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[Growth Strategy 2] Overhaul the Online Business

Growth Strategy 2: Overhaul the Online Business

Supporting Capcom's Sustainable Growth Differently than the Consumer Business

Capcom has yet to make full use of its competitive advantage in the rapidly expanding online market (PC Online and Mobile Contents), namely, its rich library of popular IPs. In particular, the Mobile Contents business struggled in the fiscal year ended March 31, 2016 with net sales of only 3.3 billion yen. However, as success in the high-growth potential Online business is indispensable for corporate growth over the medium- to long-term, we are focused on this area as one of the most important issues for Capcom. Online games are a management business, providing a stable source of profit supporting Capcom's sustainable growth in a way different from that of the Consumer business. Furthermore, these businesses enable the creation of synergies with content (IP) created in the Consumer business, playing a significant part in enhancing brand value. To alleviate investor concerns, we will implement the following two measures.

Measure 1 Strengthen Development Structure via the Newly Established Mobile Business Division

The conditions necessary for success in the Mobile business include (1) ownership of popular content that can be differentiated amidst numerous competing titles and (2) management expertise in analyzing user trends and the incorporation of those trends into development.

Until now, we developed the Capcom brand, which utilized popular Capcom content in Japan, and the Beeline brand, which licensed content from other companies for global use in games targeting women and families. Under the Capcom brand, although we unified our domestic development structure and achieved a hit with Monster Hunter Explore, other existing titles struggled, adversely affecting sales for the past few years. Under the Beeline brand, we have been unable to generate ongoing hit titles since 2010 and sales have continued to decline. In April 2016, both structures were integrated to establish the Mobile Business Division in order to focus on global development of Capcom IP. Next fiscal year, we will combine our library of popular content with our management expertise to release new titles in the Sengoku BASARA, Mega Man and Monster Hunter series and promote a structure for the ongoing release of titles. In addition, we will attempt to expand profits in Asia via licensing hit titles from Japan and overseas in the Asian region, while at the same time moving forward with M&A, targeting development companies as part of management line integration.

New Mobile Game Strategy

By integrating the Capcom and Beeline Brand organizations, which until now had promoted independent strategies, development and management expertise has been concentrated in the Mobile Business Division. Quick decision-making enables global expansion of titles utilizing proprietary content.

Through these measures, we first aim to acquire a 5% share in the domestic market over the medium term, then will attempt to maximize profit opportunities overseas by leveraging market analysis capabilities and management expertise cultivated in foreign markets under the Beeline brand.

Measure 2 Promote Business Alliances in the Asian Region

We believe the licensing of existing Online content in Asia has the potential to significantly accelerate Capcom growth. There are two ways to proceed in Asia: (1) engage in Capcom development and management through subsidiaries in the Asian region and (2) engage in development and management through business alliances with major Asian management companies. At present, we are focusing efforts on the latter.

Alliances and Titles in the Asian Region

In the PC Online business, we are engaged in negotiations in China, the world's largest online game market, as well as in South Korea and Thailand. Similarly, in terms of Mobile Content, we are enhancing development making use of leading titles in the Asian market where the adoption of smartphones continues at a brisk pace.

In terms of an example of full-fledged development in Asia, we can point to Monster Hunter Online (MHO), launched in collaboration with Tencent Holdings in China in December 2015. The game was well-received by users after distribution, giving us a solid footing in terms of content development in China.

The reason we are promoting business alliances in addition to internal development is to avoid country risk in Asia and gain management expertise. Thus, we have determined that at this time, alliances with leading companies in countries other than Taiwan are an effective means of maximizing earnings. Developing hit content from the Consumer business under our Single Content Multiple Usage strategy, making use of this content in the domestic PC Online business and licensing the content in Asia is a business model enabling Capcom to earn double or triple profits from the same content. In addition, we can also apply Online business management expertise to the Consumer business; thus promoting these strategies will enhance synergies with the Digital Contents business.

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