We operate "Plaza Capcom" amusement facilities in Japan. These arcades are predominantly in large commercial complexes and host various events designed to attract families and female customers. We have diligently followed a scrap-and-build policy to maximize our efficiency in arcade operations.
Net Sales/Operating Margin
During the previous fiscal year (ended March 31, 2014), the size of the domestic arcade facilities market decreased slightly to 456.4 billion yen (down 2.9% from the previous fiscal year). This was due to a decline in the number of arcades and the number of machines per arcade, the absence of a major hit product gaining traction in the market, competition from apps in line with the ongoing adoption of smartphones and increased diversity in how people spend their leisure time.
Arcade Operations Market
Furthermore, although the number of facilities decreased to 16,069 (down 5.4% from the previous fiscal year) , there was a slight increase in the number of machines per arcade, which was 32.7 (up 0.5 machine from the previous fiscal year), and sales per facility, which was 28.40 million yen (up 2.7% from the previous fiscal year). Many companies closed unprofitable arcades, successfully promoting management efficiency.
Number of Amusement Arcades (by number of machines)
During the fiscal year under review, the market continued to contract as in the previous fiscal year. Despite the popularity of some prizes utilizing popular contents, the April 2014 consumption tax hike caused a drop in consumer confidence resulting in fewer customers and lower customer unit prices that drove the ongoing closure of unprofitable arcades throughout the industry.
In terms of outlook for the future, although conditions vary from one arcade to the next, we expect the market to remain somewhat weak overall. Specifically, arcades in shopping centers will continue to face severe business conditions due to declining customer numbers at large commercial facilities and merchandise lineups that do not sufficiently appeal to families. At the same time, the introduction of character merchandise popular with young people and leading music game machines are expected to maintain brisk business at roadside arcades.
Capcom's strengths in this business category are: (1) early specialization in opening mall-based large-scale facilities that ensure a long-term stable customer base, (2) the planning and operation of sales venues popular with customers and (3) the ability to maintain higher profitability than the competition by instituting a strict scrap and build policy and sound management structure to raise return on investment.
Comparison of Arcade Operations Performance(Year ended March 31, 2015)
(Billions of yen)
(Billions of yen)
Source: Financial reports and earnings materials of each company (Aeon Fantasy fiscal year ended February 2015)
Note: Segments include businesses other than arcade facilities operations and exclude corporate.
This fiscal year (ended March 31, 2015), amid a soft market, we attempted to expand customer segments by focusing efforts on capturing seniors and families by offering free game experience tours for senior citizens and creating "Asobi Oukoku Peekaboo" play areas for young children in five locations across Japan. Other measures included cafes and restaurants incorporating character motifs from the "Monster Hunter" series.
However, market contraction resulted in existing store sales at 90% of the previous fiscal year, as the impact of the consumption tax and unseasonable weather kept customers away.
This year, we opened one arcade in Saitama Prefecture and closed one unprofitable arcade, bringing the total number of arcades in operation at the end of this fiscal year to 33.
As a result, net sales were 9,241 million yen (down 13.0% from the previous fiscal year) and operating income was 940 million yen (down 41.8% from the previous fiscal year).
In terms of business developments next fiscal year (ending March 31, 2016), we expect the market to continue its gradual decline. Above all, we will strive to ensure profits in the severe shopping center arcade environment by continuing to promote the cultivation of new segments and improving management efficiency at existing arcades.
In addition to ongoing senior citizen events aimed at attracting middle-aged and senior customers, we will aim for a synergetic effect by appealing to both game users and the women and family segments with Capcom character-themed cafes and restaurants and escape attractions among other efforts to invigorate our facilities and draw more customers.
In terms of the opening and closing of facilities, we will further strengthen efficient facilities and close unprofitable ones, while moving forward with the establishment of new facilities in areas with a high concentration of customers to establish new revenue streams. Next fiscal year, we plan to open four arcades, including "Asobi Library Kawaguchi" in Saitama Prefecture, and close two arcades, which will bring the total number of arcades in operation to 35.
As a result of these measures, we forecast existing arcade sales up 1% from the previous year, which is sales of 10 billion yen and operating income of 1.1 billion yen.
|Business Activities and Future Outlook (PDF:1.19MB/10 pages)|