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Columbia Music Entertainment Issues Notice of Consolidated Business Results Full Fiscal Year Ending March 2005

05.23.05

Returning to Profit on a Current Net Earnings Basis for the First Time in 14 Years

Columbia Music Entertainment Inc. (hereinafter CME; Head Office: Minato-ku, Tokyo; Chief Executive Officer (CEO): Sadahiko Hirose. Chairman: Strauss Zelnick today gives notice that it has issued its consolidated business results indicating the Company’s Overall performance for the fiscal year ending March 31, 2005 (FY 2004; April 1, 2004~March 31, 2005).

During a year marked by sluggish sales in the broader music market, CME continued to focus on the key goals of its Revitalization Plan: Strengthening revenues in its core music production business and improving efficiency by implementing comprehensive cost reduction measures. The company has now achieved its goal of establishing sustainable profitability that doesn’t rely on achieving massive hits or expanding sales.

CME’s consolidated sales during the fiscal year under review totaled JPY32,643 million (an increase of 4.6% on the previous fiscal year). Among the major reasons for this result was the strong performance of the music entertainment business, led by sales of in-house produced titles beginning with Kiyoshi Hikawa’s single Hatsukoi Ressha/Kuchibue no Minato, which reached No. 1 in the weekly Orikon chart (the first time in 18 years that an Enka record by a male solo artist has topped this chart), and Yo Hitoto’s single Hanamizuki, which continued to sell briskly well after its release in February 2004. Another factor in the sales increase was that the company’s third-party distribution business performed more favorably than was initially planned.

CME’s profitability also continued to improve with the company’s in-house music entertainment business displaying a remarkable improvement compared with the previous term. Together with the improvement in the profit margin of CME’s special sales business and the strong contribution of the third-party distribution business, CME recorded a consolidated ordinary profit of JPY 543 million (compared with a loss of JPY 825 million for the previous fiscal year. The Company booked a consolidated net profit for the fiscal year under review of JPY 157 million (compared with a loss of JPY 745 million for the previous fiscal year). With these results CME has returned to the black on a net profit basis for the first time in 14 years.

In addition, CME’s non-consolidated business performance returned to profitability for the first time in eight years with a net profit for the term of JPY 279 million.

Full Year Business Result Forecast for Fiscal Year Ending March 31, 2006

At the present time, our forecast with respect to Columbia Group’s consolidated business results for FY 2005 (April 1, 2005 ~ March 31, 2006) is for sales of 30,000 million yen, a profit and loss balance showing an ordinary profit of 400 million yen, and a net profit for the term of 150 million yen.

While the challenging environment surrounding the music CD market is expected to continue, CME will retain its focus on discovering talented new artists, strengthening its in-house music production business, and making use of the Columbia catalogue of in-house owned music to create hit records. At the same time we will expand our activities in the mobile and PC music distribution fields and upgrade and extend our digital business services in our continuing effort to lead the market as a new kind of music software company.

Concerning Capital Reduction

At this time, in order to clear unprocessed losses and to further reinforce the Company’s financial strength, CME is presenting a capital reduction proposal to its 154th Annual General Meeting of Shareholders. The proposed capital reduction will result in a decline in the Company’s capitalization without cost. It will not alter the numbers of shares held by the Company’s shareholders, and there will be no change in the net assets amount.

Artists and Titles Making Major Contributions to Sales

Music Software

Kiyoshi Hikawa— Hatsukoi Ressha/Kuchibue no Minato

Hikawa Kiyoshi Meikyoku Collection 4: Bamba no Chutaro

Toshimi Tagawa— Hana ni Nare ~ Ume, Sakura, Ayame, Ajisai, Higanbana ~

Yo Hitoto— Hanamizuki, Hito Omoi

Kaela Kimura— happiness!!!, Rirura Riruha

M i (“em ai”)— Mirai no Chizu

NITRO MICROPHONE UNDERGROUND— STRAIGHT FROM THE UNDERGROUND

TOWA TEI— FLASH

Psychic Lover, Isao Sasaki— Several titles in the Tokuso Sentai Dekaranger series

Takafumi Iwasaki, Sister MAYO—Maho Sentai Majiranger theme song/Jumon Korin ~ Magical Force

Video Software

THE YELLOW MONEY— THE YELLOW MONKEY CLIPBOX

Yo Hitoto— Hitoto Yo LIVE TOUR 2004 ~Tetoshan~

Kiyoshi Hikawa— Special Concert 2004 Kiyoshi Kono Yoru Vol.4

Fuuka, Wanwan, Uutan— Several titles in the Inai Inai Baa! series



Mail Order Business

Ogon no Hit Kayo Daizenshu

Hibari, Chiemi, Izumi ~ Sannin Musume Song Book

Incoming Call Melodies

Yo Hitoto— Hanamizuki

Kaela Kimura— happiness!!!, Rirura Riruha

M i (“em ai”)— Mirai no Chizu

Third Party Distribution Business

◇ R and C Ltd.

Downtown— DOWNTOWN no Gaki no Tsukai ya Arahende!! series

Masatoshi Hamada & Noriyuki Makihara— Chicken Rice

Gorie with Jasmine & Joan— Mickey

◇ DREAMUSIC Inc

Ayaka Hirahara— ODYSSEY, The Voice

Columbia Music Entertainment Inc.