By Sam Nussey
TOKYO (Reuters) -Kadokawa's shares jumped 19% in early Tokyo trading on Wednesday, a day after Reuters reported Sony (NYSE:SONY) was in talks to acquire the publishing, anime and gaming powerhouse.
Shares in Kadokawa, which controls "Elden Ring" developer FromSoftware, closed up 23% at their daily limit on Tuesday after the news. On Tuesday, Sony had declined to comment while Kadokawa said it cannot comment.
The deal would bolster Sony's entertainment portfolio, which spans games, movies, music and anime.
"Anime and manga are conquering the world and Sony knows this," said Serkan Toto, founder of the Kantan Games consultancy.
"They need firepower if they want to be a big player in these markets so they went for Kadokawa," he added.
Sony owns anime streaming service Crunchyroll and anime planning company Aniplex, which has built a reputation for high quality series such as "Demon Slayer".
"Adding Kadokawa anime planning/producing capacity would enhance (Aniplex's) offerings," Jefferies analyst Atul (NS:ATLP) Goyal said in a note.
"Furthermore, Kadokawa originates its own (intellectual property) through its publishing business, it would strengthen Aniplex by adding original IP," Goyal added.
The anime market is expected to roughly double to $60 billion by 2030, according to data from Grand View Research that was cited in a Sony presentation.
Japanese franchises have become a popular source of content for entertainment companies in recent years.
Netflix (NASDAQ:NFLX) has made a live action, English language adaptation of the "One Piece" manga, with Amazon (NASDAQ:AMZN) adapting Sega Sammy's long-running "Yakuza" game series.
FromSoftware has a track record of well received games including "Elden Ring", which is widely considered one of the best games of all time, and "Sekiro: Shadows Die Twice".
The industry is grappling with the high cost of making new games. Sony said last month it is shutting down two studios including Firework Studios, whose first-person shooter "Concord" fared poorly after its August release.
The Kadokawa deal "would mean less dependence on blockbusters for PlayStation and stabilise Sony's entertainment business overall," Toto of Kantan Games said.