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Market Data

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(as of October 1, 2014)

Overall software market size and our market position are described.

Home Video Game Software Markets
- Package and digitally distributed contents (DLC) -

Digital download contents (DLC) Expands Despite 7.1% Consumer Market Decline

Package Markets

In 2013, the consumer (Package and DLC) market was worth 23.7 billion dollars (down 7.1% from the previous year), the second straight year of negative growth. The reasons for this include (1) fewer consoles purchased, resulting in fewer software sales, due to the off-season before new next-generation consoles are released this year and (2) the declining average unit price of software.

In the Consumer sub-segment package market, consisting primarily of North America, Europe and Japan, the 80% of the market accounting for North America and Europe contracted 10%, while in Japan, accounting for 20% of the overall, the market shrank more than 20% compared to the previous year.

At the same time, in line with network infrastructure developments and the establishment of the online premium model, the DLC market, involving the download of full games and additional contents, is clearly growing, increasing to 7.4 billion dollars (up 4.2% from the previous year).

Consumer (Package and DLC) Market

In terms of outlook for the future, we will upgrade title lineups for next-generation consoles sold in 2013 and DLC will continue to grow. We expect a recovery and forecast a slight increase in the global consumer market to 24.9 billion dollars (up 5.1% from the previous year).

PC Online Market

In 2013 the Market Expanded Favorably by 22.0%

PC Online Market

In the PC online market, the spread of cloud game services and digital sales in North America and Europe, the rise of a new genre of browser games, and a growing number of Massively Multiplayer Online (MMO) game users in Asia resulted in solid market expansion to 28.8 billion dollars (up 22.0% from the previous year).

In 2014, this market is expected to continue growing steadily to 32.2 billion dollars (up 11.8% from the previous year). The Asia market in particular is expected to continue expanding, driven primarily by MMO games, from 12.3 billion dollars in 2013 to 13.1 billion dollars by 2018 (up 6.8% from 2013).

Accordingly, the PC game market is expected to surpass the consumer game market and grow to 32.3 billion dollars by 2018.

Mobile Content Market

Solid Global Growth as Market Expands 19.5% in 2013

Mobile Content Market

The 2013 mobile contents market achieved significant global growth, increasing to 14.7 billion dollars from 12.3 billion dollars in 2012 (up 19.5% from the previous year). The main reasons for this were (1) the ongoing adoption of smartphones in all countries of the world, (2) the rise of sophisticated tablet devices and free communication apps such as LINE and (3) the spread of native app and social games due to the growing number of mobile users.

By region, the North American market was worth 3.9 billion dollars (up 38.5% from the previous year), the European market was worth 2.3 billion dollars (up 17.3% from the previous year) and the Asian market including Japan was worth 7 billion dollars (up 14.4% from the previous year). Furthermore, in emerging and Eastern European markets, as well as other areas, the global market grew steadily to 1.3 billion dollars (up 3.8% from the previous year).

The freemium (virtual item purchases/in-game purchases), a earnings model where users download a game for free, then purchase access to additional items and other game content as needed, has predominated in the market since about 2010. With freemium games, the key to manageability is using content power (brand/game content) to appeal to users and analyzing user activity after service provision begins to offer the appropriate services and premium games.

For game companies with lots of popular software titles as well as mobile development companies with operational expertise, the opportunity to improve earnings is growing. In line with the movement from traditional feature phones to smartphones, a shift away from browser games requiring a web browser has made the distribution of native app-style games via direct download from the App Store or Google Play commonplace, demanding development structures able to respond to these changes.

Looking ahead, we forecast shipments in the 2014 smartphone market to grow to 1,204 million units (up 19.3% from the previous year) as they continue their spread across the world. We forecast tablet device shipments of 200 million units in 2014 (up 38.6% from the previous year) based on our assumption that mobile content users will continue to increase globally. Accordingly, we predict the mobile contents market will grow to 28.6 billion dollars by 2018.

Arcade Facilities Market Trends

3.6% Market Contraction Indicates Continued Downward Trend,
Continued Monitoring of Consumption Tax Increase Impacts Essential

Arcade Operations Market

During the previous fiscal year (ended March 31, 2013), the size of the arcade facilities market was 470 billion yen (down 3.6% from the previous fiscal year). This was due to a decrease in the number of company-owned arcades, which have a large sales volume per facility, the absence of a major hit product gaining traction in the market and competition from app games in line with the ongoing adoption of smartphones.

Furthermore, although the number of facilities decreased to 16,992 (down 6.2% from the previous fiscal year), there was a slight increase in the number of machines per arcade (up 0.5 machines from the previous fiscal year) and sales per facility (up 2.8% from the previous fiscal year) amid accelerated growth in large-scale company-owned arcades and a decline in small scale rental facilities.

Number of Amusement Arcades (by number of machines)

This fiscal year (ended March 31, 2014), although there was an increase in the popularity of some prize products, there were not as many hit products as last year. As a result, despite the increased operating efficiency of existing arcades at all companies, the ongoing closure of unprofitable arcades led to a somewhat soft market.

In terms of outlook for the future, price pass-through has become difficult for the one coin business structure due to the April 2014 consumption tax increase. In addition, concerns over declining customer numbers due to a drop in consumer confidence are expected to result in a weaker market as company priorities will focus on improving profitability through narrowed-down investment, operational efficiency, scrap and build policies and other initiatives.

Gaming Machines Market (Pachinko & Pachislo)

Gaming Machine Market Stable at Previous Year's Levels on Popular Pachislo Machines

Gaming Machines Market (New Machine Sales)

During the previous fiscal year (ended March 31, 2013), the Pachinko and Pachislo (P&S) market maintained the same levels as the previous fiscal year, totaling 1,202.9 billion yen (up 0.1% from the previous fiscal year). This was partly due to the third straight year of contraction in the Pachinko machine market (down 6.5% from the previous fiscal year), which accounts for more than half the overall market. At the same time, the market has been sustained by Pachislo machine market growth, which has expanded in each of the last three years (up 14.7% from the previous fiscal year).

This fiscal year (ended March 31, 2014), the Pachislo machine market remained stable and showed signs of recovery, such as the number of new arcade openings returning to pre-Great East Japan Earthquake levels and expanded sales per arcade in accordance with the increase in large-scale facilities with more than 1,000 machines, which indicate the market has bottomed out.

However, in terms of the future outlook, the Pachinko machine market is expected to remain soft, while there are indications demand has returned to the Pachislo machine market, potentially the beginning of a turning point.

Gaming Machines Market (Arcade Games Sales)

Arcade Game Machines Contract 3.6% During Transitional Period

Arcade Game Market Trends

Next, in the previous fiscal year, the arcade games domestic product sales market shrank to 167.5 billion yen (down 3.6% from the previous fiscal year) due to contraction in the arcade facilities market and the effects of the transitional period between new product sales cycles.

By genre, sales of additional items in the content of consoles with networking functions increased significantly to 23.9 billion yen (up 30.6% from the previous fiscal year), while high-sales-ratio coin-operated games (accounting for 20.8% of the market) tracked slightly lower to 34.9 billion yen (down 3.6% from the previous fiscal year).

This fiscal year (ended March 31, 2014), the market remained firm on the launch of several major coin-operated games and higher sales of upgraded network game consoles requiring little investment.

In terms of the outlook for the future, the facilities market will continue to be in a slump due to the consumption tax increase. To ensure profitability, facility operators will narrow down new arcade openings and capital expenditure, which we think will result in a softer market.

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