Overview of Capcom's Business and Outlook for the Future
This business is engaged in the development and sales of home video games and the development and operation of PC online games. We will continue concentrating management resources on this business, which represents 65% of company sales, and developing games that meet diverse user needs. We consider action and adventure games our forte, and have released many creative million-seller titles worldwide.
*1 Before the fiscal year ended March 31, 2009, the Consumer Online Games business is described as the Home Video Games business.
*2 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.
Although the package market contracted 3.8% from the previous year, downloadable content (DLC) increased 53.6% and the rapidly expanding PC onlinemarket increased 33.6%
In 2011, the home video game (package) market was worth 22,500 million dollars (down 3.8% from the previous year), the third straight year of negative growth. As in the previous year, the reasons for this include (1) a decline in game console annual unit sales, as manufacturers have not introduced new hardware for six years, (2) lower average retail prices of package software as a result of intensified competition, (3) the diversification of sales into digital distribution and other forms, etc.
The market mainly consists of three regions: North America, Europe and Japan. While the ratio of each region's share was 5:3:2, respectively, around 2000, our overseas sales ratio is increasing every year due to the maturation of the Japanese market, caused by a falling birthrate and various other social factors, as well as the increase in the global gaming population combined with the growth of emerging gaming nations. In 2011, sales were 10.1 billion dollars (down 6.5% from the previous year) in North America, 8.9 billion dollars (down 1.1% from the previous year) in Europe and 3.5 billion dollars (down 2.8% from the previous year) in Japan, with foreign markets representing 85% of the overall market.
In contrast, the DLC market expanded significantly to 4.3 billion dollars (up 53.6% from the previous year), a result of companies beginning to focus on DLC associated with major titles and the advance of global network infrastructure improvements. Consequently, the home video game market is trending higher than the previous year on the combination of package games and DLC.
The PC online game market, with an increase in users due to the rise of new genres such as Facebook and other SNS browser games, grew rapidly to 18.7 billion dollars (up 33.6% from the previous year).
As for the outlook for the next fiscal year, although Nintendo will release the new game console Wii U and the market will be continue to be invigorated by the increase of DLC, time is required before the next generation console cycle begins in earnest. We expect the total market for package games and DLC to decline slightly to 26,000 million dollars (down 3.0% from the previous year).
At the same time, the 2012 PC online game market is forecast to continue expanding to 20,800 million dollars (up 11.2% from the previous year). Improvements to the global network environment and an increase in households with broadband will be the drivers of growth. In addition to the growth in households with broadband from 334 million in 2011 to 442 million by 2016, and the introduction of new channels such as game services using cloud computing, we expect the package game market to expand to over 26,200 million dollars by 2016.
With the package market maintaining a fixed scale and the DLC and PC online markets growing over the medium term, the key for software makers in terms of maximizing earnings is investing each year in various software platforms with proven track records. However, that is only possible for companies that "possess multiple popular major titles" and "a development structure efficient enough to produce year after year". Going forward, the fight for survival among game software manufacturers will surely intensify.
Operating Results for This Fiscal Year
Release of Three Million-Seller Titles Amidst Lower Sales and Earnings and Decreasing Repercussions from Sale of Several Major Titles Last Year
Capcom's strength in the Consumer Online Games business is threefold. First, we have scores of "long-lasting intellectual properties with universal market appeal" such as million-seller titles and popular characters.
Second, we maintain an "advanced ability to develop original game content" without relying on licenses obtained from external sources. We also possess a "high level of technology", assisted by the "MT Framework", an integrated development environment built to provide common development tools for Xbox 360, PS3, PC, Wii, Nintendo 3DS and PlayStation Vita platforms. Lastly, we have "strong overseas marketing capabilities" as represented by effective sales operations in overseas markets, which are the majority of our markets, with a proper understanding of regional preference for game titles, market characteristics and business practices.
This fiscal year (ended March 31, 2012), sales of home video game major title "Monster Hunter 3 (Tri) G" for the Nintendo 3DS surpassed 1.6 million units, well above the projected number of units. Also, "Resident Evil: Operation Raccoon City"(PS3, Xbox 360), a title created in collaboration with overseas developer Slant Six Games, showed steady growth, shipping 1.7 million units. Meanwhile, "Street Fighter X Tekken" (PS3, Xbox 360), despite oversupply in the fighting genre, sold 1.4 million units, lower than projected, but enough to make it the third million-seller title this year.
We also released several software tie-ups, including titles derived from popular series "Resident Evil: Revelations" (Nintendo 3DS) and "Ultimate Marvel vs. Capcom 3" (PS3, Xbox 360, PlayStation Vita). We also released a diverse array of elaborately planned software, including new title "Asura's Wrath" (PS3, Xbox 360).
At the same time, online game "Monster Hunter Frontier Online" (PC, Xbox 360) has been consistently popular from start to finish.
In 2011, as a result of repercussions from the global sale of several major titles in the previous year, our market shares in the respective markets where we operate were as follows: Japan 7.6% (down 3.4 points from the previous year), North America 1.5% (down 0.1 points from the previous year) and Europe 0.8% (down 0.8 points from the previous year) .
Consequently, Capcom released a total of 68 titles and shipped a total of 15.7 million units (down 23.4% from the previous fiscal year). The resulting net sales increased to 53,501 million yen (down 23.9% from the previous fiscal year), and the operating income was 10,502 million yen (down 16.0% from the previous fiscal year).
Outlook for the Next Fiscal Year
4th Million-Seller Game with Flagship Software "Resident Evil 6", Improving Profitability through Aggressive Distribution of Downloadable Content (DLC)
Capcom's medium-term business goal call for expanding our share in the package game market and expanding DLC and PC online game sales—including online content—to 30,000 million yen by March 2015. To achieve this medium-term business goal, in the next fiscal year (ending March 31, 2013), we will continue promoting the business developments begun this fiscal year, namely (1) shorten the series title sales cycle, (2) strengthen online contents, (3) create new franchise and (4) enhance development staff (See "Our Strategy for Growth").
In regards to (1), we will shorten the development period and develop series products in 2.5 years by creating core game elements in-house and outsourcing other operations to outside development companies. In terms of (2), we are aggressively developing the PC online and DLC businesses. In addition to new PC online game titles, we will offer new browser games "Onimusha Soul" and "Browser Sengoku BASARA". We will also consider expanding "Monster Hunter Frontier Online" in Asia. Regarding DLC, in addition to strengthening download sales related to package software, we aim to expand all-around earnings by considering main title download distribution in line with package sales. In regard to (3), we will create new popular next generation franchise, allocating 20% of development investment to new products through efficient development in (1). Regarding (4), we aim to expand the scale of our business through the proactive hiring of 1,000 new employees over the next 10 years.
New titles next fiscal year include the release of "Resident Evil 6", the first new title for this series in three and a half years, "DmC Devil May Cry", "Lost Planet 3" and "Dragon's Dogma".
Furthermore, in consideration of the volatile market environment and our business structure, we will merge the Consumer Online Games and Mobile Contents businesses under the new name Digital Contents business to unify organizational management.
As a result of the aforementioned policy changes, we forecast net sales of 80,000 million yen and operating income of 15,000 million yen for the Digital Contents business next year.
This Year's Major Title
"Monster Hunter 3 (Tri) G"
"Resident Evil: Operation Raccoon City"
"Street Fighter X Tekken"
© CAPCOM U.S.A., INC. 2012 ALL RIGHTS RESERVED.
© 2012 NAMCO BANDAI Games Inc.
"Resident Evil 6"
"DmC Devil May Cry"
"Lost Planet 3"