Business Characteristics Underpinning Our Strategy

With Single Content Multiple Usage as the basic strategy underpinning Capcom's business overall, we make the development of highly creative content the source of our corporate value creation, and via multifaceted and global expansion of this content into multiple businesses, we have built a business model that enjoys repeated earnings. At the same time, the creation of content (upstream) and subsequent deployment in each business (downstream) is not a seamless process, and at present, we have not yet maximized our earning potential.

■Digital Contents business (Proportion of Net Sales: 71%)

Accounting for over 70% of Capcom's net sales, this is our core business, comprising the Consumer, Mobile Contents and PC Online Game sub-segments. The Consumer sub-segment creates a wide variety of popular, original content using world-class development capabilities, which is then leveraged across an array of platforms to maximize sales volume. At the same time, insufficient mobile management experience and strong dependence on certain PC Online titles continue to adversely affect earnings stability.

■Arcade Operations business (Proportion of Net Sales: 14%)

This business specializes in opening large commercial complexes in Japan, and maintaining margins of 10% or more by ensuring a stable stream of customers. At the same time, the sales growth rate in this business is low due to our strategy of carefully limiting the number of our facilities.

■Amusement Equipments business (Proportion of Net Sales: 12%)

The gaming machine (Pachinko and Pachislo) and Arcade Games Sales sub-segments maintain margins around 30% due to the release of machines using popular Capcom content and the culmination of development expertise. At the same time, legal changes and other external factors impacting the gaming machine business may pose a significant risk of postponed sales, so this business experiences substantial earnings volatility.

■Other Businesses (Proportion of Net Sales: 3%)

Our character licensing business involves the use of popular Capcom characters in Japan and overseas, providing high profitability and stable margins around 30%. At the same time, licensed products bring in a low return, as the scale of sales in this business is small at this moment.

Achieving Medium-Term Business Goals

I believe Capcom's strength lies in its development capabilities that create highly creative content. Furthermore, our Single Content Multiple Usage strategy enabling the multifaceted and global use of IP across multiple businesses places us in a highly advantageous competitive position.

Capcom possesses a wealth of IPs, including a total of 60 titles that have each sold over a million units. The multifaceted use of this content enables us to expect the following three effects:

First, it creates a synergetic effect between businesses. Multifaceted development creates new profit opportunities in businesses beyond Consumer, while drawing customers acquired through other businesses to home video games as new users.

Second, it has a promotional effect. Leveraging IP across multiple mediums at once enables us to cultivate fads while gaining wide-ranging exposure.

Third, it enables us to hedge risks. The formation of a business portfolio enables us to control earnings volatility.

Specifically, in terms of the first point (creating a synergetic effect between businesses), in addition to focusing efforts on rolling out PC Online and Mobile content, wide-ranging development involving pachislo machines and arcade games, movies, TV animation and toys, and food and beverages enables us to further improve brand value and profitability. Making use of digital content strengths, such as resilience against illegal copying, we can maintain our competitive position through expansion in growing Asian markets, enabling the cultivation of new business opportunities.

With this basic strategy, I want to focus efforts on driving our growth strategy to expand the Consumer, Mobile Contents and PC Online sub-segments. In the next fiscal year, we will realize results incrementally to ensure achievement of our medium-term business goals.