CAPCOM CO., LTD. INTEGRATED REPORT 2019 Captivating a Connected World CAPCOM INTEGRATED REPORT 2019 Code Number: 9697 Code Number: 9697 Advancing Our Global Brand Further Monster Hunter World: Iceborne Released in January 2018, Monster Hunter: World (MH:W, below), succeeded on two key elements of our growth strategy, namely globalization and shifting to digital. This propelled it to over 12.4 million units shipped worldwide, making it Capcom’s biggest hit ever. We aim to grow the fanbase even further by continuing to advance these two elements on Monster Hunter World: Iceborne (MHW:I, below), which is scheduled for release during the fiscal year ending March 2020. For details, see p. 35 of the Integrated Report 2018. Globalization Increasing global users by supporting 12 languages 1 and launching titles simultaneously worldwide The two key MH : W raised the Monster Hunter series to global Overseas Approximately 25% elements to brand status by increasing the overseas sales ratio to our success roughly 60%, compared to its historical 25%. We plan to solidify our global user base with MHW:I Overseas by releasing it simultaneously around the globe and Approximately offering the game in 12 languages. 75% 01 CAPCOM INTEGRATED REPORT 2019 Digital Shift 2 Taking our main sales and marketing channels online We expect the bulk of MHW:I sales to be digital. While we maximize revenue using the digital marketing data Trial version we have accumulated up to this point, we will analyze Feedback Capcom user purchasing trends to utilize in digital sales going Digital download sales forward. User data CAPCOM INTEGRATED REPORT 2019 02 CAPCOM INTEGRATED REPORT 2019 07 05 09 Value Creation 05 History of Value Creation 11 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 Medium- to Long-Term Vision Medium- to 21 CEO Commitment Long-Term 31 The COO’s Discussion Growth Strategy of Growth Strategies 36 Case Study: Analysis of a Top Hit 21 39 Financial Strategy According to the CFO 31 Latest Creative 41 The Head of Development Discusses Report Development Strategy 39 43 41 43 Monster Hunter World: Iceborne 45 Esports 45 Foundation for 47 Society and Capcom Sustainable 52 Capcom and the Environment 47 Growth (ESG) 53 Corporate Governance 53 Directors 56 Features of Capcom Corporate Governance 57 Corporate Governance Structure and Initiatives 63 Message from an External Director 53 67 Risk Management 52 Financial 69 An Analysis of the Market and Capcom Analysis and 71 Market Analysis Corporate Data 73 11-Year Summary of Consolidated Financial Indicators 75 Financial Review 79 Segment Information 84 Stock Data 85 Corporate Data 03 CAPCOM INTEGRATED REPORT 2019 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 product. 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. Editorial policy Subject index for reference Capcom’s Integrated Report conveys initiatives aimed at improving External environment P69,PP71–72 corporate value over the medium- to long-term to shareholders, investors and all other stakeholders. This report is issued with the Senior management perspectives PP21–30,PP31–38,PP39–40,PP41–42 intent of creating opportunities for further dialogue. Furthermore, we aim to express ideas in a simple and easily understood manner Growth strategy PP19–20,PP25–27,PP31–38 and visually represent important items to aid understanding. Details are available online. Performance and financial condition PP13–14,PP39–40,PP73–83 Business details PP07–08,PP11–12,PP17–18,P70,PP79–83 Period and scope Relationship with stakeholders PP15–16,PP47–51 This report reviews the fiscal year ended March 31, 2019 (April 1, 2018–March 31, 2019). When necessary, it also includes Company and market analysis P36,PP69–72 references to fiscal periods before and after this timeframe. Unless otherwise indicated, the scope of data presented in this report is World-class development capabilities PP41–42,PP43–46 on a consolidated basis. CAPCOM INTEGRATED REPORT 2019 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 1989–2019: Fiscal years ended March 31 1995 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1996 1997 1998 1999 2000 Genesis Big hits drive business expansion Capcom Co., Ltd. was established in Osaka in 1983. The Nintendo In the 1990s, the arrival of Super NES prompted Capcom to formally Entertainment System (NES) came out that same year, but it was difficult enter home video game development. Numerous hit titles were created to develop high-quality arcade-level content for, so Capcom focused that drew on Capcom’s arcade game development expertise. The Single business development on the creation and sales of arcade games using Content Multiple Usage strategy was launched in earnest in 1994 with the proprietary high-spec circuit board “CP System.” the release of a 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 first ever esports tournament. © CAPCOM, Shogakukan, ShoPro, 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 youth- game worlds of the highest quality, allowing us to produce one orientated Mega Man Battle Network, marked the beginning hit after another in both the arcade and home video game markets. of our foray into branding game-based content. 05 CAPCOM INTEGRATED REPORT 2019 Value Creation Story Medium- to Long-Term Latest Creative Report Foundation for Financial Analysis and Growth Strategy Sustainable Growth (ESG) Corporate Data 18,144 million yen 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Increasing shares in Europe and North America Globalization and the digital shift In 2000, Capcom listed its shares on the First Section of the Tokyo Stock With game consoles now offering full internet functionality and the Exchange. In the 2000s, Capcom created one hit title after another that popularization of gaming on PCs, the video game market has expanded gained popularity overseas. The Hollywood movie version of Resident beyond one segment of developed countries and now permeates the Evil earned 102 million U.S. dollars globally, part of a six title hit series globe. As a result of Capcom’s early initiatives to support digital sales, that continues to spread the Capcom brand throughout the world. including releasing past titles onto current 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 Resident Evil 7 Released Devil May Cry for biohazard. PlayStation 2. 2018 2005 Released Monster Hunter: Released Sengoku BASARA for World. It sold 7.5 million units PlayStation 2. within approximately one month of its release, becoming Capcom’s best-selling title. 2006 Released Dead Rising for 2019 Xbox 360; it became a Released Resident Evil 2 and million-seller, unprecedented Devil May Cry 5, both of which for a new title created for demonstrated a strong global a new game console. presence. 2013 2007 User-initiated social Cooperative gameplay becomes standard media phenomenon Monster Hunter Freedom became the first game in the Imitating the “Hadouken” special series to top a million units sold. attack from the Street Fighter series People getting together with their game consoles and posting a photo gave rise to to play cooperatively sparked the “Monster Hunter “Hadoukening” becoming a social Craze.” media phenomenon. 2018 Capcom officially entered esports, a new form of entertainment In 2018 Capcom established a dedicated department to promote the spread of esports with measures such as launching new competitions for pros and amateurs. CAPCOM INTEGRATED REPORT 2019 06 Value Creation Model Making smiles, moving hearts and building a better society with our original content Utilizing the capital we have cultivated over the years and our foundation for sustainable growth, we create popular original IP through business activities while guided by our corporate philosophy.