■Future Initiatives

1. Market Environment When it comes to video distribution, there are few pure-play companies that can handle various types of video distribution, such as J-Stream <4308>. However, some companies that are partially similar include Brightcove Inc and Vimeo Inc for video sharing and distribution platforms, and Akamai Technologies, Inc. and Amazon.com Inc , which provide Amazon CloudFront and CDN services, respectively. They are all global giant companies. In addition, some major ISP providers that deliver the service to their own members and portal site providers that partner with major content holders to provide secondary distribution services also conduct some business similar to the company. In the case of webinars in the pharmaceutical area, which account for a large proportion of the company's revenue, some overlap with the business of Kimura Information Technology Co., Ltd. and M3, Inc. 2. Meanwhile, the viewing environment of internet videos has improved both indoors and outdoors, due to people carrying devices capable of playing videos such as smartphones at all times, as well as the improvement of Wi-Fi environments and the spread of 5G. Additionally, the increasing use of videos in SNS and in-house portals, improved recognition of cost reduction and promotional effects resulting from the use of videos, and other factors have further improved the video-distribution environment. Therefore, not only Generation Z, who grew up with digitalization, but all generations have started to watch videos on the internet, and the video distribution market has rapidly expanded, especially due to the increase in demand for online services amid the COVID-19 pandemic. It was expected that the demand for hybrid and other types of video distribution would continue to be strong even after the pandemic. However, with the transition to the fifth phase of the new coronavirus infection in May 2023, there has been a strong trend toward real-world meetings, particularly in the pharmaceutical and EVC areas, and the industry seems to have gone through a short-term plateau. Nevertheless, it is widely believed that online services, including hybrid, will regain their growth momentum by 2024, after the real-world meeting trend subsides, given the convenience and high value of video distribution. In this environment, the company, which has accumulated know-how as a pioneer and a pure-play company for many years while constantly incorporating cutting-edge technology, is also expected to return to the growth trend.

Wonder Planet <4199> positions the global mobile game market as a target for expanding its share. Since 2022, the overall global gaming market has entered a phase of adjustment and has continued to stagnate, while the mobile game market maintains its status as the largest market in the world. In the mobile game market, there is a growing polarization in title trends between "casual" and "AAA (triple-A)" games, where high-quality AAA titles with development costs exceeding several billion yen are emerging, whereas it is becoming increasingly difficult for traditional mid-core titles with development costs around 1 billion yen to become hits.

※ This refers to games developed with enormous development costs, personnel, and the latest technology.

In the casual game market, there is a notable shift from a model that relies solely on traditional in-app purchases (IAP) to a monetization model combining in-app advertising revenue (iaa inc) termed "hybrid casual games."

※ According to financial disclosure materials, the hybrid casual game market is expected to grow to approximately 290 billion yen by 2023, which is an anticipated growth of about 2.8 times compared to 2020.

The company aims to expand its share in this hybrid casual market. In particular, they plan to leverage their expertise in developing "long-term operation type" titles to continuously acquire users and revenue. Characteristics of hybrid casual games include longer playtime and higher user retention rates. Additionally, with lower development costs compared to mid-core games, the company sees this as an opportunity to utilize its strengths in a competitive market environment.

2. Growth Strategy

The company's growth strategy aims to capture market share in the rapidly expanding market by leveraging its accumulated performance against the four critical factors that are important in the global hybrid casual realm, namely "casual" × "long-term operation" × "global" × "IP utilization."

Maximizing the company's strength in long-term operation achievements aims to gain share not only in the existing casual gaming market but also in the hybrid casual market. Furthermore, efforts will be made to enhance the utilization of IP and promote the development of new titles utilizing prominent domestic and international IP.

The company is currently establishing a system to achieve efficient development and operation of hybrid casual games. By collaborating across the company with various departments that have high expertise in specific functions, the aim is to efficiently develop titles with global quality standards. Additionally, by improving the development base "SEED," the aim is to unify different technologies and tools for each title to enhance process efficiency. This approach maximizes resources devoted to making the gaming experience enjoyable and user-friendly, aiming to improve competitiveness.

Regarding new titles, following the release of "Pandoland" in June 2024, two new titles are currently in development, with the goal of releasing about one new title each year from 2025 onwards. These titles are designed for long-term operation targeting a wide user base and aim to provide new gaming experiences by leveraging the recognition of IP.

Additionally, as part of the growth strategy, the company is also focused on partnerships for joint ventures. For "Pandoland" and other new titles, a strategy is being adopted that aims for long-term revenue growth while keeping the company's development costs down. This approach intends to result in gradual profit expansion but aims to maximize cumulative revenue through long-term operation.

(Author: FISCO Guest Analyst Ryoji Mogi)