CAPCOM IR

In recent years, some major titles have posted solid growth in sales volumes in the global market. On the other hand, there is a tendency for new titles as well as midrange and small titles to face difficulties. Overall, the environment for marketing activities is challenging. After taking into consideration the importance of proactive sales promotion activities, we established a plan to make the expenditures required to achieve our sales plans for major titles in this fiscal year.

We are unable to say anything specific about our performance in the March 2014 fiscal year at this time. We cannot deny the possibility of ups and downs in our performance in individual fiscal years amid rapid changes in our markets and changes in game platforms. However, in the March 2014 fiscal year as well, we aim to fulfill the targets in our five-year medium-term management plan: 1) place priority on achieving an operating margin of at least 15% every year; 2) accumulative sales of 500 billion yen and operating income to 75 billion yen over the five-year period ending in March 2015.

We believe that some rules must be established so that people can enjoy social games properly. Capcom has no social games that incorporate Complete Gotcha. Furthermore, with respect to the global use of social games, business models like the one used by Complete Gotcha are rarely used. Capcom wants to use a different approach to be a source of fun for our customers.

Our forecast for performance in this fiscal year reflects a variety of risks involving the operating environment as well as investments for future activities and other items. Since we believe this is a suitable forecast, we do not foresee any launch postponements at this time. To maximize our sales volume, we select the best timing for launches with respect to both our development and sales operations.

We are not placing priority on any particular market. Due to the increasing use of smartphones, it is possible to distribute content worldwide, particularly for iOS by using the App Store. We believe that the major strength of this business is that there is no need to view North America, Europe and Asia separately. Our goal remains to increase awareness of the Capcom and Beeline brands on a global scale.

The gross ARPPU for Beeline users is about 25 US dollars. We believe that we are maintaining prices that are both suitable and high.

We are unable to disclose more information about this target. We foresee different rates of growth in three categories: DLC (downloadable content), mobile contents and PC and others. We plan to reach the 30 billion yen target due to the steady growth of all three of these categories.

Our basic stance is to use DLC for major titles, but we cannot name any specific titles at this time. Furthermore, we will also continue to introduce as DLC the titles that we launched in prior years.

We expect that sales will be approximately evenly divided between Japan and overseas. But we are unable to provide you with any more information.

We continue to consider starting these sales because Asia is a major market for online games. We have nothing specific to say at this time, but we can say that we are moving ahead with various preparations in Asian markets, including China.

We will answer this question later.
*FY3/10 online content sales: DLC 2.5 billion yen, mobile contents 3.5 billion yen, PC and others 4.8 billion yen

We expect sales to grow in Japan and overseas because of the increasing number of newly launched social games.

Some titles become unprofitable when sales are weaker than we anticipated. But the percentage of money-losing titles is very small because we carefully manage costs and schedules.

We are unable to make a comment about the M&A activities of other companies. Capcom has acquired software development companies for the purposes of creating content that will be successful worldwide and expanding our development lineup. Our fundamental policy is to aim for organic growth through aggressive recruiting and training activities.

Sales volume of this title has surpassed our initial plan. Furthermore, this title has created a new community in the Nintendo 3DS market, a development that is extremely beneficial for the Monster Hunter series. We therefore believe that this title has been at reasonable success level.

Sales of "Street Fighter X Tekken" have fallen short of our plan. We believe one of causes is cannibalism because of the large number of other games in this genre that were launched within a short time. "Resident Evil: Operation Raccoon City" has reached shipments of 2 million units (as of May 10, 2012). This shows the success of our decision to try the new approach of using an alliance with an overseas development company.

For "Resident Evil 6", we improved efficiency by using a new alignment of internal developers. For "Lost Planet 3", we are using an alliance with an overseas development company with the goal of launching this title 2.5 years after the previous title in this series. So we have succeeded in greatly reducing the development time compared with prior titles. Overall, we believe that we are making steady progress in shortening development times by efficiently utilizing our own workforce and making effective use of external development companies.

Sales totaled 1.2 million units at the end of December 2011 and increased to about 1.3 million units at the end January 2012.

Earnings fell because we launched highly profitable new titles in the previous fiscal year.

We expected sales of about 5 billion yen from this title. However, there is no revision to our fiscal year forecast because of the strong performances of "Monster Hunter 3(Tri) G" and the Mobile Contents business.

Beeline is performing as planned. Regarding "Snoopy's Street Fair", we expect this title to start making a meaningful contributing to earnings in the fourth quarter following an update that reflects the preferences of users in Europe and North America.

Third quarter non-operating expenses include a net foreign exchange loss of 911 million yen. A one yen movement in the U.S. dollar/yen and euro/yen exchange rates combined changes our sales by about 340 million yen and operating income by about 80 million yen.

We have made no changes since the beginning of the fiscal year.

We cannot supply any numbers but we can say that this business is generally performing as expected. In addition, sales and earnings are higher than one year earlier. We are moving quickly with regard to our plan for growth of the online business in Asia.

We cannot provide a specific figure, but there was a small increase.

Changes in market conditions were not the reason for the postponement. We pushed back the launch because we selected the timing that we believe will maximize sales volume.

Overseas sales are about 60% and Japan is about 40%.

We believe the reason is that we were the first to start operations on a global scale in the social game category. Big hits like "Smurfs' Village" allowed us to establish our brands in overseas markets ahead of competitors.

It is too premature to ascertain the life cycle at this time but we assume that it is about two years.

Our basic policy is to develop these games internally. Nevertheless, we outsource the development of some titles because of the recent shortage of development resources and our increasing expertise in operating social games due to our collaboration with partner companies.

We are progressing as planned.

We believe the target can be reached because titles introduced in the third quarter will make a meaningful contribution to earnings in the fourth quarter.

We are unable to provide any specific information at this time because we are working on our plan for the next fiscal year. Our basic policy is to constantly perform studies to determine the best timing for introducing new titles in order to maximize sales volume. In the next fiscal year, we plan to launch "Dragon's Dogma" in May and "Resident Evil 6" in November. We plan to announce launch dates for other titles in April at "Captivate 2012".

Content that is downloadable can contribute to earnings only after we release packaged software that becomes a hit. Our basic stance is to consider the use of networks for the distribution of a variety of content with regard to all of our major titles. We believe that downloadable content earnings will increase along with the upcoming introductions of major new titles.

We changed the price to a more affordable level to the customers based on current market conditions and our goal of selling this title over an extended period of time.

One reason was that progress with development of this game had reached the point where we could make this announcement. In addition, we made the announcement now in order to heighten expectations leading up to the launch of the latest title in Capcom’s most prominent game franchise.

Our policy is to procure funds while preserving the proper balance between debt and equity in order to maintain a sufficient level of yen-denominated funds.

We believe that the Mobile Contents business has the most growth potential. We expect the second-largest source of growth to be the online console category, which includes downloadable content.

We are unable to provide a specific date, but we will introduce this version at the proper time.

We will acquire expertise in operating social games by continuing to collaborate with social game service providers and game developers. We will also establish a team of workers with social game operational skills through training and recruiting activities.

We do not have any figures, but we believe that a large number of Monster Hunter fans have purchased "Monster Hunter 3(Tri) G".

There are two reasons. First is the negative impact of foreign exchange rates on overseas performance. Second, we started distributing new titles late in the third quarter, so they did not make a significant contribution to this quarter. We believe that the fiscal year target can be reached due to the substantial contribution from these new titles starting in the fourth quarter.

We would like to decline disclosing this information. In the Mobile Contents business, social games and content for smartphones account for about 80% of sales worldwide.

As our policy we are always seeking the best possible timing for the release of new titles by taking into account market conditions and all other applicable factors.

Naturally, we will determine the proper timing for these introductions after studying market conditions and other items to prevent competition among our own titles.

Our stance for the overseas distribution of this title is the same as for the entire "Monster Hunter" series. We are selling the preceding title "Monster Hunter Tri" overseas so we will consider launching this title overseas, too. But no decision has been reached yet.

First, we believe that using the Nintendo 3DS will allow us to offer new types of expressions, game play action and enjoyment for the "Monster Hunter" series, which has attracted a broader range of user segments. In addition, we selected this platform with the goal of reaching a diverse spectrum of customer segments, including current users of the "Monster Hunter" series as well as people who have portable game consoles.

Our basic policy is to develop games internally. However, to improve efficiency, we use a hybrid approach that combines internal development programs with outsourcing. So we may outsource portions of development work for some titles. I cannot provide information about our development framework for specific titles.

Our priorities at this time are to accumulate know-how about social games and expand this business. We will respond quickly to changes in market conditions.

At the end of September 2011, our development staff was about 1,400, and its break-down are approximately 1,000 for home video games, 170 for consumer online games, 100 for mobile content and 130 for amusement equipment.

We want this game to outperform "Smurfs' Village".

I cannot provide any information about specific titles. We are making steady progress regarding alliances with overseas development companies. I believe that we will be able to introduce titles in the fiscal year ending in March 2013 that will demonstrate the benefits of these alliances.

We believe that our target can be achieved because of the favorable response to the content and other aspects of this game.

We will strengthen the lineup of content that we distribute in individual markets in Japan and other countries. Overseas operations currently account for a large share of this business. But we are making steady progress in raising the profile of the Capcom brand in the social game market in Japan. For example, the number of registered members for “Resident Evil: Outbreak Survive” on the GREE social networking service has surpassed one million. To make the Capcom brand even more powerful in this market, we will start introducing many games for the Japanese social game market starting in the next fiscal year.