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Bandai Namco Merger


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Interesting article in Times today...

Falling birthrate forces merger of Japan’s toymakers

From Leo Lewis in Tokyo

BANDAI and Namco, the children’s entertainment companies that, between them, gave the world Tamagotchi virtual pets, Power Rangers and PacMan, yesterday unveiled a merger that creates a £2 billion toy and video games powerhouse.

Although the combined group will establish a formidable budget for the development of new products and has set itself a 550 billion yen (£2.8 billion) sales target, the market quickly decided that the tie-up was defensive.

The cash and stock deal is the first in Japan to arise as a side-effect of the country’s demographic time bomb: a falling birthrate means that with every year that passes there are fewer Japanese children to sell toys to.

As Japan’s second-biggest toymaker, the new group will challenge the dominance of Sega Sammy in the battle for a slice of the annual $20 billion (£10.6 billion) global video games market. The deal, analysts said, is likely to set the scene for other defensive mergers as the Japanese entertainment industry faces the need to invest heavily in developing markets — particularly in Asia.

The two companies highlighted their complementary qualities. Bandai, which paid Y10.5 billion for a 6.3 per cent stake in Namco, has made its fortune by buying the rights to major cartoon and film franchises — such as Hello Kitty, Gundam and Digimon — and producing the merchandise that goes with them. But as children’s tastes have become more high-tech, Bandai has found it hard to adapt this business model to an era of mobile phones and online games machines.

Namco, meanwhile, has some of the best games technology in the industry and is making inroads into the mobile phone download market. It is a seasoned manufacturer of both home and arcade video games and runs its own chain of arcades. But young customers have shown that they like characters, and apart from the iconic PacMan, the Namco pantheon of characters is small.

The combined group will be led by Takeo Takasu, the president of Bandai, and Kyushiro Takagi, vice-president of Namco. Mr Takasu said that Bandai Namco Holdings will use Namco’s arcades as a sales point for Bandai toys, while converting more of Bandai’s characters into video games — a job that he said would require significant added levels of investment. He added that no jobs would be cut as a result of the deal.

PLAY-OFF

Bandai Products: Tamagotchi, Digimon, Sailor Moon Market value: Y230bn Sales 2004: Y270bn Earnings 2004: Y10bn

Namco Products: games arcades Market value: Y168bn Sales 2004: Y178bn Earnings 2004: Y9.4bn

Japanese games industry faltering in face of falling birth rates? Not heard that one before...

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