Risk Factor
The main risks with the possibility to cause the important effect for the management result, the financial situation, and stock prices etc. of our group is as follows.
Please note that the risks are not limited to the following contents though the main risks are described by our judgment.
(1) Risks concerning Business Characteristic
(2) Risks concerning Market Competition
(3) Risks according to Business Trend etc.
(4) Risks Concerning a Decrease in Market Scale by Population Movement
(5) Risks Concerning Licensing Agreement
(6) Risks concerning Defects
(7) Risks according to the Strategy of the Entire Group
(8) Risks according to Business Development in Foreign Countries
(1) Risks concerning Business Characteristic
The main products and services in our consumer and mobile businesses are home game software, the game contents for mobile phone and so on. Therefore, the sales are greatly influenced by the fashions of the time.
Therefore, there is a possibility to cause a material adverse effect on the financial condition and the management result etc. of our group when neither an adequate product supply nor the service development can be done for the specification, the content, and the release time.
Especially, it is important to keep up with the latest fad etc. adequately and to put the product on the market efficiently and effectively at appropriate release time. If the release time is changed in the fiscal year, there is a possibility that a serious adverse effect is caused on the achievement of quarter or the middle period. Moreover, if the release time of the product that are scheduled to release near the end of fiscal year from the beginning is changed, there is a possibility that a material adverse effect is caused on the financial position and the management result, etc. of the fiscal year.
(2) Risks concerning Market Competition
Home game software, game contents for mobile phone, and other products and services related to our main business are subjected to the intense market competition. The lifecycle of new products and platforms are short. Our products that have advantages over the products and services of our competitors are limited to a part of the products brought to the market.
As for home game software, when the hardware products enter at the maturity of the lifecycle, the possibilities of causing a remarkable price competition and the decrease of the rate of profit can be high. As for the game contents etc. for mobile phone, a new competition arises by a new technology and the development of new services of mobile phone that becomes a platform of our mobile game. As a result, the demand for the market for which our group has competed so far can decrease.
Therefore, there is a possibility that the decrease of demand and priced competition can cause the adverse effect on the achievement of our group.
(3) Risks according to Business Trend etc.
Sales of our group product can be greatly influenced by the users' consumption trend. When remarkable depression of the economic climate that can decrease consumer's consumer spending is prolonged by economic market conditions, demand for the product and service related to the entertainment might be remarkably decreased. Especially, the sales trend of our home game software products is tend to be greatly influenced by the trend of the diffusion of each game machines to which our group provides our products. Thus, the trend of the diffusion of game machines can cause the adverse effect on our group business.
(4) Risks Concerning a Decrease in Market Scale by Population Movement
The population of teenagers and twenties that are the targets of our group products and services is expected to face a decrease in Japan in the future. If the population of the target of our products and services decrease and the market scale also decreases along with it, the sales of our products and services can relatively decrease and our group might not be able to accomplish our expected sales and earnings.
(5) Risks Concerning Licensing Agreement
The products of our group include a number of the products related to the character and contents licensed from third parties. As for the home game software and game contents for mobile phone, D3group is licensed for the manufacture and the sales from each platform manufacturer and the conditions of the contract for the licenses are decided by various factors such as the conditions of competitors. As a result, there is a possibility that scheduled new contracts and the renewal of license contract cannot be achieved. Moreover, there is a possibility of not becoming contract terms that our group is scheduling even if the new contract and the renewal of a contract, etc. can be done. In addition, there are the risks concerning the possibility of recession of contract by various factors such as crucial violation of license contract by our group, nonpayment by the deadline to pay certain amount of money to the licenser, bankruptcy, insolvency or other risks of rights infringement.
(6)Risks concerning Defects
The technologies of our home game products, game contents for mobile phone, and the services are increasingly complex every year. Therefore, the defects that were not detected at the beginning of the sales or the release of new version might be found. If any defects are found in our shipped products in spite of a wide inspection before the release, they will cause extensive damage to our business and management results.
Our products and services such as home game software might include some pungent descriptions such as the scene of violence. Those products and services can be easily judged as the ones that include pungent descriptions because of the further improvement of technology, further tightening of social rules and standards in the future, and so on. Under such circumstances, the relationship between those products and juvenile delinquency etc. can be pointed out when juvenile delinquency happens. As a result, the defects of the contents of such products and services can cause adverse effect to the business of our group.
(7)Risks according to the Strategy of the Entire Group
The relocation of our group companies caused by the factors such as acquisition of business and establishment of joint company might happen as the management strategy of our group. The relocation of our group companies will be conducted to generate synergistic effect and to improve the efficiency of our group management. However, when our expected synergistic effect or the improvement of the efficiency of our group management is not obtained, it may cause material adverse effect to our group performance.
(8)Risks according to Business Development in Foreign Countries
Our group is making effort to build the system to conduct the overseas business by the regional initiation and reduce the risks of overseas business by the establishment of local cooperation and positive local recruitment for overseas development of our group. However, there are country risks such as various restrictions by the local government, the stop of foreign currency exchanges, the increase of tariff, asset forfeiture by public expropriation of the government, and so on.
Moreover, in the process of the further expansion of our business and international networks, and the increase of our benders and customers, our group can be exposed to the risks of lawsuit related to product liability, equipment responsibility, the defect of product, or labor issues, unexpected risks of bankruptcy, or risks of tax according with various interpretation of tax law and disunity of multilateral tax system ( including the risks related to transfer price).
Adverse effect can be caused to our group performance by such overseas business-specific factors and others.
Please note that the risks are not limited to the following contents though the main risks are described by our judgment.
(1) Risks concerning Business Characteristic
(2) Risks concerning Market Competition
(3) Risks according to Business Trend etc.
(4) Risks Concerning a Decrease in Market Scale by Population Movement
(5) Risks Concerning Licensing Agreement
(6) Risks concerning Defects
(7) Risks according to the Strategy of the Entire Group
(8) Risks according to Business Development in Foreign Countries
(1) Risks concerning Business Characteristic
The main products and services in our consumer and mobile businesses are home game software, the game contents for mobile phone and so on. Therefore, the sales are greatly influenced by the fashions of the time.
Therefore, there is a possibility to cause a material adverse effect on the financial condition and the management result etc. of our group when neither an adequate product supply nor the service development can be done for the specification, the content, and the release time.
Especially, it is important to keep up with the latest fad etc. adequately and to put the product on the market efficiently and effectively at appropriate release time. If the release time is changed in the fiscal year, there is a possibility that a serious adverse effect is caused on the achievement of quarter or the middle period. Moreover, if the release time of the product that are scheduled to release near the end of fiscal year from the beginning is changed, there is a possibility that a material adverse effect is caused on the financial position and the management result, etc. of the fiscal year.
(2) Risks concerning Market Competition
Home game software, game contents for mobile phone, and other products and services related to our main business are subjected to the intense market competition. The lifecycle of new products and platforms are short. Our products that have advantages over the products and services of our competitors are limited to a part of the products brought to the market.
As for home game software, when the hardware products enter at the maturity of the lifecycle, the possibilities of causing a remarkable price competition and the decrease of the rate of profit can be high. As for the game contents etc. for mobile phone, a new competition arises by a new technology and the development of new services of mobile phone that becomes a platform of our mobile game. As a result, the demand for the market for which our group has competed so far can decrease.
Therefore, there is a possibility that the decrease of demand and priced competition can cause the adverse effect on the achievement of our group.
(3) Risks according to Business Trend etc.
Sales of our group product can be greatly influenced by the users' consumption trend. When remarkable depression of the economic climate that can decrease consumer's consumer spending is prolonged by economic market conditions, demand for the product and service related to the entertainment might be remarkably decreased. Especially, the sales trend of our home game software products is tend to be greatly influenced by the trend of the diffusion of each game machines to which our group provides our products. Thus, the trend of the diffusion of game machines can cause the adverse effect on our group business.
(4) Risks Concerning a Decrease in Market Scale by Population Movement
The population of teenagers and twenties that are the targets of our group products and services is expected to face a decrease in Japan in the future. If the population of the target of our products and services decrease and the market scale also decreases along with it, the sales of our products and services can relatively decrease and our group might not be able to accomplish our expected sales and earnings.
(5) Risks Concerning Licensing Agreement
The products of our group include a number of the products related to the character and contents licensed from third parties. As for the home game software and game contents for mobile phone, D3group is licensed for the manufacture and the sales from each platform manufacturer and the conditions of the contract for the licenses are decided by various factors such as the conditions of competitors. As a result, there is a possibility that scheduled new contracts and the renewal of license contract cannot be achieved. Moreover, there is a possibility of not becoming contract terms that our group is scheduling even if the new contract and the renewal of a contract, etc. can be done. In addition, there are the risks concerning the possibility of recession of contract by various factors such as crucial violation of license contract by our group, nonpayment by the deadline to pay certain amount of money to the licenser, bankruptcy, insolvency or other risks of rights infringement.
(6)Risks concerning Defects
The technologies of our home game products, game contents for mobile phone, and the services are increasingly complex every year. Therefore, the defects that were not detected at the beginning of the sales or the release of new version might be found. If any defects are found in our shipped products in spite of a wide inspection before the release, they will cause extensive damage to our business and management results.
Our products and services such as home game software might include some pungent descriptions such as the scene of violence. Those products and services can be easily judged as the ones that include pungent descriptions because of the further improvement of technology, further tightening of social rules and standards in the future, and so on. Under such circumstances, the relationship between those products and juvenile delinquency etc. can be pointed out when juvenile delinquency happens. As a result, the defects of the contents of such products and services can cause adverse effect to the business of our group.
(7)Risks according to the Strategy of the Entire Group
The relocation of our group companies caused by the factors such as acquisition of business and establishment of joint company might happen as the management strategy of our group. The relocation of our group companies will be conducted to generate synergistic effect and to improve the efficiency of our group management. However, when our expected synergistic effect or the improvement of the efficiency of our group management is not obtained, it may cause material adverse effect to our group performance.
(8)Risks according to Business Development in Foreign Countries
Our group is making effort to build the system to conduct the overseas business by the regional initiation and reduce the risks of overseas business by the establishment of local cooperation and positive local recruitment for overseas development of our group. However, there are country risks such as various restrictions by the local government, the stop of foreign currency exchanges, the increase of tariff, asset forfeiture by public expropriation of the government, and so on.
Moreover, in the process of the further expansion of our business and international networks, and the increase of our benders and customers, our group can be exposed to the risks of lawsuit related to product liability, equipment responsibility, the defect of product, or labor issues, unexpected risks of bankruptcy, or risks of tax according with various interpretation of tax law and disunity of multilateral tax system ( including the risks related to transfer price).
Adverse effect can be caused to our group performance by such overseas business-specific factors and others.