Overview of Capcom's Business and Outlook for the Future
This business segment develops and distributes games for mobile phones. In the high growth mobile content market, we are able to respond flexibly to advances in smart phones and tablet PCs with our own brand titles and licensed content from other companies, enabling us to expand earnings even further.
*In the fiscal year ended March 31, 2011, Capcom restructured its business segment divisions, and as a result, some figures before the fiscal year ended March 31, 2009 have been retroactively adjusted.
76.2% Increase in Rapidly Growing Global Mobile Contents Market
Chance to Expand Earnings for Companies Possessing Numerous Popular Software Properties
The 2011 mobile contents market achieved significant global growth, increasing to 7,400 million dollars from 4,200 million dollars in 2010 (up 76.2% from the previous year).
The main reasons for this were (1) the advance of smartphones and other mobile devices in all countries of the world, (2) the rise of high-performance tablet devices and (3) the spread of social games due to the increase in mobile users. By region, the advanced North American market was worth 1,970 million dollars (up 75.9% from the previous year) and the European market was worth 1,280 million dollars (up 70.7% from the previous year) and the Asian market including Japan was worth 3,230 million dollars (up 77.5% from the previous year).Furthermore, in emerging and Eastern European markets, as well as other areas, the global market grew rapidly to 910 million dollars (up 84.6% from previous fiscal year).
For the past three years, the mobile content market has been in a period of great upheaval. This is because of (1) changes in the ways that users purchase games and (2) changes in development company business models.
With regard to the first point, up to now games were purchased using a "sell-out" model, where the user purchased a single download of their chosen game. Recently, the trend has shifted toward the "Freemium" model, where the game can be downloaded for free, but a premium is charged for access to additional items and other game content the user may require.
In regards to the second point, for development companies, the standard mobile phone market has been largely unprofitable for two reasons. (a) The OS used for the handsets of each mobile phone company differed, and distributing games across a jumble of disparate networks required transplantation costs, and (b) to distribute games to users required interfacing with several companies (the handset maker, the telecommunications provider, etc.), which led to high fees (50% of sales in the United States and Europe). However, with the introduction of open source operating systems such as Apple's iOS and Google's Android in the smartphone market, (i) development companies are now able to distribute content to a wide range of users with these limited OS platforms without the need for transplantation costs and (ii) with fewer companies to interface with along the way, fees are lower (30% of sales with iOS). As a result, companies possessing numerous notably popular software properties are able to release several leading titles as one part of multiplatform development, expanding opportunities to improve profits.
In terms of future outlook, given the global distribution system including Apple's App Store and Google's Google Market Place, Capcom expects smartphone shipments to exceed the 480 million units (up 63.5% from previous year) shipped in 2012 Also, the rapid spread of tablet devices is expected to drive expansion in the mobile market as its share grows from 1.9% in 2011 to 34.4% by 2016.
As a result, Capcom expects the mobile content market to grow to 21,000 million dollars in 2016 (an average annual growth rate of 23.2%), growth roughly on track with the home video game market.
Furthermore, in the domestic social game market, although the Japan Consumer Affairs Agency introduced regulation on "complete gacha" mechanics causing concern the market would shrink, part of the regulation lessened the impact. Formulating guidelines regarding in-game representations, each operating company strengthened voluntary initiatives to improve the game environment and provide users with peace of mind, safety and enjoyment. Capcom expects this market to grow as game developers, no longer dependent on speculation, will continue to provide wholesome and original games.
Operating Results for This Fiscal Year
Beeline and Capcom Brands Doing Well
Sales Up 56.6%, Operating Income Up 74.6%
One of Capcom's strengths in the Mobile Contents business is our ability to make effective use of the expertise and content developed through home video games under the Capcom brand, which is then distributed to mobile phones worldwide. Another of our strengths is the ability to acquire light users who differ from traditional Capcom users through the Beeline Brand using popular characters and novel content from other companies in games distributed to smartphones globally.
This fiscal year (ended March 31, 2012) major title "Smurfs' Village" was ranked the App Store's top seller, reaching number one in 80 countries. It continued to perform well as "Snoopy's Street Fair" continued to make a vigorous effort in Japan and Asia. As a result, Capcom's strategic brand Beeline surpassed 56 million downloads worldwide, significantly contributing to increased profitability.
Also, U.S. subsidiary affiliate Beeline Interactive Inc. became a direct subsidiary of Capcom and we established Beeline Interactive Europe Ltd. in an attempt to strengthen the link between the three development bases and speed up decision making.
At the same time, we integrated the Mobile Contents, Home Video Game and PC Online game development divisions, realizing a more flexible development structure through organizational integration.
"Resident Evil: Outbreak Survive" which began distribution in June 2011 on GREE, a major Japanese mobile phone social game site, "Monhan Tankenki Maboroshi no Shima" released in December (GREE) and "Minna to Monhan Card Master" (Mobage) released in February 2012 have more than one million members each, demonstrating their potential.
As a result, net sales were 6,308 million yen (up 56.6% from the previous fiscal year) and operating income was 2,385 million yen (up 74.6% from the previous fiscal year).
Outlook for the Next Fiscal Year
Aiming for 90.2% Sales Growth by Expanding User Numbers in Japan and Overseas, Increasing Number of Beeline and Capcom Brand Titles
Regarding business developments in the next fiscal year (ending March 31, 2013), we will continue to focus on developing content for the smartphone and SNS game markets, where high growth remains the forecast for the foreseeable future both in Japan and overseas.
In terms of strategy, Capcom will (1) expand domestic market share by increasing the number of social games under the Capcom brand and (2) strengthen Beeline's management structure and release major titles targeting a wider customer segment in an aim to intensify relations with existing users and acquire new customers.
The Capcom brand strategy attempts to achieve synergy with home video games through multi-platform development using the brand power of popular Capcom titles created in Japan. In this way, the mobile version draws the light user to the home version, and the home version draws the core user to the mobile version. Furthermore, Capcom will significantly expand number of social game releases through proactive employment of developers and collaboration with outside companies, and provide content from domestic platforms such as GREE for overseas development.Additionally, Capcom will start developing original content as well as popular home video game content.
At the same time, Beeline brand strategy will continue to focus on strengthening social games for smartphones. The reason for creating a second brand is because Capcom brand games have an image of difficulty and complexity about them, creating obstacles that would prevent most light users who normally don't play games from purchasing a casual download. Developing a new brand circumvents these obstacles altogether. Furthermore, development facilities in North America, Europe and Japan are developing social games that incorporate distinctive characteristics to acquire users in developing regions where home video game consoles have yet to be adopted. In terms of the title lineup for next year, "Shrek's Fairytale Kingdom", featuring DreamWorks character Shrek, popular in Western countries, and 15 other titles will be released in an attempt to establish a brand like "Smurfs' Village" as soon as possible.
Furthermore, from next fiscal year, in consideration of major changes in market environment and business structure, Capcom will merge the Mobile Contents and Consumer Online Games businesses to create the Digital Contents business.
As a result of these changes, Capcom forecasts sales of 80,000 million yen and operating income of 15,000 million yen in the Digital Contents business next year.
This Year's Major Title
"Phoenix Wright: Ace Attorney 123HD"
"Street Fighter IV: Volt"
© Peyo - 2010 - Licensed through Lafig Belgium - www.smurf.com.
All game code © 2011 Beeline Interactive, Inc.
"Snoopy's Street Fair "
© 2011 Peanuts Worldwide LLC
"Resident Evil: Outbreak Survive"
Maboroshi no Shima"
©CAPCOM 2011 developed
"Minna to Monhan Card Master"
© CAPCOM developed
『Shrek's Fairytale Kingdom』
©2012 DreamWorks Animation L.L.C. All rights reserved.
All game code ©2012 Beeline Interactive, Inc.