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Capcom cancels games, brings development back in-house

"Excessive" outsourcing and poor marketing blamed for missed targets

Capcom hopes a return to in-house game development will improve the fortunes of the company, as it suffers a special loss of 7.2 bn ($73.3m / 48.1m) due to the cancellation of titles in development.

As it prepares to reveal full-year results that have come in significantly under target, the company has blamed "excessive" outsourcing for low quality games, as well as a slow response to expanding digital markets and poor co-ordination from its own marketing and development divisions.

The publisher of Devil May Cry and Resident Evil has more than halved profit forecasts for the financial year ended March 2013 from 6.5bn ($66.2m / 43.4m) to just 2.9bn ($29.5m / 19.4m).

Presentation material to investors shows that the publisher singles out a "decline in quality of titles outsourced to overseas developers". As a result the company has cancelled in-progress projects farmed out to third parties as part of a "strict" review that has found games incompatible with a new focus.

It also acknowledges the company had a "delayed response to the shift to digital media" in its home video game business.

Sales of Resident Evil 6 across consoles during the financial year are expected to be around 4.9 million - way off the original 7 million target, while DmC Devil May is expected to have shifted 1.1 million units of the estimated 2 million.

To address the disappointing year, Capcom has a three point plan to improve the business; strengthen digital strategies, raise game quality by moving more game development in-house and enhance co-ordination between marketing and development divisions.

At the end of the 2014 financial year it expects profits of 6.8bn ($69.1m / 45.4m) with net sales of 97bn.

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Latest comments (15)

Adam Campbell Producer, Hopster3 years ago
Capcom were doing so well with internal development and technology, the idea of outsourcing everything seemed crazy to me.
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Paul Jace Merchandiser 3 years ago
To address the disappointing year, Capcom has a three point plan to improve the business
I really wish they would have had a five point plan instead. It would have been much easier to compare them to Mitt Romney that way. Nobody(including myself) believed in his five point plan. I'm curious how many people think Capcom's particular plan will work to turn their sales fortunes around.
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Rick Lopez Illustrator, Graphic Designer 3 years ago
This is a good news for them, always wondered why CAPCOM opted to be a publisher instead of developing games themselves. they want to become a Japanese EA or Activision. It clearly has not worked for them. Im glad they are going back to making games themselves. They lost that japanese spark that made them make my favorite games.
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Show all comments (15)
Tommy Thompson Lecturer in BSc (Hons) Computer Games Programming., University of Derby3 years ago
I find it funny that they point to outsourced work as the problem when even sales forecasts for internal projects (RE6) are woefully inflated. 7 million copies of RE6 is certainly ambitious.

Capcom alongside Sega continue to miss one core addition to their strategy: development (read: exploitation) of core IPs. I cannot think of any other companies who have such a strong roster of IP and fail to do anything with it. Certainly Capcom has revived their fighting genre, but when you consider that much of their IP maintains a cultural resonance amongst gamers, it's bizarre that they fail to capitalise upon it.
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David Radd Senior Editor, IndustryGamers3 years ago
I wish they would cite more specific examples because of the two listed (RE6 and DmC), the latter externally developed game was by far the better received one critically, though it missed its sales percentages by a higher amount.
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Matt Martin Editor, GamesIndustry.biz3 years ago
I guess it's unannounced projects in development that have been outsourced and are not meeting high enough standards.

As a publisher they seem to have those same completely unrealistic targets for sales that Square Enix had for Tomb Raider and Hitman. Solid games, with decent sales, but expectations are ridiculous.
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Yiannis Koumoutzelis Founder & Creative Director, Neriad Games3 years ago
I understand the Indian studio considered internal development.
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Private Industry 3 years ago
DmC was a great game and deserves better sales. RE6 on the other hand is a train wreck if you are a RE fan. They should bring back the real RE not what happened to the series since RE4 with it becoming more and more a shooter and less of a survival game with great puzzles and tension.
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M.H. Williams Staff Writer, USgamer3 years ago
So, sounds like Square's excuse. From last year's annual report:
http://www.capcom.co.jp/ir/english/data/explanation_2011.html?tab=0
How do you assess the performance of titles that were introduced in the fourth quarter of the previous fiscal year?

Sales of "Street Fighter X Tekken" have fallen short of our plan. We believe one of causes is cannibalism because of the large number of other games in this genre that were launched within a short time. "Resident Evil: Operation Raccoon City" has reached shipments of 2 million units (as of May 10, 2012). This shows the success of our decision to try the new approach of using an alliance with an overseas development company.

The only other outsourced title released this year was DMC, which did about as well/poorly as RE6 and probably cost far less to make. So, what changed?
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Meelad Sadat [a]list daily editorial director, Ayzenberg Group3 years ago
Falling yen might have something to do with it. Normally doesn't make sense to redirect your business based on currency fluctuations but Japan is showing that decreasing the value of the yen has become part of their economic recovery policy.
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Drew Northcott Senior Artist 3 years ago
And so it goes around again. Publishers have been wobbling between in-house and external pretty much since there have been publishers.
"We need more control, bring everything in-house"
"Look how expensive in-house is! We need to control our costs, I know - let's outsource"
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Lindsay Cox Games Programmer, Mediatonic3 years ago
It is great bringing the game s back in house, if the quality of the games are actually going to be any better. And I am not convinced they will be. RE6 and to a lesser extent RE5 were both not great entries to the Resi series, and I am sure the reviews that showed the games weren't great would have affected the sales. I am surprised DMC didn't do as well as they thought though, it is a really good game, however I guess they probably annoyed some of the die hard fans by taking the game in a different (and I think better) direction. For them, I don't think suddenly bringing everything back in house is the answer. If they can outsource some of the core IPs to studios that are going to make them awesome then the games will sell themselves.

(And on a slightly unrelated note, they shouldn't have canned that Megaman title, as it looked like a cool reinvention!)
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Rick Lopez Illustrator, Graphic Designer 3 years ago
Reseident Evil 4 was great... RE5 and RE6 were dissapointing... DMC was a great game and I want a new side scrolling Megaman. Id be ok if they remake the entire set of 8Bit and 16bit games in the way that ducktales is being handled. resident Evil needs to be remade, the story line is a mess now, with 3 versions of wesker, he now has a son, and two versions of Ada, its all just a huge mess.
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Alternatively, they could try co development. I doubt if outsourcing per se meant there was less control and quality. Would any cultural and language barriers be also be in effec?
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Tom Keresztes Programmer 3 years ago
And so it goes around again. Publishers have been wobbling between in-house and external pretty much since there have been publishers.
"We need more control, bring everything in-house"
"Look how expensive in-house is! We need to control our costs, I know - let's outsource"
Those managers seem to think 9 woman can deliver a baby in a month.
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