Toho Co., Japan's largest film studio, reported a 40.2% drop in first-half net profit to 20.02 billion yen as the blockbusters that carried last year's results faded, and it is now relying on Godzilla Minus Zero, which opens in Japan on Tuesday, to lift the second half.

For investors in Asian media, the results show both sides of Japan's content boom. Toho's anime library is earning more abroad than ever, but the studio is spending heavily to build its own overseas distribution, and the new Godzilla film is the first big test of that network. Revenue for the six months through August fell 3.4% to 185.16 billion yen, and operating profit dropped 24.8% to 30.94 billion yen, according to the company's earnings statement released Oct. 15.

The comparison was always going to be hard. A year earlier, Toho's film unit rode the Demon Slayer movie and the kabuki drama Kokuho, which Toho cited as the main reason for the decline. Revenue in the film business fell 12.1% to 91.18 billion yen this time. Domestic distribution to cinemas dropped 32.1%, even though Detective Conan and the Chiikawa movie were big sellers.

Anime Grows, Margins Shrink

The IP and anime business was the bright spot on the top line. Its revenue rose 15.6% to 43.13 billion yen, helped by streaming income from titles Toho invested in, including Jujutsu Kaisen, My Hero Academia and Frieren. Licensing of video rights in the unit grew 22.7%, and merchandise sales jumped 33.8%.

Profit went the other way. The unit's operating profit fell 44.2% to 5.97 billion yen, and its margin shrank to 13.8% from 28.7%. Toho blamed one-off charges tied to contingent payments for acquired businesses, higher staff costs, and a timing lag from moving its overseas licensing into a new subsidiary, TOHO Global, on March 1. Group selling, general and administrative costs rose 19.8%.

The company said in its presentation that the overseas spending is weighing on margins for now, but that it aims to reach more foreign fans and turn the investment profitable early. TOHO Global's network includes GKIDS in North America, Anime Limited in Europe (consolidated this year) and Toho Entertainment Asia.

At home, the cinema chain held up. TOHO Cinemas raised some ticket prices from July 1, and admissions slipped 4.2% to about 26.2 million, yet theater revenue rose 2.4% to 55.16 billion yen. The group now runs 725 screens across Japan.

Godzilla Minus Zero Goes Global

Godzilla Minus Zero opens in Japan on Nov. 3, a national holiday, and in North America on Nov. 6 through GKIDS. Toho said in its Oct. 15 presentation that the film will reach about 80 countries, compared with roughly 50 for its predecessor, and that it is Japan's first "Filmed For IMAX" title, shot with IMAX-certified cameras. GKIDS said when it announced the dates in January that it is the first time a Japanese-made Godzilla film has opened so close together in Japan and North America.

The bar is high. Godzilla Minus One, released in 2023, took about 16 billion yen worldwide by Toho's count, including 7.65 billion yen in Japan and $56 million overseas, and won the Academy Award for visual effects. That release ran through a separate Toho unit in North America and had no Toho-run distributor in Europe or Asia.

Toho said Minus Zero opens on 383 screens in Japan in its first week, slightly more than the 377 for Minus One, and that it aims to beat the earlier film's 2,308 North American theaters. Its official overseas trailer had passed 13 million views by Oct. 15.

Forecast Kept, Net Profit Raised

Toho kept its full-year forecast for operating profit at 62 billion yen, down 8.7% from the prior year, on revenue of 345 billion yen. It raised its net profit forecast by 7 billion yen to 48 billion yen, citing gains from selling part of its strategic shareholdings in September. The company said first-half results were broadly in line with plan and that it wanted to see how its big second-half titles open before changing the operating outlook.

The studio also nudged up its assumption for box office from its own Japanese films to 95 billion to 105 billion yen, excluding Minus Zero's overseas takings, from 90 billion to 100 billion yen in April. It still expects Japan's overall box office of 250 billion to 260 billion yen, below the 274.4 billion yen recorded in 2025. Demand for Japanese content shows up elsewhere too: Universal Music cited strength in Japan in its third-quarter results.

The first reading on the bet comes quickly. Weekend box office from Japan and the film's North American opening on Nov. 6 will be followed by Toho's monthly box office report for November and nine-month results in January.