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.