DeNA : Business Strategy Briefing Q&A Summary

Q1

Can you give us an update on the Curation Platform Business?

A1

(Moriyasu)

We are exploring various possibilities for the Curation Platform Business. We believe that editing and content review will be key factors in any service in this space, so we feel that it would be challenging for DeNA to operate such a service on our own. We are continuing to explore opportunities in digital media with Shogakukan, as per our April 2017 press release. We have not made any decisions that we can share today, but we are increasing the frequency of our meetings with Shogakukan, and our discussions are progressing positively. We previously operated ten media, each with varying levels of operating difficulty. We are continuing to consider what areas and genres could be possible and narrowing the focus of our discussions. Given this situation, we have been shifting personnel away from the Curation Platform Business. Currently, this business has been reduced to about 50 people. We will make information available once we make any decisions.

Q2

I believe that in the early days of the internet, as long as you had a great idea, it was possible to achieve success, even with limited capital resources. Now, in the early days of AI, a number of global companies with significant capital resources are all pursuing initiatives in this space. What do you think is DeNA's unique strength in this space?

A2

(Moriyasu)

With pure internet services, it is possible to see the response from users immediately, track trends in the short term, and develop your business accordingly. However, with AI, there are many connections with the real world. Because of this, I believe the value chain and the timeline will be extended, as you figure out how to acquire and use data, and what feedback to provide. So, it is not a simple battle of ideas. It will be important to create a business with a long term view. We will first place priority on solving social issues in Japan, and accumulate strengths in areas where it is difficult for a company to enter from outside Japan.

Q3

You have developed partner relationships with other companies in multiple businesses. Is there any underlying reason for your success in these partnerships, such as your corporate culture or identity?

A3

(Moriyasu)

Each of our partners come from a variety of industries, corporate cultures, backgrounds, and decision-making processes, and DeNA has successfully established dialogue while respecting those differences. We also do not necessarily always insist on pushing the DeNA brand. We are flexible with the needs of our partners, and prioritize working together to deliver a good service and delight to our users.

Q4

It has been awhile since SHOWROOM was launched, so why do you now have such high expectations for social live streaming services?

A4

(Harada)

In the Incubation Unit, we focus particularly on trends we expect will occur in the short term, and keeping the first mover advantage in mind, we keep an eye on controlling costs that tend to occur when you are an early mover while flexibly pursuing various initiatives.

In general, the amount of time it takes an internet service to be profitable has been lengthening. For example, I hear that it now takes seven and a half years for a company in Silicon Valley to go from launch to IPO. I think part of the reason for the current rise in social live streaming services is the combination of the popularity of stamps and other images used in chat services and the success of services that build excitement by driving participation and consumption from users in real time. China is also ahead of us on this trend, due to the speed of smartphone adoption in China. The popularity of social live streaming services is not unique to China, either. They are also popular in the US and Southeast Asia. I feel they are gaining momentum in Japan as well.

Q5

What initiatives are you pursuing in eSports?

A5

(Moriyasu)

I believe that Games x Sports is an extremely interesting area, but there are various approaches to eSports, encompassing platform operations, team management, and the games themselves, so we are exploring multiple options. Depending on the approach, there may need to be more discussion about relevant laws.

Q6

Over the past few years, it seems like you have not done much M&A. Can you give us an update on your approach for growth investment?

A6

(Moriyasu)

Up to this point, we primarily focused on M&A opportunities in startups. Going forward, we want to mainly focus on companies that have already achieved some sort of base for their business, and are generating profit. For the area, we ideally would like to stay near one of the five areas discussed today, but we will consider any business where the use of internet or AI technology, or the use of DeNA's knowhow could change the business's growth trajectory.

Q7

What is the device strategy you refer to for the game business? Are you considering providing games for console?

A7

(Matsui)

We are not currently considering developing games for console. However, we are exploring possibilities to, for example, take game apps originally developed for smartphones and with minimal additional effort provide them on PC, mobile browser, or potentially in the future, console. We are also building solutions for this purpose.

Q8

As part of the Yokohama Sports Town Concept, what business opportunities exist outside the stadium? Or is this more of a public project?

A8

(Okamura)

At this point, we intend to create a public center that attracts people and businesses. In other words, while we ensure that Yokohama DeNA Baystars content is taking root, we will pursue these initiatives with the aim of sustainably developing the Yokohama DeNA Baystars even further. However, there is a limit to what we can achieve with only our own content, or with expanding merchandising and concessions within the stadium. For example, we could add in public viewings, or initiatives like Tokyo Dome Corporation has pursued with various facilities or combinations of initiatives to increase profit.

Q9

What is your view on Superhuman Sports?

A9

(Okamura)

We are following Superhuman Sports closely. By utilizing various technologies, they provide the experience of what it is like to be a top-class athlete. I believe this area will be very interesting going forward, both as a participatory sport and a viewing sport.

Q10

In Healthcare and Automotive in particular, I believe it will be necessary to take the risk of owning assets. What is your approach for these businesses?

A10

(Moriyasu)

When considering M&A opportunities, we do not remove anything from consideration simply because it may result in owning assets.

Q11

In the explanation of the Incubation Unit, I think you mentioned that you will allocate more resources to businesses following positive signs. Are you not creating your own new innovative businesses from scratch?

A11

(Harada)

We of course have initiatives to create new businesses from scratch, for example some ideas originated from internal contests. Looking globally, even for services that have now grown to be massive, there were actually many services that were similar, but with slight differences. Keeping up to date on these potential new trends is imperative.

When I talked about investing more resources as the product grows, that is simply my approach to investment. When we are building a service in the Incubation Unit, we create a minimum viable product to validate demand. We minimize costs to the extent possible, and aim to capture the first mover advantage. Then, when we see potential, we invest more resources.

Q12

Can you share your approach to resource allocation in the game business? Also, any updates on your relationship with Nintendo?

A12

(Moriyasu)

We continue to place high priority on titles in the Nintendo Alliance. We have a little more than 1,000 people in the Game & Entertainment Business Unit, with about 100 directly participating in development for the Nintendo Alliance. So we have more resources available that we can allocate as necessary.

(Matsui)

Our partnership is going extremely well.

Q13

In the slides, you mention that you will "Use FY2020 as a checkpoint to confirm our progress towards achieving our long term goals," but how do you plan to evaluate your performance until FY2020?

A13

(Moriyasu)

We will be doing progress reviews prior to FY2020. We set milestones for what we want to achieve, back calculated from our long term strategy goals. We conduct detailed progress reviews at least once a quarter, and make changes to our direction as appropriate.

Q14

What is your view on HTML5 based browser games?

A14

(Matsui)

We are continuing R&D for web technology as a development tool, so that we can catch up on any differential between previous game development methods and HTML5. On the other hand, porting both past and present games into a browser format is not very difficult, so we will be able to do so.