We are engaged in two businesses that utilize the contents used for our home video games. The Pachinko & Pachislo (PS) business is involved in the development, manufacture and sales of frames and LCD devices for gaming machines as well as software. The Arcade Games Sales business develops, produces and sells arcade games for amusement facilities, creating synergy between businesses.
In the previous fiscal year (ended March 31, 2015), the gaming machine market shrank to 1,069.3 billion yen (down 5% from the previous year). This was due to a temporary decline in the number of new machines launched resulting from changes to rules concerning pachislo machine model certification*1 by the Security Electronics and Communications Technology Association that went into effect in September 2014 in the pachislo market, as well as the fifth straight year of declines in the Pachinko market.
*1 Model certification: A public test to verify whether or not gaming machines are in accordance with regulations conducted by the Security Communications Association on behalf of public safety commissions in each of Japan's administrative divisions
*2 Changes to certification methods: Three self-imposed restraints implemented in stages. Up to November 2014 (1) guarantee a minimum (55%) ball dispensing ratio, (2) implement limits on penalty functions, and from December 2015 (3) implement functional limitations in sub-substrates
In the arcade game market, although sales of claw crane and prize games were firm, arcade game and coin-operated game sales declined significantly, resulting the third consecutive year of negative growth at 151.1 billion yen (down 7.5% from the previous year). This year (ended March 31, 2016), the gaming machine market remained weak on the impact of pachinko machine gambling restrictions and pachislo machine third stage rule changes.*2 In the arcade game machine market, despite continued sluggishness in coin-operated games, popular music games and kids' card games helped maintain the same level as in the previous year.
This fiscal year (ended March 31, 2016), In the Pachinko and Pachislo sub-segment, the popularity of the Resident Evil 6 brand resulted in sales of 37,000 units, driving sales beyond initial projections to support earnings. In the Arcade Games Sales sub-segment, sales of Luigi Mansion Arcade were weak reflecting the sluggish market, while crossbeats REV. for arcades also struggled.
As a result, net sales were 13.343 billion yen (up 77.0% from the previous year) and operating income was 2.812 billion yen (up 2.8% from the previous year).
In terms of the market outlook, despite the passage of rule changes affecting pachislo machines, top-selling product sales lots are on the decline, thus we anticipate demand will weaken. With respect to Pachinko machines, cabinet profitability will decline in line with gambling restrictions, thus investment in hall gaming machines will be increasingly selective. Accordingly, companies will steer towards cabinet development focused on efficiency and control development costs.
In the PS sub-segment, Capcom aims to increase unit sales by (1) stably providing proprietary cabinets, (2) securing a strong sales network and improving development quality through an alliance with major sales company Fields Corp., and (3) releasing proprietary pachislo machines not dependent on gambling with a variety of clever video elements and playing styles making use of popular consumer content. Next fiscal year, we are projecting sales of 55,000 units comprising four machines including Super Street Fighter IV and Devil May Cry X (Cross). In the Arcade Games Sales sub-segment, we expect performance to remain at the same level as in the previous year based on the resurgence of prizes and sales of popular arcade games.
Accordingly, we plan to release new machines making use of popular content belonging to other companies, including Mario Party Fushigi no Challenge World.
As a result of these measures, we expect sales and profits to rise in the next fiscal year. We forecast sales of 15 billion yen (up 12.4% from the previous year) and operating income of 3 billion yen (up 6.7% from the previous year).
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