TOKYO -- Bandai Namco is leveraging Mobile Suit Gundam and other intellectual property to boost company value.
Since Bandai's 2005 merger with Namco, the company's market capitalization has topped that of America's toymakers, Hasbro and Mattel. It is now reviewing its vertical organization and moving away from reliance on external intellectual property, with the goal of becoming more like Sony, which uses its intangible assets to earn through subscription-based services.
"Gundam sales are not far from 100 billion yen ($966.8 million)," said Yusuke Fukuda, president of Bandai Spirits, a subsidiary of Bandai Namco that makes plastic Gundam models.
Gundam plastic models were first released in 1980 as Gunpla, but it now offers a wide range of games and videos. In fiscal 2019 ended March 2020, Gundam-related sales hit 78.1 billion yen, or 10% of consolidated revenue.
Foreign audiences are the next target. Bandai Namco's overseas sales ratio is 30%. Though comparisons are tricky, it is lower than either Hasbro or Mattel and their 40% ratios. Bandai Namco needs to grow Gundam sales to reach its target of 50%.
To consolidate all rights related to the Gundam franchise, Sotsu -- which holds the rights to commercialize Gundam -- was made a wholly owned subsidiary in spring 2020 for 35 billion yen. From 2021, a live-action movie is planned for a Hollywood release while a life-size Gundam will be unveiled in Shanghai. In addition, production capacity at Bandai's Gunpla factory in Shizuoka Prefecture has been boosted by 40%.
The company is also working to make better use of data. In spring 2021, the toy and game divisions will merge. Furthermore, video, music and intellectual property operations will all come together. The company will then consist of two main divisions: one to manage intellectual property and video copyrights, and the other to make toys and other products. Staff still maintain the spirit of traditional toymakers, but issues arose in the game division when workers could not obtain customer data, resulting in missed sales for Gundam.
Digital content is also becoming more important during the coronavirus pandemic. "The current organization, which is a collection of small and midsize companies, is not adequate," said a company executive.
"We're aiming to be like Sony," said Bandai Namco President Mitsuaki Taguchi. Sony's intangible assets total 1.6 trillion yen -- 20% of consolidated assets, excluding financials. By improving content distribution for its PlayStation game console and other measures, Sony is now leaning on subscription-based services as a major revenue stream.
Bandai Namco has shipped 700 million Gundam models and introduced electronic payments in December to start analyzing customer data collected from its e-commerce site and other sources. The goal is to go beyond selling toys to create a system that uses data to boost sales of games, videos and other products. It will then expand the system to other intellectual property, such as media franchise "Dragon Ball," which has a mobile game that is performing well.
The key remains the company's intangible assets. Bandai Namco makes and sells character goods, but its own intellectual property -- such as Gundam -- is limited. The company mostly relies on the intellectual property of other companies. As of the end of March 2019, the company's consolidated intangible assets totaled 11.8 billion yen, or only about 2% of total assets. That number doubled at the end of March 2020 with the acquisition of Sotsu. Now, Bandai needs to use its own intellectual property to increase its subscriber-based business.
The company's operating profit for the April-September period was 45.9 billion yen, down 4% year on year. This comprises 90% of the company's 50 billion yen forecast for the full fiscal year, which is down 37% from fiscal 2019. According to the Nikkei QUICK consensus, the average forecast of analysts for full-year operating profit is expected to reach 79 billion yen as more people buy products to stay amused at home.
Bandai had nearly 200 billion yen in cash at the end of September. It will have to use some of that to acquire more content to strengthen its subscription model. "Bandai Namco needs to increase its intellectual property over the medium- to long-term," said Hideki Yasuda, an analyst at Ace Securities.
Taguchi announced that Bandai Namco would launch about 40 new intellectual properties from 2021. This fall, the company acquired a Canadian game development business to accelerate that process.