Thank you very much for attending today's meeting, to all of you. In the Road to 2020, the previous medium-term plan, made a huge transformation. After the COVID-19 outbreak in last year, we have embarked on a structural reform from early on. Of course, we had to make very difficult decisions in some cases, but as it turns out, we have been able to become a leading corporate group as a result of these efforts. In the new medium-term plan, we will work on the theme of breaking the status quo. Beyond the Status Quo is the title, under which we will implement various management measures so that we can establish a foundation for a dramatic growth for the future. First of all, please take a look at this page.
This is the operating profit changes in the entertainment content business. Because of the stay-at-home demand due to COVID-19 last year, we have achieved a significant increase, and the general trend is on the recovery. This pachinko and pachislot business was largely affected last year. Due to the deregulation scheduled future, we believe the pachislot and pachinko business will also be able to achieve a recovery going forward. The entertainment content business, because the market is growing globally, we will make a huge investment in this area so that we can propel our growth for the future. Mr. Sugino will explain in more detail the growth strategy for consumer business from now onwards.
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Good afternoon. My name is Sugino from Sega. Thank you very much for being with us today.
We have met with some of you during small meetings. Today, I do understand that so many of you are attending our meeting for the first time, so there might be some overlaps with the previous presentation, so please allow us for that. We'll try to cover 40 pages of materials in 30 minutes, so we are going to rush through the documents, but please allow us to do so. Now, well, I will talk about the market environment. The consumer business global growth, of course, this is like preaching to Buddha, but this is continuing to grow. We have achieved a significant surge because of the rapid growth due to the stay-at-home demand due to COVID-19.
Most recently, the market size has grown to JPY 20 trillion or so. This is expected to grow to JPY 24 trillion-JPY 25 trillion in FY 2024, 2025. In this environment, platform holders, previously when it was a consumer business, Microsoft, Nintendo, Sony, those were the major players, the legacy players. Those were the legacy players that was available in the market. But most recently, the borders between devices and regions are disappearing. As you can see, more than 10 different platforms are now already available in the market. We, too, are discussing with each platform holder on a daily basis. Also, the monetization model has also gone through a major change. The one-off sale model plus the download content, these are now becoming free-to-play, are also becoming available.
Among the free-to-play and play-to-earn is also another format that we are now emerging, that is beginning to emerge. The monetization model, subscription, season pass, those flat rate models are also becoming available in larger variety compared to before. In this environment, in order for us to achieve further growth, gamers are now reaching 3 billion people on a global scale. This has grown to a very huge industry. Facebook has changed its name to Meta. GAFAM and all these large capitals are making a full-fledged entry in this business. Including the infrastructure, the huge amount of money are now flowing into the gaming industry. In this environment, the content itself cannot be contained in the cloud infrastructure and also subscription businesses.
Those, of course, for the platformers, those are the neighboring industries and businesses. Those are driving the growth and expansion of this market. The global customers, the global players, the access to games have become lower in terms of their level of hurdle. Hobby gamers, which is a jargon that we are using ourselves, but those people who have a living console in their living room and rather than those people, those are more casual users. Those people who used to play games in the past are now coming back to the games again because of COVID-19 using tablets or PCs. They are now enjoying games as a very light hobby. These are now becoming a significant segment in terms of number, which is not negligible. In this environment, I'll talk about the ecosystem now.
Not only the game users, but also those who only view. There are also our viewers who just watch it and then provide some commentaries, those people who develop characters within the game. There are many roles, gaming formats and players. Those people, together, we believe there's about 3 billion people who are engaged in games in different formats. We have to develop content being mindful of these total population and ecosystem. Now, in this environment, that was about the external environment. From here, I would like to talk about the internal environment of Sega, starting off with the strength of Sega. Of course, the Japanese gaming industry, I'm not really sure if this is the right angle, because we are now competing on a global scale.
I believe as a Japanese game company, we have the largest global studio structure in place for R&D. Of course, we have 1,200 people in Europe, 2,000 people in Japan and Asia, and 350 people in North America in terms of R&D resources. That is our current global structure, and that's only for the full-time employees. For overseas studios from 2005 onwards, we have started M&A. In 2006, we created our Creative Assembly. We now have 660 people, starting off from 60 people. This is our company developing Total War, and Total War: WARHAMMER III is going to be released this year.
In 2006, the same in U.K., Sports Interactive was acquired, which is a management company game for football. This is one of the IP pillars for us. The Football Manager 2022 will be released shortly. In 2013, when I was responsible for consumer business, Relic Entertainment in Vancouver was acquired by the company. For the major IPs, of course, this is some time ago, but we have just recently announced its series, Company of Heroes. The most recent ones include, this one is quite brisk, and this was published by Age of Empires by Microsoft. Also in 2016, Amplitude Studios in Paris, France.
This year, they have released Humankind as a new title, and they are good at 4X area. Those are the titles that they are good at. Also in 2019, we purchased a company, Two Point Studios in the U.K. They only have 30 people here, a very small scale studio. The profitability is quite high this year. Two Point Hospital is a bestseller for this studio this year, and Two Point Campus in 2022 is planned for release. Including all these, IP is now getting richer in terms of the availability or the variety. We just presented the overseas studio in the previous page.
In 2013, in Japan, Atlus was joined the Sega Group in 2013. In the Japanese studio, those are included. Also, the Megami Tensei IP is a major one that they are providing to us. Sonic, because of the blockbuster's profitability with the movie. This is now reviewed as a strong IP. We are receiving a lot of inquiries for collaboration. The past IPs, like six or seven of them at the bottom there, these of course, we will look into the right approach and try to utilize them one after another. Next. We just talked about the overseas title previous, in the previous page.
We don't talk about this so much on a daily basis, so I just wanted to give you a review recap on this. Humankind, that I just introduced a while ago, this is very well received by the audience. Actually, we have won several awards for this title. The Total War: Warhammer. We'll come back to this topic when we give more details about Total War later. In mid-February this year, the third of the series will be released shortly in February. Company of Heroes three that I just alluded to, this will be planned for release next year, and wishlist on Steam. Actually, there are so many people who are interested in this. Within Sega, this is one of the top titles, and this is generating great numbers.
I think we have a very great, good, sign, looking at very good signs for this, prominent, prospects of this business. Total War: Warhammer, each studio on a global scale, they are engaging in many collaborations with many different studios. One example, we have collaborated with NetEase of China, and this is a mobile phone title for smartphones, and we are planning to roll this out globally. Now, I would like to show you a short video introducing this title that will be available on mobile phones. I believe we have developed a very high quality title with this. Now I'd like to move on to our medium-term plan. First of all, global leading content providers. We'll become global leading content providers.
Over the longer term, of course, we will create the Super Games. For the first three years, we would like to utilize the existing IP so that they can start generating earnings. That is the focus for the next three years. In this endeavor, for Super Games as well, we would like to make aggressive investments for our growth in the future. Up to JPY 100 billion of additional investments are planned for the next medium-term. As for our strategy portfolio, if you look at the upper left, the focus area for the next year is how to develop a global brand of the existing IPs. JPY 10 billion per annum is the revenue size that we would like to achieve, and that is the ambition. Next.
Of course, the highlights for each activity are presented there for the five IPs here. First one, we would like to expand the touch points. Secondly, we would like to prolong the product life cycle. Number three, we would like to reinforce and strengthen the user engagement. Those are the three pillars of our growth, so that we can drive growth through it by focusing on these activities. Of course, the approach will be different from IP to IP, but this is general direction. For Sonic and Ryu ga Gotoku or the Yakuza series and Total War, we will talk about this later, so I will skip this.
Phantasy Star Online two, on a global scale, we have started to release this and live and also some we are trying out many different things so that we can reach out to a broader audience going forward. For media mix for Sonic, media mix live and animations are gaining a lot of great reviews, so we would like to expand touch points so that we can expand together with the user community and generate revenues. Now, I would like to give you some concrete examples regarding the IP growth strategy. I would like to talk about them one by one. First, about the Yakuza series, although what Toshihiro Nagoshi have done is already explained here.
For expanding a touchpoint, we want to have a global multi-platform and multilingual support. We have been increasing the touchpoint. We have also been prolonging the product life cycle by strengthening digital sales, the PC version, and also starting a subscription model. For the Microsoft platform, it was available. We have been using the Unreal Engine to do a different platform. From Ryu ga Gotoku, it was converted into a game with the main character Ichiban Kasuga. As for user engagement, there are some setbacks, but we have been progressing with the digital marketing. As for the PC sales for the Yakuza series, from March 2019, we have offered the PC support.
As at this point, the sales is 2.89 units, which is quite strong in our view. Also for Lost Judgment, this time, we have done a simultaneous global launch for Japan, Europe, and the U.S. At last time, U.S. and Europe lagged behind for the launch time. But with the global simultaneous launch, we were able to increase the initial sales by 76%. And I will skip the details about the strategic rollout, but we have the titles on the vertical side and the horizontal side, we have the strategy of touch points. And if you look at the different animations, we have been expanding geographically and also have been increasing the platform.
I think we have been able to check in the points on the list, and we have been able to still generate good profit for each of these initiatives. As for how we are rolling out the strategy, it's a little difficult to see, but Y-axis is mobile, X is geography, and Z is the platform. For Yakuza series, originally, we had the Yakuza title in the European and the U.S. market. By offering a PC version, as I have been explaining, we have been expanding the touch point. In Kiwami, which is a remake series, by that launch, we were able to reach the current users. By digital sales, with the stay-at-home consumption, we were able to see a big spike in the demand.
Further, with the subscription, we offered it to the Xbox Game Pass, and with the same IP, it was converted into Lost Judgment. As an IP, we were able to expand the depth and broaden the offering with the same IP. How have we been growing? From March 2017 until March 2022, we have been achieving a sales CAGR of 17%. Next, let me talk about Total War. Similarly, we have been expanding the touch points with this IP with a global rollout, multi-platform, and multilingual support. I said that we have been using Warhammer to focus on Europe and U.S., particularly in U.S. With Three Kingdoms version, we have been reaching to the Asian audience, particularly to the Chinese market.
As you have seen in the video, we have collaborated with the Chinese partner to expanding the Asian market. As for prolonging the product life cycle, in the current environment, we have the remaster so that people can really enjoy the game. With the user engagement, by communicating with the users, we have been offering the DLC. Likewise, we have also done the subscription model. In strengthening the user engagement, each of the studios have been communicating with the users by providing some of their news. With that, we would like to augment our CRM activities. This is the Three Kingdoms motif that was used to aim for the Asian market. The sales in the Asian region increased by 67% compared to the previous title.
As for Total War, we have the Y motif, the X geography, and Z is platform. This was originally a PC game, so we have been expanding to the mobile application. For a global, for mobile, games, we would normally work with a partner. In 2014, as you can see on the right-hand side, from 2004, we have used the original Rome IP, and we have also expanded into the motifs, and also been offering the DLCs. For each of these titles, the number of players, active players have been increasing. For Total War, it has been able to maintain the number of user base to move on to the next title or next series. I think we have been able to maintain a good KPI.
CAGR for Total War was 12%. Depending on the launch timing, the growth is up and down, but figure is 12%. Last is a Sonic IP. For Sonic, in 2021 was the thirtieth anniversary. I have a list of things that I want to say, but we have done a lot of collaboration. A lot of events online were conducted. The IP brand awareness has been expanded. For the license business, after the movie, from a lot of global partners, we have been receiving a lot of inquiries. It doesn't have the actual numbers, but you can see the business offer is increasing and the license business is growing. We would like to continue to grow this business.
From 2021 to 2022, a large media mix is in our plan. Just recently, we did the movie and also the game. I think it was announced last week as an announcement. The movie will be Sonic the Hedgehog two. The feedback is really good, and we expected that, but the reception was much better than expected. With Paramount and ourselves, we are very happy with the outcome. With Netflix, we are going to do a Sonic Prime. That series will be available from next year. After the movie, we made an announcement with a whole new version, Sonic Frontiers. There's a lot of expectation building up for this. The next page. Also, some of you may have not seen this yet, so I would also like to share with you some video about Sonic Frontiers.
It will be for Christmas season next year, with multi-platform and global simultaneous launch as our target. We will be striving to achieve that target. Next. Now, let me start with the CRM. This is not just for Sonic IP, but going forward, we would like to augment the CRM activities to enhance the engagement with the users. In France and Canada, as you can see on the right-hand side, we have this initiative Game Together. It's a service where the studio and the users will do the beta test in a closed environment. They can exchange information and opinions. It's like users are creating the game together with the studios. This is becoming very effective.
At this point, we don't know how we are going to globalize this initiative, but this is something that we are working on right now. Those are the talks about IP. For Super Game, in five years, this is something that we are going to be working on. We are now doing a lot of preparations, and the keywords for Super Game is a global, online, media, and IP. Those were the buzzwords. In five years, I would like to be able to provide some game that will be suitable for what's needed in five years. Recently we made an announcement about the collaboration with Microsoft. This is concerning to have a strategic alliance with Microsoft.
If there are technologies available outside of our group that's advanced, we would like to make use of that. With Microsoft, they have listened to our strategy, and they are very enthusiastic about this collaboration as well. We are now in discussion with the Microsoft team. Toward the next fiscal year and after, let me talk about the Sega things. Looking back this fiscal year, we have the Sonic Colors: Ultimate, Lost Judgment, Humankind, and Super Monkey Ball. Those were the games that were launched. For the second half, we have Shin Megami Tensei, Football Manager, and Total War. Also, at this point, the marketing has been very successful. For Shin Megami Tensei, the sales has been quite good. Regarding free-to-play.
Tomorrow, for PSO2, the big update is going to be happening. Last week, our Project SEKAI had a global launch. For Sin Chronicle, this is a new version. This is a sequel to Sin Chronicle. This is slated for spring next year. Beyond next fiscal year, these are things that we have already announced. Sonic Frontiers, and also Company of Heroes three. This is going to be a RPG, totally new game by Atlus, Project Re Fantasy, and also FPS title by the European studio, and also the latest title of Yakuza series. We don't have the visual yet, but these are in the pipeline for next fiscal year. We also have things that we have not made public yet.
Sorry, I had to rush through the presentation, but thank you very much for your attention.
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Thank you. Now we would like to move on to the Q&A session. For the details pertaining to the procedures of the Q&A session, please look at page 48. We would like to limit the number of questions to three per one questioner, and those should be limited to only the entertainment and content business. Now, if you have any question, please indicate by pressing the raise hand button. Yes. Okasan Securities, Morita-san, please.
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Hi. Hello. Okasan Securities, Morita. My name is Morita from Okasan Securities. Can you hear me okay? Can you hear me? Moshi moshi [Japanese]. Hello, can you hear me?
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Yes, we hear you.
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Yes, I'm fine. I he ar you well. All right. I have three questions. I would like to ask these questions all together. The first question regarding Sonic Frontiers. Relating to Sonic Frontiers, we just saw the video, and it looks like an open world kind of a concept. Is that correct? That's the question. I think it's well developed as a game, well designed as a game, according to my impression looking at the video. But if you have any target number of sales, please let me know in terms of number of video game titles to be sold. My second question. Total War. Your engagement with NetEase. I forgot the page number, but I think the... What is the publisher that you have in mind, especially for China domestic market and outside China?
What is the scheme that you are contemplating as you move forward with this business? That's my question number two. Of course, at the same time, I would also like to hear your views regarding its impact on revenues. That's my second question. My third question, regarding the external environment that you explained at the outset, play-to-earn. You mentioned a play-to-earn model. You referred to that possibility. As your company, for play-to-earn, what kind of views do you have for play-to-earn? Can you elaborate? Those are the three questions that I have for you. All right.
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May I comment? Okay. Thank you very much for the questions. First of all, overall, for the numbers, I would like to reserve my comments pertaining to numbers that we have not made any disclosures. As for Sonic, because this is a complete full new title for the first time in many years, we were going to follow the strategy and follow a global multi-platform approach on a global scale. We would like to have a lifetime of views here. Most recently, with Shadows of Genesis, but, you know, I mean, the Sonic. Our ambition is to sell the highest amount of quantity in the recent titles of Sonic. But I cannot disclose any details pertaining to the concrete numbers of sales.
For Sonic Forces, in the first year, it sold 1.7 million on two platforms. We would like to go beyond that number with the new series. Personally, I would like to go for the 2 million because this is the larger number because one point eight, sorry, 1.8, I think, because this is the last year. We are limiting only to one year, so we would like to go for this large number. We won't make any concessions regarding the quality. Of course, I won't comment on any details whether it is open, but we are going to embark on new challenges. This is a title that has taken on many new challenges according to our view.
If it was only for releasing, we should have been able to release it only this year already. This is different when the interconnect of games came together, but we have many outside people to try out the game so that we can test the impressions. Those are reflected in the title development.
Of course, including scientific analysis, if we can extend the launch by one year, we judge that this will become much higher in terms of quality, and therefore including the volume as well. That's the reason why we have extended the release up to next year. The release was postponed until next year because of these reasons. I believe it's a good quality. I agree with your impression. For Total War, the publisher at this point of time, Netflix is currently contemplated, but because of the many different circumstances of late, because the release is scheduled further down the road, we would like to seek the best situation mutually.
If anything changes over time, because we believe we are flexible in negotiations, so we would like to continue such dialogues depending on the circumstances. Also for the licensee Games Workshop, including their intent, we would like to reflect that in the negotiations. Also for the external environment, the third question relating to play to earn. In terms of MFP, of course we would like to try out many things, to be honest with you. Of course, many different studies are being explored at this moment. Play to earn, whether to do this or not, we would like to study this and look into this, but nothing is decided that we will go for this at this point of time.
In the guideline, the real money play, what is different with that? I think that is a question that you may have. Within the framework or the legal framework of Japan, what can be done, we have to do this within the guidelines in Japan and also the large game manufacturers, including overseas players, they have announced many things and users have shown a very negative feedback in many cases. Once it's released and people started to pay, maybe the perception will change, but I think they said it's greedy in terms of the comments that we have received from the people who tried out. What will be accepted by the users, what will not be accepted by the users will be carefully determined as we move forward.
Our mission is to continue providing experiences that can be touching to consumers. If it's very well received by customers, we might as well do that.
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Thank you very much. I look forward to Sonic Frontiers.
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Yes, please do so. Stay tuned with that. Thank you.
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Thank you very much. I'd like to take the next question. From Mr. Maeda from SMBC Nikko.
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This is Maeda from SMBC Nikko. Thank you for this opportunity. So you talked about the JPY 100 billion of active investment for growth. So I think this is an additional investment, but what is the annual base of investment? I think on top of the base investment, you're going to make an additional investment of JPY 100 billion yen.
When this additional investment is made, is it going to be an expansion of existing IP or are you going to be creating new IP? Or is it going to be for the Super Game? How is the allocation going to look like for the additional investment? On top of that, for the Super Game, for lifecycle or lifetime, I think you're aiming for JPY 100 billion of sales. When you think about that, with JPY 100 billion of sales, what is going to be the profit contribution? What is your rough image in the plan?
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Yes, thank you for the question. So we're looking at maximum JPY 100 billion as investment, so that's allocated in the budget. Right now for R&D cost, I think you're talking about R&D investment. Right now, we're spending about JPY 50 billion.
That's not included in this JPY 100 billion, as that's a separate budget. Organically, this is going to increase in the future because we are also actively hiring people. In that context, inclusive of the organic part, we will be increasing the resources and maybe including M&A out of the JPY 100 billion. I think JPY 20 billion will be allocated for that extra resources and M&A potential. Aside from that, we will be working on IP and also mechanism structure. As a value chain, we want to be global offering online games. To compete with that feature, there are some shortfalls in our offering today. When I give a PSO two, I know we are delivering well, but there are still improvements that we can make.
We have the technical knowhow and expertise. We know what's short, and we know how we can improve the quality, and we have a good understanding of that. For this, we would like to make investments. That's one, investing for value chain. Now for the existing IPs, regarding IPs, we have interest and we have done M&A in the past looking for IP. If something good comes up in the market, we will be interested. I know that other companies are quite active in this space, so we will be looking at the opportunity closely. I would like to say that we are not going to dismiss the M&A opportunity for IP. For NFT or other new technologies and also other new domains, it's difficult to try to build that up from scratch.
Of course, technologically we will be able to do that, but it's better to have multiple partners. This will be separate from value chain, but for the new technologies we're doing, domains, we would also like to consider investing into new companies. Also for M&A. Without M&A, it would be difficult for us to use JPY 100 billion. Of course, there are counterparts for any M&A opportunities. We would like to closely consider our opportunity to go through the list. As for the profit contribution, at this point, last fiscal year and this fiscal year compared to the first, as we talked in the early part of the presentation, for the entertainment segment, we have been improving our profitability. We want to elevate the profit level one notch further.
With the investment of JPY 100 billion, we want to make sure that we have a structure in place to maintain the current profitability. That will be part of that JPY 100 billion as well. Regarding M&A, we have to talk about the counterpart and also the price. We are very cautious. In the European and U.S. markets, the valuation is very expensive, so we don't want to buy something expensive. More immediate plan for investing is recruiting and also setting up the working environment. Creative Assembly all have received six and seven years of awards as Best Place to Work, and our offices have also. We have not been opening up our office for the last year or two, so I wonder why we're getting these awards.
I can say that the studio's working environment has been appreciated, and that's why we were able to successfully launch hit titles. Also, in European and U.S. studios, we are actively recruiting. In Japan, not just in Tokyo, but in the regional cities, we have been very active in recruitment. In that sense, out of this JPY 100 billion, outside of the working capital for the existing IP, we have plans to invest this JPY 100 billion of budget.
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Thank you very much for the answers. Thank you.
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Thank you. Now we'd like to take the next question.
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This is from Mori-san of JP Morgan Securities.
Hello, this is Mori from JP Morgan. I also have three questions.
First question, regarding Sonic. Next year, I have high expectations for this title. This Sonic business, expansion of the breadth of the business, can you talk about that? Basically, I believe next fiscal year the game sales will be the centerpiece of your activity. As you have shown in the graph, loyalty revenues are also there. Also the video and merchandising animations, I think, there is a possible potential for you to embark on this so that you can further expand your revenue. How would you like to strengthen the monetization of the Sonic IP? Can you explore and talk about that potential? At the same time, the IPs that you own, among them, do you have any other titles that could follow a similar IP strategy as Sonic? Can you talk about that?
That was my first question.
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Should I continue?
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Yeah, I'll continue with my second question.
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My second question is about the repeat sales. The expansion strategy for the repeat sales, I just would like to revisit this question. Every year, new titles. When you have a rich set of new titles, in the following year you have a trend to make money from the repeat of that. Of course there should be volatility in terms of the new titles, but expanding a repeat every year and accumulating that, can you share your views about the strategy for that? Because maybe I'm sorry, so sorry that my question is not clear. According to other companies, they are taking a pricing strategy so that they can expand the number of countries where they can sell. I think that's the accumulation model that they're following. What is your approach for this possibility?
My last question, this is somewhat more ambiguous, so sorry for that. We've been talking about the NFT and play-to-earn, and this is a related question. Metaverse is now becoming a buzzword, so how you define that? Including that, can you share with us your views about the business opportunity for Metaverse?
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Thank you. Now, Sonic was the first question. The expansion, the possibility of expanding this business. As you just pointed out, the game will be the centerpiece of our activity, center focus going forward, because we are a game provider anyway. The animation partners and of course the theater version in English and animations, and those things that could have a negative impact on the game, even though they have a business opportunity, we will exclude that from the picture. Therefore, in terms of expansion of business, game will be the centerpiece. On the other hand, in games, of course for global multi-platform approach and releasing new titles is nothing that we have done in the past. We have to focus on this and do this properly first and foremost. Of course, when it comes to movies.
As you know, these are now being translated into subscriptions, and of course, I cannot give you some concrete numbers, but the number of user-viewers are increasing significantly. Tens of billions of people are now reachable, including the mobiles, not only the animation and films. That is the size we are talking about. Two generations, father and son, for example, mother and son, and parent and child, and talking about Sonic together with the parent and son or child, those are now increasing in cases. Therefore, in this environment, we would like to offer high quality games in a proper manner. That's very important for us. For other surrounding or peripheral areas, we would like to partner with good players.
Of course, money is very important, but first and foremost, we would like to align with big partners who can issue and publish good quality. That's very important. If you're asking us whether to do this in-house alone, of course, this is separate and sidetracking from the consumer business. Sega, we have these game centers and then, in our case, the amusement sales overseas are now growing significantly in terms of the sales amount. At Sega too, these are doubling every year. In this environment, the prize know-how, using prize know-how and doing things efficiently, we are now in that situation. Therefore, we would like to actively think about these possibilities going forward because of the environment.
Also regarding the license revenues that you have seen in the graph, this is a pure merchandising and collaboration licensing revenue, so that does not include any animation. When it comes to movies, we have a 55% revenue share there, so the revenue and profit, 50%, slightly less than 50% is what we earn. That is the amount in terms of the business. Also for Netflix, we have a different arrangement in terms of deal. That is a non-risk deal. For the animation business, of course, there are things that we do, some things we do not do depending on the area. Once 2 becomes a release, I think the Sonic one viewers will increase. I think that will become available in subscription sites.
Now we can be expecting a growth of IP revenues as a result of that. That's our expectation. The licenses on a retail basis, this is now growing to the size of JPY tens of billions. I think when you go overseas, we see this quite frequently when you go to the European market or U.S. markets. Asia, this is still a challenge, so we would like to accelerate our efforts this year and next year. The third question was quite difficult, whether we are going to do this or not. Right now, in IP licenses, when we talk about this from this angle, we are receiving a lot of requests with Project SEKAI and also the Persona.
Those are the titles that we receive a lot of inquiries, and we would like to focus on this and accelerate our efforts going forward. We are already pouring a lot of efforts, but we would like to continue with this going forward. Whether it's similar to Sonic, I don't think it's the case, because reaching billions of people is not that easy. Of course, we would love to see this expanding to that level. Comparable to Sonic, I think it's something difficult to achieve. What is different from us versus other companies is the heart of Sega, I think. Our Sega logo is different. Those are the things that we would like to leverage in order to develop merchandise. Something unique about Sega is that point, I believe. Super Monkey Ball, of course, the app store launch title.
Back then, we enjoyed millions of downloads at $19. This is a remake, it's been around, but in the U.S. and European markets, especially the U.S., this is quite popular. I think some possibility of merchandising will be sought there. Also for the Sonic movie, this made a very big hit. We are receiving inquiries for remake or making videos. Those inquiries are increasing significantly. That's the two, whether we are going to take that risk or not take this risk and then leave it to others. Those are the, including the idle IPs, old IPs, legacy IPs, reviving them together with partners could be a possibility for us to achieve additional revenues. Of course, we're not really sure what becomes popular of late, so we have to watch out the antenna.
Of course, the Yakuza, the karaoke content song, is now making a huge hit in Sweden. I think all the students in elementary school class can sing that song. We would like to keep an eye on these developments and seize the opportunity. For the re-release after the new release, I think the re-release, especially those released at the end of the year, will have healthy sales in the next year. Long tail business is now occurring in many cases. The re-release in the next year of the first release is now becoming larger in terms of size. What we do about that in the year that don't have a re-release or
Actually, we talked about Capcom, but Sega too, right now, even today, this is still the case as of today, but pricing strategy is something that we have been working on quite extensively at very cheap prices. Some campaign, some events, anniversaries, those were the things that we have been conducting over the years. We still do that even today. Pricing strategy, after all, is something that we have to review to some extent, because even at Sonic, quality is our focus. We have spent a lot of money for the development of that Sonic. It's not that easy for us to reduce the prices and sell large quantities. Rather, we would like to enrich the library and make it look different together with many different partners. I think that is more important as we speak today.
As for the areas, the regions, DX is now making a lot of progress. Our marketing was not reachable to some people, like Latin America, Africa or India. Those are. We are always still trying to keep an eye on where, what kind of opportunities are available in which region. There are some markets where we were not able to reach with our marketing. We would like to cultivate those opportunities going forward. That will further allow us to boost the baseline of our business. As for me, to add another comment regarding repeat, additional SKU, additional platforms, additional languages. It's not just that we just have the title there. All these additional things will become available as an additional support after the release, so that we can provide an update.
Including that, we have to make efforts so that the titles will not become obsolete. It's not that pricing reduction will do the job. After pricing, we will have to look at many campaigns, Sega Weeks, so that this is about discoverability. Out of the tens of thousands of titles at the store, how to have customers discover our title is something that we have to work on together with partners. We have to collaborate with this because we have been doing this quite skillfully. Not only reducing the prices, but working still skillfully with the collect campaigns. We've been introducing BI, scientific analysis, so that what will be the right price to maximize the revenue is something that we are always looking at, leveraging the historical data.
These studies are becoming more accurate and precise, so we would like to continue with these studies going forward. Yes, exactly. The result of the analysis, if it turns out the prices is too low, we will remove the title off the shelf from the next fiscal year. That's something that we do also. The third question relating to NFT and play-to-earn Metaverse, that was the question I believe. After all, maybe play-to-earn does not apply here, but IP, establishing an IP properly and having many users welcome that's for the first time we can achieve a Metaverse. When there's only 10,000 players, it's not a Metaverse. It's difficult to claim that as a Metaverse. That's how people talk about Metaverse. Because we have Metaverse, and we have.
People don't play games because there's a Metaverse. Therefore, PSO2, they're live, and they are realizing Metaverse. We hear that a lot. Sandbox, they have Sandbox types of game, many different, achievable scalabilities available. That's the strength of PlayStation, therefore. I think if that's enjoying, enjoyment of users, we would like to develop that and create that kind of opportunity. Unless we introduce something new, in three years' time, five years' time, the game will become obsolete. Therefore, in five years' time, for us to all these things that we are currently contemplating as specifications may become a Metaverse in that timeframe, because we are affected quite a lot by the recent trends, of course, we don't know how those are called.
In reality, within that world, we would like to develop games so that many people can do many things within that world. Of course, the independent games are currently being developed, so I hope that you understand that. Metaverse is becoming a bad buzzword. The plan that we do Metaverse, I think people will welcome that. The Facebook's Metaverse, that's my start. It's a next step SNS, now becoming video, photograph, so SNS, and then becoming video. Then next step is becoming a community. I think that is the ambition in the digital world, and this is the Metaverse. It's not going to become available tomorrow, what is the definition of Metaverse? There are people, and that creates a community.
Metaverse does not collect people, gather people, so like Fortnite, the, I mean, Dōbutsu no Mori, I think title, because that's a community because there are people there. We call it Super Game, so maybe this not ring the bell. But this could become a Metaverse. This could be a Meta. And if it, if we call, if you call it Metaverse, and it's more, well accepted by the community, we will call it that way. But we are not claiming that we are going to create Metaverse. We are claiming to create games, and it's going to be multi-platform and network, and community backed. That's what we would like to achieve. And in some cases, PVP and combating kind of elements could become a sport kind of thing.
That's what we would like to create. In that community, in that world, if it's downloaded by tens of millions of people, if there are so many active users, that could come, that constitutes a Metaverse. In the Project World, this is already receiving great reviews already within the people inside. Although this is not a virtual world, but it's kind of Metaverse in that regard. Metaverse in five years' time, when that becomes available, what constitutes a Metaverse may be different from what we have in our concept today. In that regard, although we don't call it Metaverse, but I think, something similar is envisaged by Super Game in our jargon, I would say.
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Hi. That finishes your question.
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Yes, thank you very much for your thorough answers.
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Thank you. Next, I have received a question from email. Mr. Nakata from QUICK. We have two questions from Nakata-san. The first one, regarding the project management of the overseas studio. The other peers may have been struggling, but in your case, how are you managing the overseas studios, or are you seeing any challenges? The second question is for Creative Assembly's FPS game on page 42. You are planning for next year's launch, but there's no information available. Can you give us some update? And what is expectation for the free-to-play FPS?
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Yes, thank you for those questions. Regarding the project management of the overseas studios, I know that the other peers have been struggling.
Right now, at Sega Europe, we have Gary Dale, who used to be the Take-Two Interactive's president. He is very good at communicating with the studios, because he was managing Rockstar Games. I won't say what kind of a company Rockstar Games was, but he gives us the organizational chart. He has the studios at the top, and he has himself at the very bottom. He has this strong thinking that they are trying to support the studios. That idea has been penetrated into the organization in Europe. Now, the previous president was also good, but the current one has a very good relationship of trust with the studios. I also have a very strong trust.
We have a relationship of very open conversation, and I think that works very well. In just one word, the Japanese game companies have struggled with the management of the overseas studios, and we see that frequently. We are not managing the overseas studios from Tokyo by Japanese people. The local management is managing their own business. It's going to be almost impossible for Japanese leadership to manage the overseas studios. We have a history of overseas M&As, we have embraced the identities of these overseas studios, including Atlus in Japan. We are willing to respect and protect their identities. I think that speaks for all.
Some of the challenges that we are facing is that right now, due to COVID-19, management has been quite tough. Especially in Canada, we are fighting for talent in the market because the talent recruitment and also retention for any company, I believe, is a challenge, including ourselves. Locally listed companies would offer stock options, but we are a Japanese company, so we have to have an alternative retention in project to retain good talent. Those are areas where we see as challenges. However, we have a very strong line of communication. We have been able to communicate over these issues on a real-time basis. Gradually, I believe we can improve that.
Also, regarding the FPS in Europe, this will be similar to the Sonic topic, but there are some challenges that we have to overcome. We have to make sure that we overcome those choking points before the launch. Just yesterday, or just last week, end of last week, we had a meeting of about one hour with the local studio. We want to enhance the quality slightly more. After overcoming those choking points, we would like to decide on the service launch date. Also, I know that we are not providing information. I feel the same way, so I hope that you can be patient. Next year, we will have some exposures to the media about this title.
We have just said it's going to be an FPS game, but the current trend would also be reflected. It's a new way of playing the game. That's something that we want to realize, including the visual. This is something that we are creating in the Sega Group, so we want to reflect some Sega style in the game. If those are achieved, we would like to move ahead. The development cost and also the operational cost, I think, this is going to be the biggest investment to date that we are internally developing. We want to make sure that we bring out the highest quality standard. Thank you.
We ran out of time. We would like to finish the questions for the investors and analysts at this juncture. Thank you. Especially now, I would like to continue with the presentation on pachislot and pachinko machine business. Especially focusing on Smart Pachislot and smart pachinko. What's the difference between the smart pachinko, pachislot compared to conventional ones? This page, please. Yes. First and foremost, it's very easy to understand. The physical payout of balls and medals will no longer be there, and the play data will be connected online, so the associations for pachinko and pachislot will be able to collect such data.
All these illegal chip acts, illegal play, and those counterfeit play will be known immediately that if this unit of this hall is showing something wrong, that will be immediately able to be spotted. This will be digitalized. At a glance, it doesn't look any different, but there won't be any balls coming out from the tray in, and the entry point of the balls will no longer disappear. There's no significant difference in terms of appearance. But in terms of function and the performance, there's a great difference. The benefits of introduction are as follows. From the manufacturer's point of view, of course, deregulation pachinko and pachislot, there will be deregulation.
Also for pachislot, as a member of the association, the board member of the association, I cannot talk about this, but there's a lot of news on the internet, so please refer to them. We are taking this quite positively, so all the dissatisfaction of the users can be resolved through this new regulation that is applied on pachislot. Of course the number of components will reduce. As far as the pachislot is concerned, the number of components used will come down. From the user's perspective, all these, we can design many good products. Also for the measures against addictions, because you don't have to insert any balls any longer, so without the balls, even if the unit is played all day long, 5% of game increase can be expected.
For the halls, automatically, the utilization rate will go up automatically. Because those time that people spend for inserting medals were inactive hours, but that can be eliminated. Also for the pachinko halls, the operation burden will come down because the staff do not have to move around carrying balls and medals. The noise environment, those circulation of the balls and also the medals will not come out, so the collision between balls and the payout of the balls, those were quite noisy, but those noise level will come down. Of course, the noise coming out of the machines will become smaller. Of course the illegal play, the crimes bringing in balls from other shops will be prevented. Digital services will be quite effective here.
I think the biggest benefit is the initial cost of opening a new store will come down because you don't really need the island. You don't have to have the facility to clean up and wash the balls and medals. Because that facilities will no longer become needed, the space between islands will no longer be needed, and therefore that means more units can be installed. Still the number of staffs, the employees can be reduced at the same time. Those halls who are willing to open new stores, they might as well open smart pachinko and smart pachislot shops only. Of course this will be very good against measures against addiction as well. I talked about this earlier a little bit.
For Smart Pachislot, we will be able to improve the gameplay and various game design will become possible. The upper limit of the numbers of games will be abolished. The benefits are that the users disadvantages will all no longer be there. Of course, I cannot talk about the details, but the numbers are available on the internet. Please look at the internet news coverage. For the schedule for installation, Smart Pachislot, the application is now already started to be received. For further deregulation, that is likely to be approved, most likely. The development in view of this new regulation will be applied from next year onwards, I believe. Around the summer of next year, we will aim for installation in the market.
Around that timeframe, I think smart pachinko will also become available around that timeframe. The existing pachislot and pachinko games will coexist in the market for the next several years, I believe. We would like to seek various possibilities outside the box without being bound by conventional thinking. The whole layouts will become more liberated because we don't have to have the island facilities any longer. The efficiency per space will increase and therefore those shops who were open in front of the stores may be opened again because the revenue will pay off for the rent once the number of units available become increased. Because of these facilities are very heavy, there are not so many stores located in the highest.
Higher levels, but that could also become a possibility. Cashless shops can may become available, and software download also could become available in the future further down the road. Those like arcades, like, once you get up in the morning, the new upgraded versions will maybe automatically be available. Stickers may be different. Technically, those are feasible, so it's all about regulation. We would like to look into this possibility, including the change of regulation, and many operations will be digitalized and made electronic. Many advantages are expected as this smart pachinko and pachislot penetrates in the market. This will become a reality in the future. We had a very gloomy industry because the regulations were only getting tighter and tighter. Now the situation is turning around.
Once it becomes widespread and adopted broadly by society, I think we now will have a different view of this industry with a brighter future. Around 2023 or so, Smart Pachislot, very special shops, once the models become available in richer variety, once the first shop becomes available and open, I think the industry will change dramatically. I think the adoption of these new machines will spread immediately in the industry. Now I would like to ask Mr. Fukutake to explain the financial str`ategy.
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Yes. For myself, I would like to present the financial strategies. On the screen you will see the slide, and I think you have seen this before, so I will be brief on this slide.
Today I would like to talk further beyond just introducing the ROIC and what we are doing after introducing ROIC. On this slide, we have the equity expansion of equity spread, and we would like to aim for over 10% ROE. As this, we have not been drilling this down from left to right. We have drilled it up from right to left. On the far right, we have the three boxes. At a certain point, is the lowest above, cost of capital optimization. When we say cost of capital, it's about how we are going to allocate the optimal capital structure. That's the first thing we discussed. Mr. Satomi, the CEO, has had the excess cash at Yokohama, but this is going to be released. I think he communicated that over the IR meetings.
The cost of owning the cash, I think, reflected to our cash discount. To date, we have been continuing our investment, but we have secured to invest more actively for growth. Starting from there, we talked about the optimal capital structure. The D/E ratio will be 0.5x-0.6x . You know, we feel that this will be the most efficient, and also we would be at the top of the risk buffer. That was the starting point. For the operating companies, the business companies, the investment should generate a return. We asked them to augment their capability to generate cash. That's why we introduced ROIC.
To be more specific, on the upper half of the slide, I think you don't need me to explain about this, but when we say we are going to aim for over 10% ROE, in the middle we have the company-wide ROIC. This is a consolidated basis. In last year, for March 2021, and going back five years, we used the average WACC as a reference point. You can get that from Bloomberg. It is at 7.2-7.3. Regarding the capital, optimal capital structure, we also reported to use the financial leverage. We looked at the debt ratio in the past, and 0.5, 0.6 was something that we were communicating.
If you do the math, you can see that the financial leverage is going to be 1.25x-1.3x . We have not been communicating this specifically, but if you do the math, you can get the hurdle rate for the ROIC for the business company. You can calculate that yourself. Depending on the company, the nature of the business is different. As we have been discussing, of our theater consumer business, for the time being, we are going to be actively investing for growth. It's not as if ROIC is going to increase for the consumer business. The capital deployed is going to be building up. On average, this will be 13%-14%.
It needs the consumer business to reach 13%-14% first to reach an ROE of over 10%. Recently the market risk premium has been increasing. Also, the WACC is on a rising trend. Anyhow, this formula is how we have been thinking about the different targets. At the bottom half, on the left-hand side it's easy to see, so I will skip this. The difficult part is the business company ROIC. Here, we are looking at the return versus the capital deployed. Even if we introduce that, the business company will not be able to manage this. On a balance sheet, when we are looking at the investment side, we have the global CMS, including the overseas subsidiary.
We can see the cash level, net, taking out the non-business assets, and we are looking at net working capital and fixed assets. The ordinary income is the KPI for each of the companies. Using the ordinary income, the average will be 13% as target, but for different companies, the ROIC target will be slightly different from business to another. To the group companies, when we say that we are going to introduce ROIC, they did not have the full understanding. We are still communicating and working on this together so that the concept of ROIC can penetrate. We start with Sega Sammy, Sega Toys, and TMS Entertainment. Those entertainment was the 5 subject companies. At the introductory level, we did seven sessions.
From day zero to Z-day 1.5, that's three sessions. It was about why we are introducing ROIC. Also, in sum, we were saying we are going to generate more power to generate cash. The business companies did not understand how to do that. The management perspective was shared so that management understanding will be shared, and we are on the same page. We did that for 3x . After day two, we asked them, even if we ask the companies to come up with a plan, they will not be able to do the plan themselves. Also, looking at the nature of the business and the organizational environment, you know, sectional environment, depending on those facts, when we try to improve the ROIC, what approach was the best approach to take?
Also, on the investment side, it did not change, but when we looked at the component and the breakdown, the people on site have to be able to follow what we are doing. Even if we have a structure in place, if the people on site are not able to follow, we will not be able to manage that. Management, middle management, and the people on site had to discuss this, so that, on day two, we ask them to come up with a rough plan. Myself and also the five companies, the president, worked together, to look at the KPI to see if there's something that we can manage and the reason why we are selecting the KPI, what is the priority of different KPIs.
Also, we discussed this in day three, day four, and we fine-tuned that. On the last day, we talked about what are the remaining assignment and the challenges, and that's how we started this fiscal year. Every six months, we did the first monitoring meeting, so we would have the monitoring meeting every six months, to see the progress and to see if we need to change the approaches. With each of those companies, we are discussing on those points, to fine-tune the strategy. Also dismiss some of the projects and also introduce new approaches so that on average, the business companies can achieve a ROIC of 13%. We are now at the starting line.
To be more specific, and this is for Sammy's pachislot and pachinko machine business work stream. It's either increasing the NOPAT or then reducing the invested capital to improve the ROIC. As I said earlier, the business investment is something that we are going to be active, particularly for Sega. The capital invested shall not be reduced to increase the ROIC. Also, I'm talking about something that's very challenging, so we are going to actively invest and also increase the NOPAT. There will be some time lag between the two, but while making a huge investment, we want to generate a further return and generate more cash. This is example from Sammy, but I guess next page might be more suitable for me to use. This is at Sammy, the people also have come up with this.
These are the KPIs that they want to manage the business with, and this is how the operation is overseen. The first one is increasing the NOPAT, and also for cost ratio, it's working from both sides. It's mainly has some effect to reduce the invested capital. On the cost side, we have to talk about how to improve the margin and also the ratio of things like a part subject to reuse. These are some KPIs that can be managed on a daily basis. That's how we set the KPI. This is a referential point. I just use Sammy as an example, but with the five companies I mentioned earlier, we are doing this exercise. That's all from me. Thank you.
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Thank you very much. Now, we'd like to take questions. If you have a question, please indicate by pressing the Raise Hand button.
This is a question from SMBC Nikko Securities, Maeda San, please.
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My name is Maeda from Nikko. I have two questions. First, regarding the ROIC improvements, the measures for ROIC improvements. Up until now, in your efforts so far towards the target, have you realized the tangible results? What is the probability of achievement, including the timeline? Can you confirm these points? That's my first question. By March 2026, will you be able to achieve the target, according to your impression? That's my first question. My second question is related to pachislot and pachinko machines business. Further deregulation is something you just elaborated and alluded to. With that alone, the halls incentives, will they be increased with that alone? Previously, when the CR machines were introduced, I think that's a good case. Maybe the deregulation may not be so significant compared to that experience.
In relation to capital expenditures, maybe smart pachislot and pachinko machines may not be widely adopted. How do you think about that? Can you share your views on that?
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Okay. I would like to talk about ROIC first. In the medium-term plan, in the next three years, ROE 10% is the assumption that we use. The ROIC, the average of our business companies of 13%, we would like to achieve this during this period. That's the assumption. Especially the Sammy that we just elaborated, those are very meticulous plans. In the case of Sammy, 30% of operating margin is the target that we have set in the previous medium-term plan. The development and sales cross-functional team was established, and we have conducted a breakdown management.
These are quite concrete in terms of the case of Sammy. The number of units, I think, has the biggest impact on the case of Sammy. I think this is quite feasible for us to achieve. As far as Sega is concerned, because the investment size is going to be sizable, whether things progress favorably or not, I think it's the biggest variable risk here. But recently, the performance has been quite favorable. In the near and medium-term period, based on the segment, if you are able to achieve those segment results, on the contrary, the investment amount, because the goodwill is quite sizable. If it could, the goodwill is quite sizable, then the investment amount would become large.
If we achieve the operating profit margin of this period, I think 13% is well achievable. Whether the breakdown is meticulous or not is a difference, but I think we have a concrete management in place at each company that will allow us to achieve these targets. My second question. This is a major change after the last case of CR. In the case of CR introduction, what became controversial is that with the pachislot and pachinko machines, the halls will not become operational. It has to come together as a unit. Units were also needed back then. Units, the competition for units was quite important.
Because this was a major deregulation, this led to increase in sales, and that was great confusion in the market. Of course the component procurement will take time, so we would like to take necessary measures so that we are talking about this in the industry. This is the biggest burden on the part of the halls, because in addition to the machines, they have to renew the units as well. Maybe in some cases, software upgrade will do the job. This is, I think, the biggest bottleneck for the widespread adoption of the new games. Of course, the compatibility if all these machines will pass the test and become compatible with the regulation is another question.
Of course, the existing machines will also become, I think, the case. The 2024 will be the year of full-fledged adoption. Of course, there will be differences depending on the halls. If there is aggressive pachinko hall, they will decide on which island to convert into smart machines. If that is the case, the operations efficiency improvement will be only limited. All the smart slots, smart pachinko, only dedicated shops. If those dedicated shops are opened as new shops in large scale, then full-fledged adoption will make huge progress, I believe, because this provides a huge benefit to the halls, in my view. I think those are the conditions for the widespread adoption.
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Thank you.
Thank you for your question. Are there any questions from the participants? If you have any questions, please use the Raise Hand button. If you are joining by phone, please send your question by email. Any other questions from the participants? If you have further questions, please use the Raise Hand button. If you are connecting by phone, please send your question to the email. If there are no further questions, we would like to conclude the conference today. Awesome. With that, we would like to close a Sega Sammy Holdings Management Meeting 2021. For any requests for interviews or for any additional questions, please contact the IR members. Thank you very much for your participation today.