Sony Reportedly in Talks to Acquire Kadokawa, Owner of Elden Ring Parent Company FromSoftware

Sony is in discussions to acquire Kadokawa Corporation, the Japanese media giant behind the hit game Elden Ring, according to sources familiar with the situation. The deal would significantly enhance Sony’s entertainment portfolio by expanding its presence across games, anime, manga, and film.

The Potential Deal and Market Reaction

If the talks reach a successful conclusion, an official agreement could be finalized in the coming weeks. Following the news, Kadokawa’s stock price jumped 23%, hitting its daily limit, and bringing the company’s market value to around $2.7 billion. Sony’s own shares also saw a slight increase of 0.6%.

Kadokawa’s broad business operations would complement Sony’s existing strategy, as the company is a major player in anime publishing and owns several renowned game development studios, including FromSoftware, the creators of Elden Ring. Sony already controls anime streaming services like Crunchyroll and Funimation, which aligns well with Kadokawa’s diverse media assets, making a potential acquisition a natural fit for Sony.

Strategic Importance of Kadokawa

Sony has a 2% stake in Kadokawa and holds a 14% stake in FromSoftware, the development studio behind Elden Ring. Kadokawa itself owns the majority of FromSoftware, with a 70% share, while Tencent holds around 16%.

The enormous success of Elden Ring, which has sold over 25 million copies globally, highlights the critical role FromSoftware plays in Sony’s gaming business. The studio’s next big release, the highly anticipated Shadow of the Erdtree DLC, further underscores its importance.

Piers Harding-Rolls, Research Director at Ampere Analysis, noted that Sony’s interest in Kadokawa’s gaming arm became clearer in 2022 when it increased its stake in FromSoftware. This move reflects Sony’s broader goal of developing cross-media properties, merging games with anime and other forms of entertainment to strengthen its media empire.

Defensive and Growth Perspectives

Some analysts suggest Sony’s interest in acquiring Kadokawa could also be motivated by a desire to protect its strategic relationship with FromSoftware. By securing Kadokawa, Sony would prevent rival companies from taking control of the studio, which could disrupt their successful partnership.

Moreover, Kadokawa’s expertise in anime and manga would further enhance Sony’s offerings in these areas, providing a valuable opportunity for cross-media development. This would allow Sony to extend its reach and create even more interconnected experiences across different entertainment platforms.

Challenges Facing Sony’s Gaming Division

Sony’s gaming business has faced significant challenges recently, including a wave of layoffs and the closure of multiple studios. Earlier this year, the company cut 900 jobs globally, including at some of its top PlayStation studios such as Insomniac, Naughty Dog, Guerrilla Games, and Firesprite. PlayStation’s London-based studio was also shuttered.

Additionally, Bungie, the developer of Destiny 2 that Sony acquired last year, has been struggling with financial setbacks, leading to more job cuts. Despite these difficulties, Sony remains focused on expanding and securing its position in the gaming and entertainment sectors, and the potential acquisition of Kadokawa would be a strategic move to support this long-term vision.

Acquiring Kadokawa would strengthen Sony’s already prominent position in the gaming, anime, and media industries. The deal would deepen Sony’s ties with FromSoftware, ensuring the continued success of Elden Ring and other major projects. While Sony faces internal challenges, this potential acquisition represents a significant step toward expanding its intellectual property portfolio and creating synergies across its entertainment businesses.