Capcom looks toward big changes after difficult FY13

Mobile growth, DLC and an end to outsourcing all on the agenda as Capcom struggles to move with the times

Capcom's fiscal 2013 report has stressed the need for sweeping change in the company, as it rebounds from a difficult period straight into the costs of a new hardware generation and an increasingly competitive mobile market.

While revenue actually climbed from ¥82 billion ($820m) to ¥94 billion ($940m) in the year ended March 31 2013, the company's attempts to pivot in virtually every aspect of its Digital Contents business - which comprises console, PC and mobile development, and accounted 67.7 per cent of all revenue - saw profits fall by more than half to just $31 million. Barring 2010, when it made a profit of $22 million, that makes fiscal 2013 Capcom's least profitable year since 2005.

In total, Capcom sold 14 million units of its games at retail, and only three releases passed 1 million sales. Indeed, two of that group performed well short of expectations: Resident Evil 6 sold 4.9 million against expectations of 7 million, and DmC: Devil May Cry sold 1.15 million units on expectations of 2 million. Capcom's single biggest success story in the console/PC space was Dragon's Dogma, a new IP, which sold a relatively modest 1.3 million units.

"If the DLC we are providing to users is deemed uninteresting from the start, there will be no ongoing business to pursue"

Haruhiro Tsujimoto, COO, Capcom

Nevertheless, Capcom expects revenue to hold next year and profits to roughly double, bringing it back in line with fiscal 2012's results. If it meets those expectations, however, it's unlikely to be down to packaged retail releases.

Capcom has forecast even slimmer returns for the next fiscal year, with only 13 million unit sales expected from a line-up that includes Lost Planet 3, Monster Hunter 4 and Dead Rising 3. Monster Hunter 4, which is scheduled for release this month, seems likely to meet its expected 2.8 million sales by the end of March 2014. The console release of Resident Evil: Revelations, launched in May, should also hit its relatively lowly 1.2 million target. But Lost Planet 3 is another matter - it may only need to sell 1.2 million to meet expectations, but it is off to a poor start in Japan, and its sales in the UK suggest that it will be among the calendar year's most notable failures. Between them, Capcom's three biggest console releases for the rest of this fiscal year are not expected to sell more than an under-performing Resident Evil 6 managed in six months.

Capcom's annual report notes the sluggish performance of the all-important console market on several occasions, and it certainly isn't the only company to feel the negative effects of that slowdown. However its performance throughout this generation has rarely been more than solid, leaving it in a difficult position for the challenges ahead. At present, Capcom has just over $152 million in cash, which isn't much for a company attempting to navigate the costly transition to a new hardware generation and the company-wide implementation of a service-based infrastructure.

Any console titles that fail to perform in the next two years will be increasingly difficult to bear, and Capcom now has two mid-term strategies in place to mitigate that risk. First, to push for quality by bringing previously outsourced work back into the company, pledging to hire 100 new staff in each of its consumer, mobile and PC online teams by the end of fiscal 2014.

The second is a stronger commitment to DLC with its consumer releases, with an aim of maximising the profitable life of each product. In this area, Capcom has exemplified the common criticisms of Japanese console and PC companies by falling dramatically behind the times. By Capcom's data, the DLC ratio for consumer releases last year was 39.7 per cent, but it managed just 14.1 per cent with its own products.

"I regret to say that, up to now, we had few plans for the full-scale implementation of DLC," said COO Haruhiro Tsujimoto. "From here on out, we need to focus on the long-term provision of content starting at the earliest stages of development. Furthermore, in terms of user response, if the additional related content we are providing continually to users online is deemed uninteresting from the start, there will be no ongoing business to pursue. This means that, more than ever before, the creation of underlying content is the key to success."

"Today's mobile game industry is a world apparently full of dreams about making a fortune off a hit game. But if the hit is just a one-off, success is transient"

Haruhiro Tsujimoto, COO, Capcom

Capcom's other mid-term goals are associated with the high-growth market for mobile and online games. The company's online content was one of the few aspects of the business to show healthy growth, increasing 45.9 per cent to ¥22.9 billion ($229m). By March 2014, that is expected to increase a further 22.3 per cent, reaching ¥28 billion.

Exactly how Capcom intends to accomplish that is more difficult to pinpoint. Beeline's Smurf's Village has been the golden goose of the company's mobile and online strategy for almost three years, and the pressure is on to create another hit. Indeed, Capcom lists that very task as one of its key priorities for fiscal 2014, but the company is clearly aware of how fickle the mobile market can be, even to those building from existing success. For now, Capcom will concentrate on developing apps based on its existing brands.

"With Smurf's Village, we learned that there are not as many core users in this market as there are in the consumer market. Outside of Japan, people spend less money on mobile games, particularly in Europe and North America, making it a low-margin, high turnover business," said Tsujimoto.

"Today's mobile game industry is a world apparently full of dreams about making a fortune off a hit game. But if the hit is just a one-off, success is transient. For Capcom, it is crucial to maintain and deepen the user support we have worked so hard to earn up to now. We believe we can outperform other companies as long as we are able to continue this approach. This kind of strategy is already beginning to be implemented in Europe and North America, and we don't intend to be left behind. I keep coming back to this point, but the essence of a game's value is derived from it content-its worldview and characters, etc.

"Only companies that understand this and are able to continue providing customer satisfaction will be able to survive."

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Latest comments (5)

Rick Lopez Illustrator, Graphic Designer 8 years ago
Im just going to rant a bit.... cause ya see, Capcom is a company that has produced games that I have fond memories of and still play to this day.. But along the lines, something went wrong. so here i go!!!

Look, CAPCOM can do things better. First off, MegaMan, please bring him back, but make it with super cool 2D graphics like ducktails, Dragons Crown or Rayman origines. Update the game play and I can think of alot of ways to do so while staying true to what makes a Megaman game. Second we need a sequel to Dragon Dogma. But Capcom tends to want to milk the cow and will take a franchise and drive it to the ground to make a quick buck as they did with Resident Evil. A seuel to Dragon Dogma needs to be a well crafted game. They need to take there time. Like the people at Rockstar did with Grand theft Auto. Its a game that is ready when its ready. I really loved the first one.

They should make another Power Stone. A seriouse fighter thats appealing for hardcore and casual gamers alike. it should be more in the spirit of smash Bros. or playstation All Stars. I would like another 3d Bionic Commando. What hurt that game was the story and the crappy ending. Seriously his wife was his arm??? Another Bionic Commando rearmed wouldnt hurt either. I just didnt like that the character could jump and the querky humor of the second one. Anyway DMC was a good game, It just had unrealistic sales targets and should have been budgetted accoringly. Bioshock Infinite had around 4million sales and was deemed a success. Resident Evil simply needs to be rebooted and go back to survival horror. The story is a mess right now. And it needs to go back to traditional Zombies.

I guess one game Im looking foward to is the STRIDER HD. I would like another ghouls and ghosts and Gargoyles quest. They can also bring back forgotten worlds as a 3d 3rd person shooter. Id also love another Rival Schools and Drakstalkers game. Each can bring something different to the table if they get creative enough.

I would also like to see a breath of fire game, that has the scale of Dragon Dogma, but has an animated look and japanese RPG feel like the tales games and the graphic style can be remiscinent of the character artwork by Tatsuya Yoshikawa. I always loved his designs. But that new breath of fire 6 for mobile phones just killed it for me. It looks like Maple Story online, not breath of fire.

The problem with Capcom is that they are thinking like a publisher and not as a developer. I dont think that the people at Capcom are driven by making great games. But they rather analyse graphs and charts and sit on there asses all day discussing stocks, financials and corporate bullshit.

They are literally sitting on top of a mountain of great IP and they have no idea how to maximize its potential. They are too busy looking at american games and wanting to westernize there franchises that they cant see to potential of there own IP. The attempt at making Resident Evil another call of Duty failed. And as good as dragon dogma is, it doesnt have the character and charm of the breath of fire series. Dont get me wrong its a great game. But it feels dry and lifeless compared to Japanese RPG.s like tales of Xillia and Persona 3&4.

As of late Ive been playing Breath of fire 2 for the 8th time on my old DS and it never seems to lose its charm. There are parts in the games story that always leave an impression, like the whole thing with the St. Eva church and the way the followers of it are being decived, and then each character has there own personal issues, such as Nina with her black wings and Rand with his strict mother. And it had subtle moments when you can choose to romance katt or save her as in the colisium, where if you saved her she would join the battle. Rands mom dies, Sten was an ex soldier from his country. It had 3 different endings. You met your father, mother and sister. then there where the shamen transformations, that changed things up towards the end of the game. Then the world is filled with different races, characters and it just feels so alive. And game progression is steady, but it never gets slow, its always moving foward, and all this in a file no bigger than 4mb.

Then capcom says its a dead franchise, that they will stop making these games because they produce no money. I just think they need to sit back, think of these franchises, analyze the market and new technology, to see how they can reinvent, reinvigorate and re establish these franchises for the new generation, while staying true to what made them good in the first place.

Finally we have Keiji Inafune with Mighty No.9 teaching capcom how a Megaman game should be done. Since Capcom isnt doing anything with the franchise.

Anyway, the only game Im looking foward to from Capcom is STRIDER HD, lets hope they dont mess that up and is as good as Bionic Commando ReArmed.

FINALLY... I wasnt happy with all the shit they tried to pull with DLC, always online features and locking content on discs.

Edited 3 times. Last edit by Rick Lopez on 10th September 2013 4:55pm

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Steve Goldman Journalist. 8 years ago
more bad news from companies
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I loved Dragons Dogma and hope they do a awesome sequel. The art direction, and medieval fantasy architecture is just great content tourism as well!
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Greg Wilcox Creator, Destroy All Fanboys! 8 years ago
@Dr. C.: "Content tourism!" That made me laugh a lot because that's how I ended up playing through the game. A very dangerous vacation spot, that Gransys...
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DD is the only game that lets me snapshot ingame whilst fighting monsters in the deep dungeons below. dangerous. deadly and err so beautiful
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