Creating value through emotional experience

Sales of music CDs in Japan have been declining steadily due to the change of users' sense of value and consumption style caused by the information technology innovation. Currently, annual physical music sales in Japan total about 310 billion yen, down by roughly half from 1998 when CD sales peaked. On the positive side, there has been enormous growth since 2005 in the volume of music sold over networks, chiefly to cell phone subscribers. This market segment had sales over 90 billion yen, but this growth has not offset the steep drop in sales of packaged recorded music. This is why the Avex Group is not optimistic about the future for music companies that rely on a conventional record-style business model.

To adapt to changes in market conditions, the Avex Group is moving away from a business model that is heavily dependent on CDs and other packaged products. We are instead increasing emphasis on various businesses that surrounds artists, such as agent business, live performances, merchandise, fan clubs and keeping the sales level by developing our own business model in a comprehensive manner.

We are yet far from satisfied and aware that the company needs to grow further. Centering the entertainment, we continue to challenge new business areas that would lead enduring growth. We have announced the mid-term business plan, "Next Era 2014", presenting our direction and strategy. It would be our pleasure to share our view.

Our group will go on to contribute to the society through entertainment activities and provide color to customers' life by "creating value through emotional experience".
We would like to ask for your continuous support and encouragement.

Masato Matsuura
CEO
Avex Group Holdings Inc.