■Company Overview

3. market environment

Regarding the market environment surrounding the Roland ＜7944＞ business, the global musical instrument market has an average annual growth rate (CAGR) of 3.8% (source: Music Trade Magazine) from 2016 to 2021, and although there are increases and decreases from fiscal year to year, it is growing steadily over the medium to long term. From 2022 onwards, although adjustments in dealer inventory due to the decline in COVID-19 demand, the Ukraine issue, rising interest rates, and a breakdown in supply-demand balance have continued, the company predicts that it will return to a normal growth trajectory after 2025.

As a market trend, new lifestyles have become established, and as leisure time is on the rise, music is being selected as one way to enjoy leisure time. Until now, the main way to enjoy music has been “listening,” but with the enhancement of video content and the spread of SNS/web distribution, it has become easier to “create” and “disseminate” music. Electronic instruments, which are the company's business area, are affordable, lightweight and compact, can be adjusted in volume, easy to buy online, easy to start playing for reasons such as being maintenance-free, etc., and can be enjoyed in various ways due to connectivity to the internet, cooperation with tablets and smartphones, lesson functions, etc. We see such changes in the external environment as a tailwind for the company.

4. competitive advantage

The company's four strengths are “game changer mindset,” “multidimensional,” “Roland Platform,” and “agility.”

(1) “Game Changer Mindset”

The company cites “planning ability,” “technical ability,” and “management judgment” as the background for creating Game Changer products. By actually delivering products to customers, it is possible to obtain a lot of feedback, creating a virtuous cycle where “planning ability” is further refined based on that feedback. Due to the accumulation of technology over 50 years since its establishment, it has accumulated advantages in hardware and software, such as custom LSI, DSP technology, sensor technology, sound sampling, etc., and has accumulated various knowledge about points leading to musical expression, such as touch, feeling, response, etc., and has continued to increase the degree of perfection as an instrument. High quality is achieved with these technologies and know-how, and it has an advantage in product pricing.

Since the launch of the SH-1000, the first synthesizer produced in Japan, the company has released many innovative products, such as the world's first guitar synthesizer and electronic drums equipped with mesh heads. In recent years, they have also been working to create a market by introducing new products such as convertible drums that can be played on both acoustic drums and electronic drums, electronic wind instruments, and electronic Japanese drums, etc., and they continue to embody the mindset as a game changer.

(2) “Multidimensional”

The company is a world-renowned global brand. The overseas sales ratio accounts for about 90%, and it provides a wide range of musical instrument categories to music fans around the world. In recent years, the company has been focusing on hardware and internet connectivity. The policy is to expand the “Roland Cloud” service and expand the target hardware and customer base. The revenue model for this service consists of subscription revenue, single item sales revenue, and hardware sales promotion effects. Of these, subscription revenue and single item sales revenue can be expected to improve LTV (lifetime value) by providing various services. Also, as a hardware sales promotion effect, product competitiveness is improved by differentiation through cloud services.

(3) “Roland Platform”

The company unifies and visualizes customer data on the “Roland Platform,” and enhances products and services based on deep customer understanding obtained through data. Since this cycle improves communication with customers, it can be said that it is a powerful engine for optimizing marketing. Furthermore, the company aims to expand the Roland Account from 2.3 million in the 2022/12 fiscal year to 3.4 million in the 2025/12 fiscal year.

(4) Agility

The company went through an MBO in 2014 and built a system to promote corporate value management. Due to the renewal of the governance system by MBO, agile management decisions have become possible, and they have responded flexibly to the critical situation of the COVID-19 pandemic, and are growing steadily. Furthermore, the ROE is 20% or more, boasting best-in-class capital profitability.

(Written by FISCO Guest Analyst Ryoji Mogi)