Daiichi Kosho (7458 JP) is Japan’s leading producer of karaoke equipment.
As you may remember, I discussed Daiichi Kosho in this previous thematic, and I mentioned that I own the stock in a recent portfolio review. I also wrote a deep-dive on Daiichi Kosho’s competitor Koshidaka - a stock that has risen +71% since I first mentioned it.
The pandemic hurt the Japanese karaoke industry. Singing is a high-risk activity for COVID-19 as virus particles spread through respiratory aerosols. Under a state of emergency, some Japanese karaoke bars closed, and others reduced their opening hours.
Daiichi Kosho dominates the market for karaoke machines through its DAM brand name, with an approximate market share of 55%. The company operates with a razor and blade business model, selling the hardware cheaply and then charging customers by the song. It’s a profitable business with not much competition.
The company also runs karaoke parlours through the “Big Echo” brand name and related restaurants. While Koshidaka’s Manekineko chain is strong in the low-end segment, Big Echo dominates the premium segment.
The Japanese karaoke industry is now ex-growth. The number of karaoke users peaked in the 1990s but has stabilised more recently. The elderly market is growing, offsetting weakness in karaoke for nightclubs and bars. But there is high demand for karaoke among youth as well who use karaoke boxes to hang out with friends in a private environment away from home.
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