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How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?

Dentsu dominates Japan’s media sector and advertising

Dentsu switches from JGAAP to IFRS accounting standards with big impact on KPIs

Dentsu dominates Japan’s advertising and media industries, and attracts some of the most creative Japanese talent, although Dentsu is not the first advertising agency in Japan – that priority belongs to Hakuhodo.

From April 1, 2015, Dentsu decided to switch to IFRS accounting standards from Japan’s JGAAP standards. For FY2014, Dentsu reports financial results both using IFRS and JGAAP standards, giving us the fascinating opportunity to compare both accounting standards for a major corporation.

So how big is Dentsu? For FY 2014 (April 1, 2014 – March 31, 2015) Dentsu reports (we have rounded the figures):

  • Turnover (IFRS) = ¥ 4642 billion (=US$ 37 billion)
  • Net Sales (JGAAP) = ¥ 2419 billion (=US$ 19 billion)
  • Revenues (IFRS) = ¥ 729 billion (=US$ 6 billion)

For operating income, net income and other data IFRS and JGAAP measure quite different KPIs.

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How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?
How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?

Managing Japan/West cultural issues via the Dentsu-Aegis-Network

As for many Japanese corporations, Dentsu’s challenge is to leverage a dominating position in Japan into a global business footprint, while managing the well-known cultural issues. Dentsu’s approach was to acquire the French/UK agency Aegis, and then via Dentsu-Aegis acquire a string of agencies all over Europe:

Dentsu and Dentsu-Aegis

Dentsu dominates Japan’s advertising space, and is a very very strong force in Japan’s media industry sector, through control and management of major advertising channels with an overwhelming market share in Japan, and has been working hard to leverage its creative power and strength in Japan into a larger global footprint.

A big step forward towards a larger global footprint for Dentsu was the acquisition of the London based Aegis Group, announced on July 5, 2012.

Read our report on Japan’s Media Landscape

Dentsu HQ
Dentsu HQ

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Japan media landscape restructuring

Japan’s broadcasting is a US$ 40 billion/year industry

There have been many attempts over the years for Japan media landscape restructuring

by Gerhard Fasol

Japan’s broadcasting markets (commercial TV + NHK + CATV + satellite + AM & FM radio) have annual combined revenues on the order of US$ 40 billion. The main players in this market are five large commercial TV groups and the semi-public NHK.

Media Group TBS attracts uninvited merger proposals

One of these five TV and media groups – TBS – has received an uninvited merger proposal by it’s largest shareholder – the internet portal Rakuten – and in parallel also attracted the Murakami-Fund as an investor.

TBS media group under pressure? and why?

Earlier this year Japan’s Murakami Fund acquired about 7% of the TBS Media Group, and declared that TBS was undervalued and should sell non-core assets, such as real estate and other non-TV / non-media related properties.

Recently, Rakuten acquired about over 20% of TBS shares, making Rakuten the largest shareholder of TBS. Rakuten announced a business plan for a merged Rakuten-TBS Group integrating Rakuten’s internet businesses with TBS’ TV and media operations. Since Rakuten’s stock market valuation is about 35% higher than TBS’ valuation (as of October 24, 2005), Rakuten’s management is expected to dominate a potentially merged group.

TBS’ management is not delighted with the prospect of losing control in this way. In response, three things happened:

  1. TBS management announced cooperations with “stable shareholders” Dentsu, Mitsui Bussan, and Bic-Camera, and non-shareholder, and other Japanese corporations.
  2. The Murakami Fund proposed a management buy-out, which would lead to a delisting of TBS by the Tokyo Stock Exchange, taking TBS private. This possibility was voted down by TBS management.
  3. Livedoor offered support as a (very unlikely) white knight. Given Livedoor’s record of a failed hostile take-over attempt of the Fuji-Sankei media group earlier this year (for details see our report on Japan’s Media industry), it seems to be more than unlikely for TBS to go for Livedoor as a white knight – however no one knows for sure.

At this time the acquisition battle for the TBS Group is in full swing and the final outcome is difficult to estimate. In parallel to the take-over battle, a public discusson by Japan’s industry leaders is examining the desirability of hostile take-overs in Japan.

Japan media analysis report:

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