ANNUAL REPORT 2014 “Monster Hunter 4” “Dead Rising 3” “Resident Evil Revelations” “Duck Tales” © 1989, 2013 Disney Distributed by CAPCOM U.S.A., INC
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Katsuhiko Ichii Kazuhiko Abe Overview of Capcom’s Business Director and Director and and Outlook for the Future Executive Corporate Officer Executive Corporate Officer in charge of in charge of Consumer Games Business Overseas Business Digital Contents This business engages in the development and sales of consumer games (package software and digital download contents (DLC)) and the development and management of mobile content and PC online games. Original content created for consumer games is developed for a variety of platforms and distributed globally. Net Sales Operating Margin (Millions of yen) (%) 74,297 21.5 65,824 18.7 59,809 63,636 11.1 6.8 2011 2012 2013 2014 2011 2012 2013 2014 (YEARS ENDED MARCH 31) (YEARS ENDED MARCH 31) SWOT Analysis S: Strength W: Weakness O: Opportunities T: Threats World-class development and Dependence on specific genres technological capabilities Lack of development staff Own a number of original Lack of native app game hit titles popular titles and management expertise PC online game management expertise S W Arrival of next generation O T Consumer game presence consumer game consoles diminished by diversity of play Expand digital download business Falling average sales price of Expanding PC online game genres package games and areas of adoption Low barriers for entry into Increased users from global expansion mobile contents, large number of smartphone adoption of competitor firms Market Trends and the establishment of the online premium model, the DLC market, involving the download of full games and additional contents, is Consumer (Package and DLC) clearly growing, increasing to 7.4 billion dollars (up 4.2% from the DLC Expands Despite 7.1% Consumer Market Decline previous year). In 2013, the consumer (Package and DLC) market was worth 23.7 billion In terms of outlook for the future, we will upgrade title lineups for dollars (down 7.1% from the previous year), the second straight year of next-generation consoles sold in 2013 and DLC will continue to grow. We negative growth. The reasons for this include (1) fewer consoles expect a recovery and forecast a slight increase in the global consumer purchased, resulting in fewer software sales, due to the off-season before market to 24.9 billion dollars (up 5.1% from the previous year). Diagram 22 new next-generation consoles are released this year and (2) the declining Mobile Contents average unit price of software. In the Consumer sub-segment package market, consisting primarily of North America, Europe and Japan, the 80% Solid Global Growth as Market Expands 19.5% in 2013 of the market accounting for North America and Europe contracted The 2013 mobile contents market achieved significant global growth, 10%, while in Japan, accounting for 20% of the overall, the market increasing to 14.7 billion dollars from 12.3 billion dollars in 2012 (up 19.5% shrank more than 20% compared to the previous year. Diagram 21 from the previous year). Diagram 23 The main reasons for this were At the same time, in line with network infrastructure developments (1) the ongoing adoption of smartphones in all countries of the world, 35 CAPCOM ANNUAL REPORT 2014 “Monster Hunter 4” “Dead Rising 3” “Resident Evil Revelations” “Duck Tales” © 1989, 2013 Disney Distributed by CAPCOM U.S.A., INC. (2) the rise of sophisticated tablet devices and free communication contents market will grow to 28.6 billion dollars by 2018. apps such as LINE and (3) the spread of native app and social games PC Online due to the growing number of mobile users. By region, the North American market was worth 3.9 billion dollars In 2013 the Market Expanded Favorably by 22.0% (up 38.5% from the previous year), the European market was worth 2.3 In the PC online market, the spread of cloud game services and digital billion dollars (up 17.3% from the previous year) and the Asian market sales in North America and Europe, the rise of a new genre of browser including Japan was worth 7 billion dollars (up 14.4% from the games, and a growing number of Massively Multiplayer Online previous year). Furthermore, in emerging and Eastern European markets, (MMO) game users in Asia resulted in solid market expansion to 28.8 as well as other areas, the global market grew steadily to 1.3 billion billion dollars (up 22.0% from the previous year). dollars (up 3.8% from the previous year). In 2014, this market is expected to continue growing steadily to The freemium (virtual item purchases/in-game purchases), a earnings 32.2 billion dollars (up 11.8% from the previous year). The Asia market model where users download a game for free, then purchase access to in particular is expected to continue expanding, driven primarily by additional items and other game content as needed, has predominated MMO games, from 12.3 billion dollars in 2013 to 13.1 billion dollars by and Outlook for the Future Overview of Capcom’s Business in the market since about 2010. With freemium games, the key to 2018 (up 6.8% from 2013). Accordingly, the PC game market is manageability is using content power (brand/game content) to appeal to expected to surpass the consumer game market and grow to 32.3 users and analyzing user activity after service provision begins to offer the billion dollars by 2018. Diagram 24 appropriate services and premium games. For game companies with lots of popular software titles as well as mobile development companies with Operating Results for This Fiscal Year operational expertise, the opportunity to improve earnings is growing. Consumer (Package and DLC) In line with the movement from traditional feature phones to smartphones, a shift away from browser games requiring a web Sales and Profits Rise on Big Hit “Monster Hunter 4” browser has made the distribution of native app-style games via with Net Sales of 53 Billion Yen (Up 15.5%) direct download from the App Store or Google Play commonplace, In the Consumer sub-segment, there were three million-seller titles. demanding development structures able to respond to these changes. The overwhelming popularity of core title “Monster Hunter 4” drove sales Looking ahead, we forecast shipments in the 2014 smartphone of 4.1 million units, greatly surpassing sales projections of 2.8 million, market to grow to 1,204 million units (up 19.3% from the previous while “Dead Rising 3” for the U.S. and European markets (1.2 million) and year) as they continue their spread across the world. We forecast “Resident Evil Revelations” (1.2 million) sold over one million units each. tablet device shipments of 200 million units in 2014 (up 38.6% from Furthermore, New DLC titles such as “Monster Hunter 4” and “Duck Tales” the previous year) based on our assumption that mobile content users sold well in Japan and overseas, contributing to overall sales. At the same will continue to increase globally. Accordingly, we predict the mobile time, although “Lost Planet 3” for overseas markets never really took Diagram 21 Diagram 22 Package Markets Consumer (Package and DLC) Market (Billions of dollars) (Billions of dollars) 18.4 25.5 25.7 25.6 25.6 23.7 24.9 25.0 16.3 15.7 3.3 15.5 14.6 2.5 2.7 13.7 2.5 2.0 12.3 14.6 13.7 12.3 1.5 15.7 15.5 7.1 1.2 18.4 16.3 6.8 6.3 6.1 5.8 5.4 4.9 12.7 7.8 10.2 11.0 11.9 6.9 6.7 6.7 6.6 6.7 6.2 7.1 7.4 9.2 2012 2013 2014 2015 2016 2017 2018 (CY) 2012 2013 2014 2015 2016 2017 2018 (CY) (Estimate) (Estimate) (Estimate) (Estimate) (Estimate) (Estimate) (Estimate) (Estimate) (Estimate) (Estimate) Japan Europe North America Package DLC Source: International Development Group Source: International Development Group CAPCOM ANNUAL REPORT 2014 36 “Lost Planet 3” “Resident Evil: Clan Master” “Monster Hunter Hunting Quest” “Smurfs’ Village” ©CAPCOM developed by gloops © Peyo - 2010 - Licensed through Lafig Belgium - www.smurf.com. All game code © 2011 Beeline Interactive, Inc. off and sold just 400,000 units, package and full game download sales intensifying competition and struggling new titles. totaled 17.5 million units(up 4.8% from the previous fiscal year). As a result, net sales were lower than last year at 6.3 billion yen As a result, package net sales were 43.3 billion yen (up 6.4% from (down 6.0% from the previous fiscal year) as the dearth of new titles the previous fiscal year), digital download sales net sales were 9.7 billion caused the cost and sales ratio to worsen and profitability to decrease. yen (up 86.5% from the previous fiscal year) and Consumer net sales Summary were 53 billion yen (up 15.5% from the previous fiscal year). As a result, the Digital Contents business this fiscal year achieved Mobile Contents sales of 65,824 million yen (up 3.4% from the previous fiscal year) Capcom and Beeline Brands Performing Weakly with and operating income of 4,489 million yen (down 36.4% from Sales of 6.5 Billion Yen (Down 40.9%) the previous fiscal year). In Mobile Contents, amid the growing prevalence of smartphones, although existing Capcom brand browser-type game “Resident Evil: Outlook for the Next Fiscal Year Clan Master” (Mobage) and recently launched Capcom brand native Consumer (Package and DLC) app game “Monster Hunter Hunting Quest” (iOS/Android) performed steadily, the lack of strong titles and a bitterly competitive Net Sales of 37 Billion Yen (Down 30.2%) Affected by environment made these achievements an uphill battle.