If you felt a pinch in your wallet after buying figures, imagine how Kadokawa executives are feeling right now. The entertainment giant behind a vast portfolio of anime, manga, and light novels has released its financial report, and the numbers are stark. Operating profit plummeted nearly 60% between April and December 2025. The core issue? A strategic bet on original anime titles that didn’t deliver the expected returns, while sequels – the reliable crowd-pleasers – were sidelined.
The Risk of New IPs
Let’s break down this corporate drama. While overall sales didn’t decline dramatically, the real problem lies in operating profit – the figure remaining after accounting for overhead. Kadokawa’s anime and live-action division experienced the most significant losses, swinging from a substantial profit the previous year to an operating loss this year. The explanation is straightforward, if painful: new series are a gamble. Without a major, established franchise to guarantee merchandise sales, streaming licenses, and disc revenue, income simply doesn’t materialize. Add to that the rising costs of anime production and increased labor expenses, and you have a recipe for financial trouble.
The gaming division offered a partial reprieve, though it didn’t shine as brightly as during the peak of ’s Elden Ring DLC release. Fortunately, titles like Elden Ring Nightreign are performing well, but not enough to offset the company’s overall challenges. In the publishing sector, the situation is equally tense: while international manga sales are strong, the domestic Japanese market remains stagnant and production costs have eroded profits.
Hope Rides on Established Franchises
However, it’s not all doom and gloom. Kadokawa has a few aces up its sleeve. The company is banking on a rebound in the final months of the fiscal year (ending in March ) thanks to the highly anticipated new seasons of Oshi no Ko and Re:Zero. These are the tentpole franchises, the series that generate revenue simply by existing. This underscores a key lesson about the industry: while original ideas are welcome, sequels are what pay the bills and keep the lights on.
This situation mirrors a broader trend highlighted in recent industry reports. According to web search results, 40% of anime companies reported profit gains, while over 34% experienced operating deficits. The issue isn’t a lack of demand for anime, but rather margin compression – rising costs are squeezing profits even as sales remain relatively stable. KADOKAWA’s 59.7% drop in operating profit, despite only a 1.7% dip in revenue, is a clear illustration of this challenge. The company’s anime segment swung to a loss, while publishing profits collapsed by over 90%.
The broader context, as reported by Outlook India, reveals that KADOKAWA’s problems aren’t isolated. The entire Japanese media landscape is grappling with rising labor costs and shifting consumer habits. While the gaming and web services divisions showed growth, they weren’t enough to offset the losses in anime and publishing.
