Chapter 589 Culture and Entertainment

“Judging from last year’s operations, the entertainment division’s revenue primarily comes from three areas.”

“Namely: music production and artist management; karaoke and live performances; and the sales and distribution of games and audiovisual products.”

Itakura turned to the music division’s financial report.

“First is the music business.”

“As of the end of last year, the number of artists and groups officially signed under our company has increased to over eighty, with a steady increase in those who have officially debuted and can generate sustained profits.”

“After Miss Sakai Izumi held her major performance at Seibu Stadium last May, her record sales and public recognition have both risen further. The band ‘Backlight’ also remains a vital source of our record sales and tour revenues, with several records released last year performing quite well.”

“‘Twilight Signal’ has also developed smoothly in the underground rock market. Following a full year of performances and record promotion, they now possess a fairly stable fanbase. We plan to further expand the scale of their record releases and nationwide tours in the first half of this year.”

“In addition, Miss Nishimura Yumi’s collaborations in television dramas and commercial theme songs continue to grow. Miss Matoba Miki has also completed several rounds of recording and song production, and we expect to officially launch her solo works this year.”

Having said this, Itakura turned to the section on new talent development.

“As for artists newly signed last year, two bands are particularly noteworthy.”

“One of them is called Mr. Children, an all-male four-piece band focusing primarily on original songs. In the second half of last year, we finalized an official contract with them, and their first commercial record is currently in production, slated for release this spring.”

“The other is called GLAY, a band originally formed in Hokkaido that later moved to Tokyo to pursue their career. We noticed them last year through an investigation of Live House performances, and we have now signed a development contract with them, arranging dedicated rehearsal and recording resources.”

“However, they are not yet ready for large-scale commercial promotion. The company plans to let them continue building performance experience, and arrange their official debut once their songs and live stage presence have sufficiently matured.”

Itakura clearly already had his own judgment regarding the arrangements for these newcomers.

Today’s S.A. Entertainment was no longer the small company from six years ago that had only a few recording studios and a handful of signed artists.

Relying solely on record sales, advertising partnerships, and live performances, the company had already built a fairly comprehensive business system.

Furthermore, as the Japanese economy continued to deteriorate, more and more small and medium talent agencies that originally relied on big corporate sponsorships and hefty publicity budgets to stay afloat were beginning to face cash flow issues.

Some young artists who had yet to officially debut even lost their opportunities for ongoing training because their agencies slashed budgets.

This instead gave Saionji more options—or rather, this was all within Satsuki’s plan to “harvest cheap yet high-quality Japanese assets after the bubble burst.”

Whenever promising talent was found, S.A. Entertainment could leverage its existing recording studios, performance venues, and distribution channels to provide them with a relatively stable environment for development.

As for how many among them would truly make a name for themselves in the future, only time would tell.

“Next is the karaoke business.”

Itakura turned the report to the next section.

“The results achieved in this sector last year were even better than we initially projected.”

“Although the Japanese economy remains sluggish, overall karaoke operating revenues did not decline accordingly; on the contrary, they maintained modest growth. According to market surveys, the primary reason is that consumer entertainment spending is undergoing a shift.”

“During past economic booms, many corporate employees were accustomed to going to high-end bars, nightclubs, or other pricey entertainment venues after work. Now that corporate entertainment expenses are generally cut and ordinary families have begun curtailing non-essential expenditures, high-end entertainment venues have taken quite a noticeable hit.”

“Yet people won’t give up entertainment altogether just because the economy is bad.”

“Especially young people and ordinary office workers; during this phase of economic downturn, they actually have an even greater need for cheap pastimes where they can hang out with friends without placing too heavy a financial burden on themselves.”

“A gathering or round of golf that previously cost tens of thousands of yen can now be replaced by spending just several thousand yen for a few people to hang out in a karaoke box for hours. For many consumers, this is clearly much more cost-effective.”

This was actually a very interesting consumer phenomenon.

Even if overall income drops, people will not necessarily give up small-ticket purchases that bring them satisfaction.

Namely, the famous ‘lipstick effect’ theory—unable to afford expensive luxury goods, one might still be willing to buy oneself a lipstick.

Unable to bear the expenses of fine dining and nightclubs, one would still be willing to spend a modest amount of money singing for a few hours with friends.

When large numbers of consumers begin making similar choices, a portion of the spending that originally flowed into high-end entertainment venues gradually shifts to more budget-friendly entertainment options.

And Saionji just happened to have completed their layout in this market long ago.

“Additionally, regarding store operation formats,”

Itakura continued.

“We currently employ three main models.”

“The first is the container-style karaoke that was developed the earliest. These are mainly set up around train stations, the peripheries of residential areas, and other plots with lower rents. Such locations have low construction costs, the equipment can be reused, and adjusting operating locations is fairly convenient, so it remains our most numerous format at present.”

“The second is ordinary indoor stores. These primarily repurpose the second and third floors of commercial buildings near train stations or renovate underperforming old shops. Depending on scale, they are fitted with a dozen to several dozen private boxes, providing drinks, light meals, and basic lounge facilities, mainly targeting students, ordinary company employees, and family customers.”

“Since vacant commercial properties in Tokyo have been gradually increasing since last year, the lease costs for such stores have fallen significantly compared to the bubble era. We have already begun leveraging this opportunity to expand indoor store operations in cities like Tokyo, Osaka, and Nagoya.”

“As for the third type, it consists of higher-priced, high-end karaoke clubs.”

“They are mainly situated in Ginza, Roppongi, and other upscale commercial districts. The private rooms are larger, with higher equipment and soundproofing standards, along with dedicated service staff, catering, and member reservation services.”

“However, there are very few of these stores at present, and their operating performance in the second half of last year was noticeably weaker than the first two formats.”

Itakura paused briefly.

“Therefore, this year we plan to continue expanding the scale of the first two store types, especially by converting low-cost commercial real estate into regular indoor stores. For high-end clubs, we will temporarily halt large-scale expansion and focus on maintaining existing clientele and improving single-store profitability.”

Having said this, he added another piece of data.

“Furthermore, although the group’s own karaoke stores have attained considerable scale, our revenues from equipment and music copyrights do not rely entirely on directly managed stores.”

“Currently, S.A. Entertainment maintains partnerships with multiple large karaoke operators nationwide. In addition to music accompaniments and guide vocal tracks, some equipment, recording, and song update services have also been incorporated into long-term supply contracts.”

“Among them, copyright revenue from guide vocal tracks remains quite substantial.”

“Especially after Miss Sakai Izumi’s official debut, those guide vocal tracks she recorded in the past have garnered significant renewed attention.”

Hearing this, Satsuki couldn’t help recalling that small recording studio in Shinjuku years ago.

And the girl who sat in front of the microphone every day, earnestly recording song after song.

Back then, having Sachiko record those guide vocal tapes was originally meant to build up experience and an audience for her future debut.

In retrospect, the results turned out even better than she had expected.

However, Itakura was clearly no longer satisfied with the existing business model.

“In addition, we are discussing the development of next-generation karaoke equipment with SIS.”

“Currently, most stores still rely on cassette tapes, compact discs, or dedicated accompaniment hardware to update their song libraries, which incurs relatively high maintenance and delivery costs. If we can use telecommunication lines to directly update song data, we can not only shorten the turnaround time for new releases but also reduce equipment maintenance costs for the stores.”

“This technology is still in the testing phase, but we plan to select a few indoor stores for trials this year.”

Having heard this, Satsuki nodded slightly.

Networked karaoke, huh.

That was actually a pretty good direction.

Moreover, with Saionji now owning SIS and its own telecommunications tech team, conducting research on this should be much easier than for an ordinary entertainment company.

“Next is the gaming and anime-related business.”

Itakura turned to the final section of the report.

“Last year, S.A. CIRCUIT’s sales of game software, records, and audiovisual products continued to grow. As new-generation gaming consoles like the Super Famicom become increasingly widespread, the cross-selling effect between game software, anime, music, and other related merchandise has also become more pronounced.”

“In accordance with Milady’s request from last June, we have conducted a fairly comprehensive survey of domestic animation studios, independent game development teams, and relevant character licensing enterprises in Japan.”

“At present, the first phase has completed the acquisition of two animation production studios.”

Itakura placed two company profiles on the desk.

“Namely Studio Fantasia, and Triangle Staff located in Tokyo’s Suginami Ward.”

“Neither of these studios is particularly large, but both possess relatively mature animation production experience. Studio Fantasia previously participated in the production of several OVA titles and has collaborated with companies such as GAINAX; Triangle Staff boasts a roster of experienced key animators and production personnel.”

“Considering that animation production relies heavily on specialized personnel, we did not replace the management teams immediately after the acquisition. Instead, we retained the original creators and production leads, while the entertainment division provides funding, equipment, and distribution channels.”

“Currently, both studios still primarily take external production commissions while beginning to participate in producing music videos, game opening animations, and other video content under the group.”

“In addition, we are also making further contact with J.C.STAFF and GAINAX.”

Speaking of GAINAX, Itakura made a point of giving a bit more introduction.

“This studio previously produced works such as ‘Gunbuster’ and ‘Nadia: The Secret of Blue Water.’ Although their scale is not especially large, they enjoy tremendous renown among young animation enthusiasts.”

“In particular, the PC game ‘Princess Maker’ released last year demonstrated their capability to extend animation production expertise into the field of game development.”

“We have already proposed investment and co-production plans to them. However, they place high importance on creative autonomy over original works, and we have not yet reached an agreement regarding equity cooperation.”

Satsuki’s gaze lingered on GAINAX’s dossier for a moment.

Anno Hideaki.

Sadamoto Yoshiyuki.

Along with several other familiar names.

It seemed Itakura had indeed tracked down some incredible talent this time.

Even so, she wasn’t in any rush to chime in.

Since negotiations were still ongoing, she would let Itakura handle it for now.

“In terms of game development, our primary contacts at present are Game Freak and Quintet.”

Itakura continued his presentation.

“Game Freak is a very small independent game development studio whose core members include Tajiri Satoshi and Sugimori Ken. Despite their small headcount, they completed the development work on Yoshi-related games published by Nintendo last year, proving their ability to independently produce commercial games.”

Hearing this name, Satsuki’s gaze paused slightly.

Game Freak?

Wasn’t that the studio that later developed the Pokémon series?

She took another look at Tajiri Satoshi’s name on the profile.

It really was them.

“We are currently discussing the possibility of providing them with development funding and equipment support. However, since they already have formal business ties with Nintendo, at this stage we are primarily considering non-exclusive investment and collaboration, without intervening in the publishing rights of existing game projects.”

“As for Quintet, it is a company established by several former developers from Nihon Falcom, whose founding members were involved in the production of the ‘Ys’ series. Their title ‘ActRaiser’ also achieved a favorable market response.”

“They currently maintain close cooperation with Enix, so we are not considering an outright acquisition for now. Instead, we hope to establish further business relationships through capital investment or co-development projects.”

With that, Itakura finally closed the folder.

“Overall, our anime and gaming divisions are still in an early stage of expansion, and it will be difficult to achieve profits on par with records and karaoke in the short term.”

“However, judging from the companies we have contacted, Japan does not lack outstanding creators and developers. What truly constrains their growth is often a lack of funds, equipment, and adequate distribution channels once their works are finished.”

“And these happen to be conditions that Saionji can provide.”

“Therefore, we plan to continue expanding relevant investments this year, while also establishing an independent content planning and distribution department to gradually integrate businesses such as anime, gaming, music, and character licensing.”

“As for the studios we have acquired, they will retain their respective creative teams and operational characteristics. We do not plan to merge all the companies into a single massive studio, so as not to hurt their original production efficiency.”

Itakura sorted out the final report.

“That concludes the main operational overview of the entertainment division and several directions we intend to pursue this year.”

Satsuki listened and nodded with satisfaction.

This Mr. Itakura truly looked more and more like a proper president.

Thinking back six years ago when she first handed that small building in Shinjuku over to him, all she needed was an obedient titular president who could represent her and handle affairs, and Itakura had happened to be a suitable candidate.

Who could have guessed that this fellow, who back then even doubted his own ability to manage a company, would later gradually display remarkable business acumen.

Now he was actually capable of managing such a massive cultural and entertainment empire, and even proactively sought out new projects that could synergize with their existing operations.

Especially in the realm of anime and gaming.

Back then, Satsuki had merely told him to seek out people who had talent but lacked funding.

Unexpectedly, only a little over half a year had passed, and he had already brought back quite an impressive report card.

“Well done, Mr. Itakura.”

She placed the report back on the desk.

“Let’s continue pushing forward in this direction this year. You may appropriately increase the investment budget for the anime and gaming businesses, though specific projects must still undergo standard commercial evaluations.”

“Yes!”

Itakura complied immediately.

Then, he sat back down in his seat.