Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY2010 · unconsolidated
Revenue$393M
Net income$30M
Net margin7.5%
→
FY2019 · consolidated
Revenue$358M
Net income$126M
Net margin35.1%
The combination of April 2009 was carried out in stages rather than at a stroke: a holding company first, then a single operating company, then the absorption of the studios it bought, and finally, in 2014, a rebranding that put Koei’s name ahead of Tecmo’s in English. Underneath the reorganisation two engines were turning — long-lived IP resold along four routes, and an investment arm run by Erikawa Keiko — and between them they produced eight consecutive years of record earnings on revenue that barely moved.
A holding company, and a wholesale repositioning onto the “Koei first” style
On 1 April 2009 Koei and Tecmo established a joint holding company, Koei Tecmo Holdings — styled in English at the time as TECMO KOEI HOLDINGS — by share transfer; both companies were delisted the same day and the holding company was newly listed. The share-transfer ratio was 0.9 shares in the new company for each Tecmo share and one share for each Koei share, making it, on a combined enterprise-value basis, a combination led by Koei. That December Koei’s four overseas sales subsidiaries were reorganised directly under the holding company, switching to a structure in which the global sales network was managed centrally at holding-company level. In January 2010 the North American entities KOEI Corporation and TECMO, INC were merged and renamed TECMO KOEI AMERICA Corporation, a first step towards brand integration in North America.
In April 2010 Koei and Tecmo were merged to form Koei Tecmo Games Co., consolidating development and publishing into a single core operating company. At the same time the group’s business domains were reorganised into three companies: Koei Tecmo Games alongside Koei Tecmo Wave (media, rights and pachi-slot) and Koei Tecmo Net (online). In April 2011 Koei Tecmo Games absorbed the last of the old Koei and old Tehkan entities that had been re-established during the transition, completing the final shape of the operating-company integration. In December 2011 it took full ownership of Gust, the studio behind the Atelier (アトリエ) RPG series, bringing the JRPG genre in-house alongside Koei’s historical simulation and old Tecmo’s action titles. In October 2014 Gust was absorbed into Koei Tecmo Games, completing the full internalisation of the acquired studio.
In July 2014 the holding company changed its English style from TECMO KOEI to KOEI TECMO, and at the same time altered the form of its legal Japanese name from コーエーテクモホールディングス株式会社 to 株式会社コーエーテクモホールディングス. It was a global rebranding in the fifth year of the combination, aligning group companies, overseas entities and even title logos on the English style that put Koei first. In brand terms it acknowledged what had already been the case at the time of the combination on combined enterprise value, number of IPs and scale of revenue: that Koei led. From consolidated revenue of $445M (¥36bn) and ordinary profit of $92.8M (¥7bn) in FY11 (the year ended March 2012), the company reached revenue of $352.4M (¥39bn) and ordinary profit of $165.8M (¥18bn) in FY18 (the year ended March 2019) — revenue flat, but ordinary profit two and a half times larger. The plan drawn up immediately after the combination, aiming at combined operating profit of $210.6M (¥17bn) for the year ending March 2012, was achieved in 2015, four years late.
Investment income the equal of operating profit — Erikawa Keiko’s asset-management arm
What characterised the finances of Koei Tecmo Holdings after the combination was that investment income swelled to a scale on a par with operating profit from the core business. From FY15 (the year ended March 2016) onward, non-operating income was booked at between $55.1M (¥6bn) and $73.5M (¥8bn) every year, and in FY18 (the year ended March 2019) non-operating income of $76.1M (¥8bn) sat against operating profit of $108.7M (¥12bn), leaving the two almost evenly matched. The source was the return on an investment arm that placed roughly $905.8M (¥100bn) to $1.4B (¥160bn) of surplus group cash in shares, structured notes and similar instruments, run under an arrangement in which Erikawa Keiko oversaw investment policy. She had invested in shares on her own account since the age of eighteen, and the know-how she had accumulated privately since the Koei years was organised into a corporate function at the holding company after the combination.
The games industry has a structure in which rising development costs and the hit-or-miss fate of released titles swing single-year results by 20 to 30 per cent against the previous year. Koei Tecmo’s results in this period ran the other way: from FY11 to FY18 both ordinary profit and net profit rose without interruption. Eight consecutive years of record earnings rested on two wheels — stable profit from the core business, and investment income from outside games. In FY19 (the year ended March 2020), the tenth anniversary of the combination, the company delivered a ninth consecutive year of profit growth, its highest earnings since the combination, and a dividend of ¥60 a share (after a one-for-1.2 share split). Investment income played the part of offsetting single-year swings in the core business, and contributed to the stability of the dividend policy — either a payout ratio of 50 per cent or ¥50 a share.
Dependence on investment income was, however, ambivalent as a criterion for institutional investors. The achievement of raising the profit margin of the core games business, and the contingency of an accounting treatment that folds unrealised gains and losses on the investment portfolio into ordinary profit, sit side by side in the same set of accounts. That the breakdown between core-business profit and investment income was disclosed in ever greater detail at each results briefing from FY15 onward reflects how closely the market was watching that dependence. Running the profit of the games business and the return on investments through separate companies — an organisational split — was already being argued internally by management in this period as a structural proposition, and would be implemented later, in the establishment of a corporate-finance subsidiary in April 2025.
Selling the same IP four ways: new titles, DLC, mobile and collaborations
By the 2010s the earnings structure of Koei Tecmo Games had turned into a machine for monetising the long-lived IP it had held since its founding, over and over, across multiple platforms and revenue formats. Nobunaga’s Ambition, Romance of the Three Kingdoms, Musou (無双, released overseas as Warriors), Dead or Alive, Atelier and Winning Post were each rebuilt to generate revenue along four routes: new packaged releases, DLC, mobile versions, and collaboration titles built on another company’s IP. A collaboration title combines the settled fan base of an original work with Musou-style gameplay; it carries lower development risk than building new IP in-house from scratch, and even after paying a licence fee its economics are easier to foresee — a commissioned form of development. Hyrule Warriors (ゼルダ無双, 2014) and Fire Emblem Warriors (ファイアーエムブレム無双, 2017) are the representative examples, and the product design of borrowing the rights to a popular IP from Nintendo or another publisher and recasting it with the feel of Musou play took hold.
Overseas sales of the main IP also expanded through the 2010s. On packaged-game unit sales by region as at FY19 (the year ended March 2020), 2.95 million units were sold in Japan against 6.69 million overseas — 2.85 million in North America, 1.57 million in Europe and 2.27 million in Asia — so that the overseas share reached close to 70 per cent of units sold. There were regional tendencies: the historical simulation lines centred on Japan, the Musou and Dead or Alive lines on Asia and North America. Across the group as a whole, however, a balanced geographical spread was achieved. That raised resistance to swings in currencies and in regional economies, and softened the single-year variation in core-business profit.
Internally, Koei Tecmo Games kept several independent brands side by side — the Shibusawa Kou brand, ω-Force and Team NINJA among them — with each brand running its own IP and development organisation on its own profit and loss, an in-house brand system. Koinuma Hisashi (鯉沼久史), president of Koei Tecmo Games from 2015, said in a 2023 interview that this in-house brand system had begun to bear fruit in the 2020s. An organisation in which several IPs and several development brands run in parallel was also a mechanism for preventing a delay or a poor launch on any single title from striking group results directly.