We operate "Plaza Capcom" amusement facilities in Japan. These arcades are pr dominantly 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.
During the previous fiscal year (ended March 31, 2015), the size of the domestic arcade facilities market shrank to 422.2 billion yen (down 7.5% from the previous year).
This was due to the decline in personal consumption following the consumption tax increase implemented in April 2014, the spread of smartphones and the impact of scrambling to win shares of consumer free time amid a variety of leisure activities. Companies across the board closed unprofitable arcades and attempted to streamline management, resulting in the total number of arcades decreasing to 15,612 (down 2.8% from the previous year), and annual sales per facility declined to 27.04 million yen (down 4.8% from the previous year), reducing the overall scale of this market. This fiscal year (ended March 31, 2016), market contraction slowed due to the resurgence of prizes and recovery from the impact of the consumption tax hike.
With the slow pace of market recovery, Capcom strived to expand its customer base by means of community-based store strategies. For example, for the middle-aged and seniors capcom conducted service days and free game experience tours ; for woman and families capcom set up additional Asobi Oukoku peekaboo sites and kids’Corners that targeted children. Nonetheless, segment results were soft, partly because of the lack of a high-performance product as well as sluggish demand due to the dispersion of entertainment toward smartphone games. During the period under review, Capcom developed arcade operations through its scrap and build strategy, and opened four arcades including the "Amuse Factory Tokoname" (Aichi Prefecture) and the innovative "Capcom Café" (Saitama Prefecture), while closing three arcades, bringing the total number of arcades to 34.
As a result, net sales were 9.056 billion yen (down 2.0% from the previous fiscal year), and operating income was 699 million yen (down 25.6% from the previous fiscal year), with both sales and profit declining year on year.
Comparison of Arcade Operations Performance (Year ended March 31, 2016)
(Billions of yen)
(Billions of yen)
Source: Financial reports and earnings materials of each company (Aeon Fantasy fiscal year ended February 2016)
Note: Segments include businesses other than arcade facilities operations and exclude corporate.
In terms of market outlook, we expect conditions to remain the same as in the previous year. In addition to the ongoing resurgence in prize games, we expect the introduction of popular arcade cabinets to increase customer traffic. Furthermore, revisions to the Entertainment and Amusement Trades Act (Entertainment and Amusement Trades Rationalizing Act) in June 2016 relaxed restrictions on the amount of time young people can spend in arcades when accompanied by a guardian, which is expected to give the market a boost.
Next fiscal year (ending March 31, 2017), Capcom will promote streamlining of arcade management through its ongoing scrap and build policy to ensure earnings at the same level as the previous fiscal year through the creation of new earnings opportunities.
Ongoing senior events will be held with the aim of attracting middle-aged and senior customers, Capcom characters will be used to create themed "Capcom Café" restaurants and "Chara Cap" stores specializing in character merchandise will be opened among other efforts focused on expanding customers and creating new earnings opportunities. In terms of the opening and closing of facilities, in an attempt to further strengthen efficient arcade management operations, we will open new facilities in locations with high concentrations of customers to secure new revenue streams. Next fiscal year, we plan to open three facilities with no closures, resulting in a total of 37 facilities.
As a result of these measures, expecting year on year sales of existing stores to be 100%, we forecast net sales of 9 billion yen (down 0.6% from the previous year) and operating income of 800 million yen(up 14.4% from the previous year).
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