By Jacky Wong

Japan's Sony is pressing the start button on a potential game-changing acquisition that could rewrite its playbook.

The entertainment company is exploring a buyout of Japanese media company Kadokawa, according to Reuters. Kadokawa confirmed that it received an initial letter of intent to buy the company but hasn't made up its mind yet.

Kadokawa is perhaps best known outside of Japan for FromSoftware, the game developer behind smash hit "Elden Ring." The game, set in a fantasy medieval realm, has sold 25 million copies since its launch in 2022. George R.R. Martin, the author of the fantasy book series behind "Game of Thrones," helped develop its back stories and characters. A new expansion of the game got off to a flying start after coming to the market in June, selling five million copies in just the first three days.

Sony hasn't released any major new videogame titles from its own studios this fiscal year ending March. Bringing FromSoftware into the fold will certainly beef up its lineup of big budget titles or AAA games. Sony already has a 14% stake in FromSoftware, while Kadokawa owns 70% of the game studio.

But Sony's ambitions go beyond just gaming. In the domestic market, Kadokawa is also a publisher of novels and Manga -- Japanese graphic novels. That fits nicely into Sony's anime strategy. The company already owns Crunchyroll, an animation streaming service with more than 15 million subscribers. It also owns animation production and distribution company Aniplex.

Adding Kadokawa's original content will create a vertically integrated powerhouse in anime to meet rising global appetite for the hot Japanese cultural export.

The overseas market for anime has grown at an average annual rate of 20% in the past 10 years, according to Jefferies. Some of Kadokawa's content has already been aired on global streaming platforms. Its fantasy comedy manga "Delicious in Dungeon," for example, has been turned into an anime series on Netflix this year with a second season in production.

For Sony, this potential acquisition is a level-up in the entertainment world.

Write to Jacky Wong at jacky.wong@wsj.com

(END) Dow Jones Newswires

November 26, 2024 08:02 ET (13:02 GMT)

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