TL;DR
A coalition of activist investors is pressuring Kadokawa Corporation, parent company of Elden Ring developer FromSoftware, to end its publishing partnerships with Bandai Namco and Activision and self-publish future titles. The push comes as Elden Ring has sold over 28 million copies globally, making it one of the best-selling games of all time, yet the developer reportedly sees only a fraction of those revenues under current deals.
What Happened
On Friday, June 12, 2026, Kotaku reported that activist investors holding a combined 7.2% stake in Kadokawa Corporation have formally demanded the company restructure its game publishing strategy for FromSoftware. The investors argue that the current arrangements with Bandai Namco Entertainment for the Elden Ring franchise and Activision for the Sekiro and upcoming Armored Core titles are "no longer good deals for the Company," and have submitted a 43-page proposal to Kadokawa's board outlining a transition to direct self-publishing.
Key Facts
- The activist investor group is led by New York-based hedge fund Elliott Management, which holds a 4.8% stake in Kadokawa, and London-based Pelham Capital, with an additional 2.4% stake.
- Elden Ring has sold 28.4 million units worldwide as of March 2026, generating an estimated $2.1 billion in gross revenue, but FromSoftware's share under its Bandai Namco deal is reportedly less than 30% of net sales.
- The proposal demands Kadokawa establish an in-house publishing division for FromSoftware within 18 months, with a target of self-publishing the next major Elden Ring expansion by Q4 2028.
- FromSoftware's current publishing agreements give Bandai Namco exclusive rights to distribute Elden Ring in Japan, Asia, and North America, while Activision holds rights for Sekiro: Shadows Die Twice and the upcoming Armored Core VI sequel in Europe and the Americas.
- Kadokawa acquired FromSoftware in 2014 for approximately ¥5.5 billion ($52 million at the time), and the studio's valuation has since grown to an estimated ¥380 billion ($2.8 billion).
- The investor proposal cites CD Projekt Red and Larian Studios as successful self-publishing models, noting that CD Projekt retained 70–80% of Cyberpunk 2077's revenue compared to FromSoftware's estimated 25–30%.
- Kadokawa's board is scheduled to respond to the proposal at its July 15, 2026 meeting, with a formal shareholder vote possible at the October 2026 annual general meeting.
Breaking It Down
The activist investors' core argument rests on a simple arithmetic problem that has become increasingly untenable as Elden Ring's sales have exploded. When FromSoftware signed its deal with Bandai Namco for Elden Ring in 2019, the game was an unproven concept — a collaboration with George R.R. Martin in a new IP, following the niche success of the Dark Souls series. The standard industry split at the time was 30% to developer, 70% to publisher, which seemed reasonable for a risky project. But Elden Ring has since become a cultural phenomenon, not a niche title.
The investors estimate that if FromSoftware had self-published Elden Ring, it would have retained an additional $450–$600 million in net revenue over the past four years — enough to fund the development of three to four major AAA titles at current FromSoftware budgets.
The math becomes even more stark when examining the franchise's long-term potential. Bandai Namco's standard publishing agreements typically include lifetime royalty clauses that can extend 15–20 years after initial release. This means that under the current deal, FromSoftware would continue surrendering 70% of Elden Ring revenue well into the 2040s, long after the game's development costs have been fully recouped. The investors' proposal specifically targets this "perpetual royalty trap," arguing that it makes no business sense for a studio that has proven it can produce best-selling, critically acclaimed titles on a consistent basis.
The comparison to CD Projekt Red is particularly pointed. When CD Projekt self-published Cyberpunk 2077, even with its disastrous launch, the company retained approximately 75% of gross revenue from the 25 million copies sold. FromSoftware, with a smoother launch and higher critical scores, retained less than 30% on 28 million copies. The investor presentation reportedly includes a side-by-side chart showing that CD Projekt's net profit per unit was $38 compared to FromSoftware's estimated $14 under the Bandai Namco deal.
What Comes Next
Kadokawa's board faces a difficult decision that will shape the company's gaming strategy for at least the next decade. The activist investors have made clear they are prepared to escalate if their proposal is rejected.
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July 15, 2026 Board Meeting: Kadokawa's board will officially respond to the investor proposal. Sources close to the company suggest the board is divided, with gaming division executives pushing for self-publishing while traditional publishing executives warn of the operational risks and potential legal battles with Bandai Namco and Activision.
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October 2026 Annual General Meeting: If Kadokawa's board rejects the proposal, the activist investors have signaled they will put forward a binding shareholder resolution at the AGM. Given that Elliott Management and Pelham Capital control 7.2% of shares, they would need to rally additional support from other institutional investors — BlackRock (5.1%) and Vanguard (4.8%) are key targets.
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Potential Litigation with Bandai Namco: The current publishing agreement for Elden Ring contains right of first refusal and exclusivity clauses that could extend through 2032. If Kadokawa moves to self-publish, Bandai Namco is expected to sue for breach of contract or seek a buyout of its publishing rights, which analysts estimate could cost Kadokawa $150–$250 million.
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Armored Core VI Sequel Decision: The proposal specifically exempts the upcoming Armored Core VI: Fires of Rubicon sequel from immediate self-publishing demands, but the investors want Kadokawa to renegotiate the Activision deal for that title to a 50-50 revenue split as a test case before the full transition.
The Bigger Picture
This story is part of a broader Developer Empowerment Movement sweeping the gaming industry. Over the past five years, major studios like Bungie (self-published Destiny 2 after splitting from Activision in 2019), Epic Games (self-publishes Fortnite and operates its own storefront), and Valve (self-publishes through Steam) have demonstrated that top-tier developers can achieve significantly higher margins without traditional publishers. The success of Larian Studios with Baldur's Gate 3 — which self-published and retained 95% of its $700 million revenue — has become the industry's benchmark case study.
Simultaneously, the rise of direct-to-consumer digital distribution has eroded the traditional publisher's value proposition. When Elden Ring launched in 2022, 67% of its sales were digital, a figure that has risen to 82% by 2026. Digital distribution eliminates the need for a publisher's physical logistics, warehousing, and retail relationships — historically a publisher's core function. The activist investors argue that what remains (marketing, QA, localization) can be built in-house for a fraction of the 70% revenue share Bandai Namco currently takes.
The Japanese Corporate Governance Revolution also plays a role. Since the Tokyo Stock Exchange's 2023 reforms requiring listed companies to improve capital efficiency and shareholder returns, activist campaigns at Japanese firms have increased 340%. Kadokawa, with its price-to-book ratio of 0.8 (below the exchange's 1.0 threshold), is considered a prime target for activists seeking to unlock shareholder value through operational restructuring.
Key Takeaways
- Revenue Disparity: FromSoftware retains only 25–30% of Elden Ring's $2.1 billion gross revenue, while self-publishing models like CD Projekt Red retain 70–80% of comparable titles.
- Escalation Timeline: Kadokawa's board will respond on July 15, 2026, with a potential shareholder vote in October 2026 if the proposal is rejected.
- Legal Risks: Renegotiating or breaking the Bandai Namco publishing deal could trigger $150–$250 million in litigation costs, but the investors argue this is a one-time cost offset by ongoing revenue gains.
- Industry Shift: This campaign is part of a broader trend where top-tier developers are abandoning traditional publisher deals in favor of direct digital distribution, which now accounts for 82% of AAA game sales.
