■Overview of NexTone＜7094＞

5. Strengths of the Company

The company's strengths lie in being a business with high barriers to entry, handling everything from copyright management to promoting the use of songs in a seamless manner, and the fact that the majority of its revenue comes from a stable stock business.

Since the enforcement of the Copyright Management Business Act in 2001, over twenty private companies entered the market, but now all but the company have either withdrawn from or scaled down their businesses, resulting in a de facto duopoly between the company and JASRAC. Copyright management requires substantial system management capabilities for the vast data and information related to daily copyright use, as well as stable and continuous song management entrustments from significant copyright holders, hence it requires much time and initial investment to monetize, indicating high barriers to entry. In this regard, the company has actively invested in systems from an early stage, building long-term and wide-ranging relationships and networks in the music industry, making it the only entity capable of competing with JASRAC.

The main difference between the company and JASRAC lies in the form of contract. JASRAC operates under a trust contract where copyright holders must transfer the copyright of their songs to JASRAC. For example, even if a song is created by oneself, a usage fee is incurred each time it is performed live or at a concert. However, the company adopts a commission contract form, allowing copyright holders to retain their copyrights while entrusting management. Especially artists like singer-songwriters who create their own songs tend to choose the company's management methods and philosophy, and it is reported that an increasing number of artists are transitioning their copyright management from JASRAC to the company. In the fiscal year ending March 2024, the amount of copyright usage fees collected is expected to be 137.16 billion yen for JASRAC and 11.55 billion yen for the company, with market shares of 92.2% for JASRAC and 7.8% for the company, indicating a gradual expansion of the company's share.

Additionally, the company utilizes usage data for songs obtained through its copyright management business to supply master recordings to music distribution service providers, coordinate the promotion of music content, and engage in casting. This accelerates the penetration speed of songs and maximizes revenue per content. The company is the only one handling everything from copyright management to promoting the use of songs in a seamless manner, which is a significant differentiation from other companies.

Furthermore, a large portion of the revenue from the copyright management business, DD business, and music distribution business the company engages in is formed by a stable stock business, with profits accumulating due to the increase in the number of copyright-managed songs and handled master recordings. The domestic music market continues to expand, supported by the growth of internet services such as streaming music distribution services, aiming for continuous profit growth in line with market expansion.

(Written by Fisco Guest Analyst Takuma Jilin)