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2020 CAPCOM CO., LTD. INTEGRATED REPORT REPORT INTEGRATED LTD. CO., CAPCOM Code Number: 9697 Number: Code 2 CAPCOM INTEGRATED REPORT CAPCOM INTEGRATED Code Number:9697 0 2 0 CONNECTING Continuing to create financial and non-financial value Achieving seven consecutive years of increased operating income In the constantly evolving game industry, Capcom sees change improves, even following the stock split we conducted on April as opportunity, and as a result of the progress we have made 1, 2018 in order to improve the liquidity of our stock and expand with business reforms such as strengthening digital sales and our investor base, and it now exceeds the level it was at prior to switching to in-house production, the fiscal year ended March the split, reaching a record high. We will continue to increase our 2020 marks seven years of consecutive increased operating corporate value (market capitalization) with sustainable business income. Our stock price has also risen as our performance growth so that we can reward our stockholders’ loyalty. August 31, 2020 Market Stock price Operating Stock split 696.2 billion yen capitalization (yen) Income 1:2 (billion yen) (million yen) March 31, 2018 4,985 yen August 31, 2020 5,140 yen March 31, 2013 25,500 1,476 yen million yen March 31, 2018 22,827 337.6 billion yen March 31, 2013 18,144 99.9 billion yen 16,037 13,650 12,029 10,151 10,299 10,582 2013 2014 2015 2016 2017 2018 2019 2020 2021 (plan) (Years ended March 31) 01 CAPCOM INTEGRATED REPORT 2020 Providing smiles and moving hearts all across the globe Since Capcom’s founding in 1983, we have continued to move specifically, digital sales have increased significantly. We aim to hearts and deliver smiles through the entertainment of games. continue providing even more game software to an even greater In recent years, the spread of the internet, PCs, and smartphones extent of the world’s countries and regions in order to bring smiles has made it possible to enjoy games even without game to as many people around the globe as possible. consoles, while at home, and anywhere around the world. As a result, Capcom’s game software distribution volume, and more Total Digital 28,000 units sold units sold thousand units (thousand units) (thousand units) 25,300 25,500 24,400 23,500 thousand units 20,550 19,400 17,500 16,700 15,000 15,300 13,000 12,900 9,000 6,100 4,800 5,000 2,700 2013 2014 2015 2016 2017 2018 2019 2020 2021 (plan) (Years ended March 31) CAPCOM INTEGRATED REPORT 2020 02 CAPCOM INTEGRATED REPORT 2020 Value Creation 05 History of Value Creation Story 07 Value Creation Model 09 Major Intellectual Properties (IP) 11 Effectively Leveraging IP 13 Financial Highlights 15 ESG Highlights 17 Business Segments Highlights 19 Risks and Opportunities / Medium- to Long-Term Vision Medium- to 21 CEO Commitment Long-Term 31 The COO’s Discussion of Growth Strategies Growth Strategy 39 Financial Strategy According to the CFO Latest Creative 43 The Head of Development Discusses Report Development Strategy 45 Resident Evil Village Foundation for 49 ESG Information Sustainable 50 Capcom and the Environment Growth (ESG) 51 Society and Capcom 57 Corporate Governance 57 Directors 59 Corporate Governance Structure and Initiatives 66 Message from a Member of the Audit and Supervisory Committee Financial 67 An Analysis of the Market and Capcom Analysis and 69 Market Analysis Corporate Data 71 11-Year Summary of Consolidated Financial Indicators 73 Segment Information 78 Stock Data 79 Corporate Data Subject index for reference Editorial policy External environment P67, P69-70 Capcom’s Integrated Report conveys initiatives aimed at improving corporate Senior management perspectives P21-30, P31-38, P39-42, P43-44 value over the medium- to long-term to all stakeholders. This report is issued with the intent of creating opportunities for further dialogue. Furthermore, Growth strategy P19-20, P25-27, P31-38 we aim to express ideas in a simple and easily understood manner and visually represent important items to aid understanding. Details are available online. Performance and financial condition P13-14, P39-42, P71-77 Business details P07-08, P11-12, P17-18, P68, P73-77 Period and scope Relationship with stakeholders P15-16, P49-56 This report reviews the fiscal year ended March 31, 2020 (April 1, 2019–March 31, 2020). When necessary, it also includes references to fiscal periods before Company and market analysis P19, P67-70 and after this timeframe. Unless otherwise indicated, the scope of data presented in this report is on a consolidated basis. World-class development capabilities P43-44, P45-48 03 CAPCOM INTEGRATED REPORT 2020 Corporate Philosophy Capcom: Creator of entertainment culture that stimulates your senses Our principle is to be a creator of entertainment culture. Through development of highly creative software contents that excite people, stimulate their senses, and bring smiles to their faces we aim to offer an entirely new level of game entertainment. Since Capcom’s establishment in 1983, we have leveraged our strength in world-class development capabilities to create a plethora of products. Game content is an artistic product that fascinates people, consisting of highly creative, multi-faceted elements such as characters, stories, worlds and music. This content can be deployed in a variety of media while being used to support the creation of a richer society. Going forward, Capcom aims to become a company that brings happiness to people and society by offering the most entertaining content in the world. CAPCOM INTEGRATED REPORT 2020 04 History of Value Creation Creator of entertainment culture in Japan and around the world Trend in operating income Note: 1983–1988: Fiscal years ended December 31 1989–2020: Fiscal years ended March 31 1995 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1996 1997 1998 1999 2000 Big hits drive Genesis business expansion Capcom Co., Ltd. was established in Osaka in 1983. The Nintendo In the 1990s, the arrival of Super NES prompted Capcom to Entertainment System (NES) came out that same year, but it was formally enter home video game development. Numerous hit difficult to develop high-quality arcade-level content for, so titles were created that drew on Capcom’s arcade game Capcom focused business development on the creation and development expertise. The Single Content Multiple Usage sales of arcade games using the proprietary high-spec circuit strategy was launched in earnest in 1994 with the release of a board “CP System.” Hollywood movie and animated movie based on Street Fighter. Title history 1983 1992 Released our first originally Released Street Fighter II developed coin-op Little League. for the Super NES. 1984 1993 Released our first arcade Released Breath of Fire video game Vulgus. for the Super NES. 1985 1996 Released our first home video Released Resident Evil for game 1942 for the Nintendo PlayStation, establishing Entertainment System (NES). the genre of survival horror with this record-breaking, long-time best-seller. 1987 Released Mega Man for the NES. Capcom and Entertainment Culture 1991 Street Fighter II becomes a major hit The game became a sensation in arcades across the country, establishing the fighting game genre. In 1992, a national tournament was held at the Ryogoku Kokugikan in what might be called the © CAPCOM, Shogakukan, ShoPro, first ever esports tournament. TV Tokyo 2002 © 2002 CONSTANTIN FILM PRODUCTION GMBH / NEW LEGACY FILM LTD. 1988 2002 CP System Multi-media roll out of Capcom IP starts in earnest Through leveraging our proprietary, high-performance circuit board we were able to The Hollywood film adaptation of Resident Evil, along with captivate game players with exquisitely depicted, immersive the animated TV show and movie adaptations of the game worlds of the highest quality, allowing us to produce one youth-orientated Mega Man Battle Network, marked the hit after another in both the arcade and home video game markets. beginning of our foray into branding game-based content. 05 CAPCOM INTEGRATED REPORT 2020 Value Creation Story Medium- to Long-Term Latest Creative Report Foundation for Financial Analysis and Growth Strategy Sustainable Growth (ESG) Corporate Data 22,827 million yen 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Increasing shares in Globalization Europe and North America and the digital shift In 2000, Capcom listed its shares on the First Section of the Tokyo With game consoles now offering full internet functionality and Stock Exchange. In the 2000s, Capcom created one hit title after the popularization of gaming on PCs, the video game market has another that gained popularity overseas. The Hollywood movie expanded beyond one segment of developed countries and now version of Resident Evil earned 102 million U.S. dollars globally, permeates the globe. As a result of Capcom’s early initiatives to part of a six-title hit series that continues to spread the Capcom support digital sales, including releasing past titles onto current brand throughout the world. game consoles and ongoing sales of catalog titles, operating profit margins and the overseas unit sales ratio have been on the rise. 2001 2012 Released Onimusha for Released Dragon's Dogma. PlayStation 2, the first game for PlayStation 2 to become a million-seller in Japan. 2017 Released Devil May Cry for Released Resident Evil 7 PlayStation 2. biohazard. 2018 2005 Monster Hunter: World is Released Sengoku BASARA for released selling a cumulative PlayStation 2. total of more than 15 million units, the first title to do so in Capcom’s history. 2006 Released Dead Rising for 2019 Xbox 360; it became a Released Resident Evil 2 and million-seller, unprecedented Monster Hunter World: Iceborne, for a new title created for both of which demonstrated a new game console.