"Sunrise's copyright agency is still in Sotsu's hands." Director Hattori adjusted his reading glasses. "Although we now control Sunrise, the agency agreement between Sunrise and Sotsu is a legacy issue. The contract is far from expiring, and Sega has no grounds to terminate it unilaterally."
"Exactly," Takuya Nakayama nodded. "That's the most awkward part right now. Sega owns Sunrise, and Sunrise owns the copyrights to Gundam, the Brave series, and a whole bunch of other anime IPs. There's no question about who owns the copyrights themselves. But when it comes to the actual commercial licensing—who gets the license, how the fees are set, who gets the rights to develop merchandise—Sotsu is the one actually calling the shots."
He drew a line across the document with his finger.
"Bandai can get the production licenses for Gundam models not because they have a good relationship with Sega, but because Sotsu is acting as the intermediary. As long as Sotsu remains an independent third party, Bandai has a legal channel to continue obtaining licenses, no matter how dissatisfied Sega is with them. The only thing Sega can control is the priority for collaborations on its own self-developed games. But Bandai's main sources of income—toys, food collaborations, stationery licenses—Sega can't even get a finger in the door."
Director Terauchi frowned, trying to digest the information.
"So you're saying—we should acquire Sotsu."
"Yes," Takuya Nakayama replied decisively. "We swallow Sotsu whole. We cut off Bandai's supply lines."
The atmosphere in the conference room turned tense. The directors exchanged glances.
To put it politely, this was a strategic integration. To put it bluntly, they were cutting off Bandai's lifeline.
"Sotsu doesn't just handle Sunrise's copyright agency work," Director Hattori interjected. He knew Sotsu's business model better than anyone else in the room—he could recite it all from memory. "They hold the licenses for a vast array of other anime and tokusatsu works. Beyond that, Sotsu performs a critical function in the entire anime industry: the formation and operation of production committees."
He began counting off on his fingers.
"First, they buy broadcasting slots from television networks. Then, they bring in sponsors to form a production committee, sharing the production costs and risks. Next, they coordinate with production companies like Sunrise to create the anime. Finally, they handle the planning and promotion of character merchandise. Sotsu has a mature system for managing this entire chain."
Hattori paused, turning to Takuya Nakayama.
"If Sega acquires Sotsu, we can integrate their system with Sega Galaxy's copyright management operations, eliminating a massive amount of redundancy. Right now, Sega Galaxy's IP licensing often has to go through Sotsu or other agencies to negotiate terms. It's inefficient and adds an unnecessary layer of middleman costs."
Takuya Nakayama leaned back in his chair, his hands resting on the armrests.
"Director Hattori has already said most of what I was going to say."
He swept his gaze across the conference table.
"Integrating Sotsu's copyright agency business with Sega Galaxy's existing licensing management system will take our control over IP commercialization to the next level. Sotsu's promotion and GG agency operations can also help Sega Galaxy expand its marketing channels and promotional strategies for peripheral products. These are all obvious synergies."
He paused.
"The public explanation is simple: Sega is acquiring Sotsu to open up broader commercial monetization paths for its own game IPs—Pokémon, Sonic, Phantasy Star, Virtua Fighter, Kirby, The King of Fighters, and a whole host of others familiar to players. Sotsu's expertise in anime production and character merchandise planning can synergize with Sega's game IPs. After integrating overlapping business segments, we can improve operational efficiency and save resources. This reasoning is foolproof to any financial media outlet."
Director Sugiura, who had been listening intently, interjected: "What about Bandai?"
"Bandai will find that the IP licensing channels they rely on have all fallen under Sega's control overnight," Takuya Nakayama said, his tone flat. "Want to keep producing Gundam models? Talk to Sega. Want to release new Dragon Ball merchandise? If the copyright agency goes through Sotsu, they still have to go through Sega. The legacy licensing contracts they hold for non-Sunrise IPs will eventually expire. Whether those contracts get renewed, and under what terms, will no longer be decided by Bandai."
Director Terauchi leaned back in his chair, fingers interlaced over his stomach.
"This way, Bandai will be strangled every single day they don't sit down at the table with Sega."
"Sega was the one in the awkward position before. Bandai could take or leave the deal, while Sega was desperate but had no leverage," Takuya Nakayama said. "After acquiring Sotsu, the tables will turn. Now Bandai will be the one in the awkward position. Every time they make a licensing deal, they'll have to keep in mind that the person sitting across from them is from the same company that wants to swallow them whole. After living like this for a while, even the toughest bone will grow soft."
Director Hoshino flipped through the memo in his hand and asked a practical question: "What's Sotsu's equity structure? Can we negotiate a deal?"
"Sotsu isn't a public company. Its equity is concentrated in the hands of a few founding shareholders and the management team," Takuya Nakayama replied, providing the information he had already gathered. "But they're not a huge company. Compared to Sega's annual revenue, the acquisition price won't be too outrageous. The key is how to convince Sotsu's management to accept the buyout. They've worked with Sunrise for so many years, and they're already anxious about Sega controlling Sunrise. Instead of waiting for Sega to use Sunrise's contract expiration to blackmail them one day, it's better to sell now for a good price. The management can even keep their positions and benefits."
"The carrot, then the stick," Director Terauchi summarized in four words.
"You could put it that way," Takuya Nakayama replied.
The meeting room fell silent for a few seconds as everyone processed the strategy.
The director in charge of legal affairs spoke up. "Are there any risks regarding antitrust review for the acquisition of Sotsu? Sega already controls Sunrise. If we also bring in Sunrise's copyright agent, will the regulators have any objections?"
"I've considered that," Takuya Nakayama answered. "Sunrise is an animation production company, while Sotsu is a copyright agent and GG planning company. Their business natures are different. Sega itself is a game and hardware company. All three fall into different sub-sectors in the Fair Trade Commission's industry classification. The threshold for vertical integration in antitrust reviews is far lower than for horizontal mergers within the same industry. The Legal Department will conduct a preliminary review in advance, and we shouldn't encounter any major obstacles."
The legal director nodded and made a note in his notebook.
Director Hattori spoke up again.
This time, his question was more practical.
"How will the organizational structure be arranged after the integration? Will Sotsu's production committee operating system be incorporated into Sega Galaxy, or will it remain independently operated?"