China's Tencent Invests In Kadokawa, Will Co-Finance Animation And Develop Japanese IP

China’s Tencent Holdings has said it will acquire a 6.86% stake in Japan’s Kadokawa, striking a partnership between two media giants that reflects the shifting balance of power between the two countries’ industries.

Tencent will buy 4.86 million shares for a total of 30 billion yen (USD$265 million) via its Hong Kong-based subsidiary Sixjoy. It will become Kadokawa’s third-largest shareholder. The transaction is expected to take place between November 15 and 26.

Kadokawa states that the companies will “jointly invest in Kadokawa animation titles and jointly work on game adaptations of those titles.” A big impetus for the deal is the desire to develop and spread Kadokawa’s vast library of IP, which includes anime and games but also manga, books, live-action films, and more.

China is a huge and fast-growing, yet sometimes inaccessible, market for foreign entertainment. “Japanese IP is also very popular in China,” Kadokawa president and CEO Takeshi Natsuno told Japanese news program Abema Prime. He noted that the Chinese government limits the number of foreign titles released in the country, but suggested that Japanese-Chinese co-productions might not count as foreign, thus bypassing the protectionist policies.

Natsuno added that the production of these shows wouldn’t necessarily happen in China, whose animation labor costs are starting to outstrip Japan’s.

Tencent has been busy buying, investing in, and partnering with game companies and animation producers around the world. It also invested 65.7 billion yen in Japanese retail titan Rakuten in March. But at home, it has faced a growing regulatory crackdown on gaming.

Meanwhile, Kadokawa is rapidly developing its own anime strategy. It currently produces around 40 titles per year. It is a majority shareholder in Tokyo-based cg studio Engi, which was established in 2018, and has a stake in Tokyo-based 2d studio Kinema Citrus. This summer, it launched Studio Kadan, a new cg and vfx studio.

Earlier this year, the company announced a capital alliance with Sony and advertising company Cyberagent, with a view to developing its game and animation businesses.

Image at top: Kadokawa’s feature “Konosuba: God’s Blessing on this Wonderful World! Legend of Crimson”