flows from investing activities (23,969) (570) (1,027) 653 (11,644) (18,156) (980) (3,508) (2,572) (2,422) (2,403)Free cash flow (16,541) 4,059 3,786 6,520 (8,194) (16,946) 6,313 (1,790) 6,521 8,913 10,768 Cash flows from financing activities 13,251 (8,932) (4,769) (4,745) 8,275 17,929 (2,552) 5,067 (9,982) (7,541) (7,370)
at year-end:Cash and cash equivalents, end of period 9,510 4,556 3,539 5,357 5,486 6,371 10,093 13,166 9,717 11,039 14,422 Net assets 34,101 30,876 32,713 30,076 33,446 33,699 32,812 29,760 30,266 33,547 36,932 Total assets 73,530 64,723 62,956 64,981 83,826 105,894 102,124 107,013 94,593 93,315 99,258 Current assets 32,520 27,080 26,127 29,141 37,521 45,069 45,819 52,748 39,999 40,377 49,271 Current liabilities 23,914 21,745 21,060 28,744 42,232 57,543 40,117 42,089 33,095 35,977 51,466 Interest-bearing liabilities 16,500 13,500 10,500 9,501 19,500 39,000 38,175 45,069 34,813 29,053 23,698
amounts per share (yen):Net income (loss) 141.40 63.49 76.95 10.22 93.79 71.33 21.17 (21.09) 22.72 123.60 115.06 Net assets 738.83 693.89 735.28 691.34 768.32 772.31 751.05 684.89 668.82 747.13 821.97 Cash dividends 63.00 35.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00
key ratios (%):Operating income margin 11.9 8.8 9.5 5.7 9.6 8.6 8.1 5.5 4.7 10.2 10.1 Net income margin 5.4 3.9 4.9 1.1 5.0 3.0 0.9 (0.8) 0.8 4.8 4.1 ROE 13.5 9.6 11.5 2.7 14.1 9.2 2.8 (2.9) 3.4 17.5 14.7 ROA 6.7 4.5 5.7 1.3 6.0 3.2 0.9 (0.8) 1.0 5.6 5.0 Current ratio 136.0 124.5 124.1 101.4 88.8 78.3 114.2 125.3 120.9 112.2 95.7 Shareholders’ equity ratio 46.4 47.7 52.0 46.3 39.9 31.3 31.6 27.5 30.4 34.4 35.4 D/E ratio (times) 0.5 0.4 0.3 0.3 0.6 1.2 1.2 1.5 1.2 0.9 0.6
Operating income (left) Operating income margin (right)
Net income (loss) (left) Net income margin (right)
0
30,000
60,000
90,000
120,000
07 08 09 10 11 (FY) 0
3,000
6,000
9,000
12,000
0
3
6
9
12
07 08 09 10 11 (FY) –1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
–1
0
1
2
3
4
5
6
07 08 09 10 11 (FY)
30 Avex Group Holdings Inc.
ManageMent Message grOwth strategIes
(JPY mn) (%) (JPY mn) (%) (%) (Times)
net assets / rOe tOtal assets / rOa sharehOlDers’ equIty ratIO /D/e ratIO
(JPY mn)2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
For the year:Sales 82,455 80,983 73,896 75,418 89,783 101,626 104,639 117,819 118,142 111,561 121,027 Operating income 9,797 7,154 7,015 4,269 8,650 8,691 8,510 6,480 5,566 11,343 12,263 Net income (loss) 4,443 3,118 3,648 836 4,478 3,063 909 (905) 975 5,308 4,934 Cash flows from operating activities 7,428 4,629 4,813 5,867 3,450 1,210 7,293 1,718 9,093 11,335 13,171 Cash flows from investing activities (23,969) (570) (1,027) 653 (11,644) (18,156) (980) (3,508) (2,572) (2,422) (2,403)Free cash flow (16,541) 4,059 3,786 6,520 (8,194) (16,946) 6,313 (1,790) 6,521 8,913 10,768 Cash flows from financing activities 13,251 (8,932) (4,769) (4,745) 8,275 17,929 (2,552) 5,067 (9,982) (7,541) (7,370)
at year-end:Cash and cash equivalents, end of period 9,510 4,556 3,539 5,357 5,486 6,371 10,093 13,166 9,717 11,039 14,422 Net assets 34,101 30,876 32,713 30,076 33,446 33,699 32,812 29,760 30,266 33,547 36,932 Total assets 73,530 64,723 62,956 64,981 83,826 105,894 102,124 107,013 94,593 93,315 99,258 Current assets 32,520 27,080 26,127 29,141 37,521 45,069 45,819 52,748 39,999 40,377 49,271 Current liabilities 23,914 21,745 21,060 28,744 42,232 57,543 40,117 42,089 33,095 35,977 51,466 Interest-bearing liabilities 16,500 13,500 10,500 9,501 19,500 39,000 38,175 45,069 34,813 29,053 23,698
amounts per share (yen):Net income (loss) 141.40 63.49 76.95 10.22 93.79 71.33 21.17 (21.09) 22.72 123.60 115.06 Net assets 738.83 693.89 735.28 691.34 768.32 772.31 751.05 684.89 668.82 747.13 821.97 Cash dividends 63.00 35.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00
key ratios (%):Operating income margin 11.9 8.8 9.5 5.7 9.6 8.6 8.1 5.5 4.7 10.2 10.1 Net income margin 5.4 3.9 4.9 1.1 5.0 3.0 0.9 (0.8) 0.8 4.8 4.1 ROE 13.5 9.6 11.5 2.7 14.1 9.2 2.8 (2.9) 3.4 17.5 14.7 ROA 6.7 4.5 5.7 1.3 6.0 3.2 0.9 (0.8) 1.0 5.6 5.0 Current ratio 136.0 124.5 124.1 101.4 88.8 78.3 114.2 125.3 120.9 112.2 95.7 Shareholders’ equity ratio 46.4 47.7 52.0 46.3 39.9 31.3 31.6 27.5 30.4 34.4 35.4 D/E ratio (times) 0.5 0.4 0.3 0.3 0.6 1.2 1.2 1.5 1.2 0.9 0.6
Net assets (left) ROE (right)
Total assets (left) ROA (right)
Shareholders’ equity ratio (left) D/E ratio (right)
–10,000
0
10,000
20,000
30,000
40,000
–5
0
5
10
15
20
07 08 09 10 11 (FY) –40,000
0
40,000
80,000
120,000
–2
0
2
4
6
07 08 09 10 11 (FY) 0
10.0
20.0
30.0
40.0
0
0.5
1.0
1.5
2.0
07 08 09 10 11 (FY)
312012 Investors’ Guide
OperatIOnal revIew ManageMent OrganIzatIOn FaCts & FIgures
Business and Other risks
The items discussed below are some matters that are deemed to have a significant potential impact on investor decision-making from among the information regarding business and accounting conditions found in this Investors’ Guide.
Please be aware that forward-looking state-ments found in this guide reflect the judgment of the Avex Group (Avex Group Holdings and its consolidated subsidiaries) as of the end of the fiscal year under review.
1. trends in Major titles, artists and talent
The Group’s business performance can be affected by whether or not the Group has any hit artists and hit content, and by the popularity of major artists and talent, contract duration, and growth of new artists and talent.
2. Operations in Overseas MarketsThe Avex Group is expanding its music and video businesses in East Asia. In the event that an unexpected incident occurs in any of the overseas markets represented due to a change in political or economic conditions or legal or regulatory elements, disadvantageous taxes, or social disor-der caused by terrorist attacks, war, or the like, it is possible that the Group’s performance may be affected.
3. Impairment lossWhen market values of the assets held by the Group decrease significantly, or business profit-ability deteriorates, an impairment loss in noncur-rent assets may be recorded by applying impairment accounting, which would affect the Group’s performance and financial position.
4. Fund procurementThe Group has mostly procured funds through borrowings from financial institutions and the issuing of bonds. The funds have been used to acquire investment securities and real estate, and for investing in the video business. If current interest rates change, the Group’s performance may be affected.
In addition, certain of the borrowings have a financial restriction clause. Infringement on the clause could, for example, cause the borrowing interest rate to be raised, and/or the benefits of term to be forfeited. Such change, in turn, may affect the financial position and business perfor-mance of the Group.
5. new BusinessesThe Group is actively becoming involved in new areas to further consolidate its position in the entertainment business, but there is the undeni-able possibility of risks arising in the process of execution of new business due to a sudden change in the business environment or an unfore-seeable problem which materializes afterwards, and this may affect the Group’s performance.
6. Dependency on a specific Corporate Manager
CEO Masato Matsuura, one of the founders of Avex, has been playing the core role in formulat-ing and determining Group management strate-gies and concluding contracts with important business partners and artists. In the event that Mr. Matsuura leaves the Group for any reason, the performance of the Group may be affected.
32 Avex Group Holdings Inc.
Corporate DataCompany name: Avex Group Holdings Inc.
Established: April 11, 1988
Paid-in capital: JPY4,229.6 mn
Number of employees: 1,385
Headquarters: 3-1-30, Minami-Aoyama, Minato-ku, Tokyo 107-8577, Japan
Phone: +81-3-5413-8550 (reception desk)
URL: http://www.avex.co.jp/e_site/
Corporate Data and Investor Information (As of March 31, 2012)
Number of shares held Percentage of shares held (%)
Max 2000 Inc. 2,050,000 4.79
T’S Capital Inc. 2,050,000 4.79
The Master Trust Bank of Japan, Ltd. (Trust account) 2,035,600 4.76
BBH Lux. Fidelity Funds Japan Advantage 1,604,400 3.75
Japan Trustee Services Bank, Ltd. (Trust account) 1,472,900 3.44
Masato Matsuura 1,357,924 3.17
Toshio Kobayashi 1,357,818 3.17
Trust & Custody Services Bank, Ltd. (Securities investment trust account) 1,008,900 2.36
Daiichikosho Co., Ltd. 920,000 2.15
Ryuhei Chiba 787,250 1.84
Notes: 1. In addition to the above table, there are 3,364,398 shares of treasury stock owned by the Company. 2. CEO Masato Matsuura serves as a Representative Director of Max 2000 Inc. 3. Percentage of shares held calculated after deduction of treasury stock.
Stock InformationNumber of shares issued: 46,157,810
Stock exchange listing: First Section of Tokyo Stock Exchange
Stock code: 7860
Trading unit: 100 shares
General Shareholders’ Meeting: June each year
Transfer agent: Mitsubishi UFJ Trust and Banking Corporation, Corporate agency division 7-10-11 Higashisuna, Koto-ku, Tokyo 137-8081, Japan
IR data is also posted on the Company’s website.(http://www.avex.co.jp/e_site/ir/)
Japanese financial institutions9,867,984 shares
21.38%
Japanese securities companies576,629 shares
1.25%
Other Japanese corporations5,432,774 shares
11.77%
Foreign investors5,766,597 shares
12.49%
Total46,157,810
sharesJapanese individual investors and others21,149,428 shares
45.82%
Treasury stock3,364,398 shares
7.29%
BReAkDOwn OF SHAReHOLDeRS
Top 10 Shareholders
2012 Investors’ Guide 33
OpeRATIOnAL ReVIew MAnAGeMenT ORGAnIzATIOn FACTS & FIGUReS
Avex Group Holdings Inc.3-1-30, Minami-Aoyama, Minato-ku, Tokyo 107-8577, JapanURL http://www.avex.co.jp/e_site/