KADOKAWA ANNUAL REPORT 2006

We promote the development of “Cross media business” combined not only with paper media but also with the Internet and mobile phones that are expected to show a great growth through splitting off the editing section of “Walker” magazine and “The Television” magazine into separate companies and by integrating them with subsidiaries related to IT and digital contents. As of June 1, 2006, Kadokawa Cross Media established April 1 (by splitting Walker business dept., Ad business dept. and other sections of Kadokawa Shoten) bought out Walker Plus and Kadokawa Shoten Hokkaido, and Kadokawa The Television that was established at the same time (by splitting some part of magazine business dept.) bought out Kadokawa Interactive Media.

Kadokawa Cross Media is going to link the Walker magazines such as "Tokyo Walker" and the web/mobile sites of Walker Plus, and Kadokawa The Television will fuse TV information magazines such as "The Television" with "web The Television" and "Keitai The Television". In this cross media business, we develop multiple media by mixing and crossing them in order to enhance readers' and users' abilities to reach/recommend and to expand the operating revenue at an early stage. As to advertisement business, we will realize a united advertisement with higher appealing power by uniting different media, which has never been done before, and we will respond to the needs of a wide range of clients flexibly.
Along with the spread of the Internet and mobile phones, an open environment where this information can be shared was created and in the dual-directional micro media, information communities for experiences and word of mouth information were created. Which means that voices of consumers using blogs and SNS (Social Networking Service) will have high value as information. We are going to fuse these characteristics with paper successfully and to convert to a business model complying with the needs of the age as Kadokawa type cross media business.

With regard to the site management business of this term, the largest entertainment information site in Japan "Walkerplus.com" expanded its business territory and improved sales steadily, and at the same time Kadokawa Interactive Media that distribute TV program information widely to paper media, web sites and mobile phone and Kadokawa Digix that offers various attractive solutions in the IT business industry expanded their business territories and improved the business results.
"Mobile Walker", "Mobile Famitsu" and "Melody Clip!" that develop mobile phone business also improved the functionality of equipment and services and expanded sales steadily, moreover we started operation of new "Kadokawa mobile" aiming at a comprehensive portal site where the abundant content assets of our company group are assembled.

Kadokawa Mobile started an electronic book site for mobile phone users called "Choku yomi" from March 30, 2006. Using this service, you can conveniently purchase even one favorite book without the need to pay a fixed monthly information charge. This distribution service is carried out mainly using the rich content of Kadokawa Holdings (magazines, books, comics, animations and movies). With regard to light novels in particular, all labels among the group publishing companies in Kadokawa Holdings participate in the service and offer the largest selection of books in Japan. As a unique service from the site operated directly by Kadokawa Group, it is planned to distribute new book or magazine information for each label as well as event information. We will expand the distribution service to various platforms including PCs in the future. Furthermore, with the rapid expansion of the electronic comic market for mobile phones as a background, we have decided to start distribution of electronic comics in order to utilize the comic assets of Kadokawa Comic Ace and so on that are retained by the group. The Kadokawa group retains a large number of comics including "Sergent Keroro" that can be proud of its accumulated sales of 8 million copies, "Evangelion" that has just celebrated its 10th anniversary and "Emma" the popular work from Enterbrain.