A Western Initiative: Svensson On Capcom's Digital Future

Japanese-headquartered veteran publisher Capcom is, of course, best-known for its high profile Japanese-developed games. Devil May Cry 4 is the latest in a line of titles like Lost Planet and Dead Rising to achieve notable sales in the west.

However, the staff at the U.S. arm of the conglomerate are working hard to make it just as relevant to the company's success. They're moving forward by concentrating on digital download titles for Xbox Live Arcade and PlayStation Network, such as the Certain Affinity-created Plunder and Backbone's careful remake - Street Fighter II HD.

Here, Capcom’s vice president of strategic planning & business development, Christian Svensson, articulates his continuing plan to raise the company's fortunes, and its parent's awareness of the market situation in North America and Europe.

During the presentation, [senior corporate communications director Chris] Kramer actually said there are some triple-A titles and some A titles. I was very impressed that he actually said A titles, because people don't usually use that -- it's either triple-A or it's just a game.

Christian Svensson: Right. There's what people say publicly and then there's reality, and I think the reality is that not every title is Devil May Cry or Street Fighter IV or Resident Evil 5, and that's fair to say.

I think our digital titles are never going to be as flashy as our titles with the budgets that I just mentioned, but that doesn't make them uncompelling, and doesn't make them unengaging.

Quite the contrary -- I think when you look at some of the titles like Plunder, which is probably one of the favorite titles I have across everything that we're doing, it's going to find an audience. There's no question about that. There's going to be a community that forms around that game, that becomes interested in competition, interested in being the best. I could see Counter-Strike clan-type things popping up around that game.

That was really what attracted Capcom to it particularly. Any game where you have, on first playable, people screaming commands at each other across the office, you're probably onto something. It came to us in a state that was already pretty playable and pretty fun, and we've just been honing and drilling down on that further and further and further over the past seven, eight months or so.

There's obviously a lot of digital download stuff coming from Capcom right now. Not that it's such a bad thing, but why the big push right now?

CS: I think the timing of it is largely because there are two things coming to a head. Number one, there's an audience -- there are now consumers who in some cases look to digital first. It's not a huge audience, but it's growing every single day. And there are people who are seeing tremendous value in what can be offered there.

The other part of this is that I think the retail climate, particularly in the U.S., but to some degree in Europe, we're looking at ever-shortening shelf lives for titles, and I think we're looking at lots and lots of content that doesn't lend itself to finding an audience in two or three months.

I think the Street Fighter community is an active and avid one -- I'll point to our success with [XBLA title Street Fighter II] Hyper Fighting: we're still selling a lot of Hyper Fighting every single month and we're, what, twenty-two months past launch? If we were in retail we'd have been managed out of the channel long ago, and those consumers wouldn't have found that content. I think that a much longer shelf life allows for different kind of content to be viable that wouldn't make sense in a retail setting.

So it's a long tail for new purchases -- because in retail, you can buy used games.

CS: Correct. It's also about aggregating community, so again, the type of content we're trying to build here always has some kind of community aspect to it, whether it's a competitive context, whether it's a co-op context, whether it's a user-created content context, and you're going to see on titles even further out on the horizon when we finally do get around to announcing some of the things for much later '08 and into '09, that we're going to become even more aggressive in the scope and scale of these projects.

With the volume of stuff Capcom is releasing, you could almost have a Capcom channel on these download services.

CS: I don't think we're there yet, but my hope is that Capcom's name becomes synonymous with: "Y'know, I'm getting good value for money in the digital space, and I'm going to find some fun people to play with when I'm there."

Is this push for digital coming from the U.S. side or the Japan side more?

CS: It's more the U.S. side. I think Japan has been interested in it and Ben Judd in particular has been one of the first producers in Japan to grasp it and say, "You know what, this is really cool," but there will be others, I promise you. So while you're going to see the U.S. leading the charge for a little bit, you are going to see Japan become more active in this space.

It struck me as a natural evolution for the U.S. office, seeing as Capcom U.S. controls the Street Fighter license and has started to be more proactive even with publishing third-party titles like Plunder. Is Capcom going to be expanding more in that direction?

CS: Our western expansion plans have been in progress for about two years. We've talked about this in the past -- there's been some pretty massive restructuring in those two years in both the U.S. office and in Europe. I think you're going to see that continue. We're actually hiring for a whole bunch of positions on both marketing and product development side, because we expect to become an even bigger part of the company's revenue base moving forward.

The issue of where we fit relative to the rest of the company: our revenues are still a bit out of whack in regard to what the actual market sizes are. But I'll use Lost Planet as an example; I think our last announced figure was 1.6 million units sold on the 360 SKU alone -- we're a little bit above that now, but I won't say exactly what. But you can look at the Famitsu numbers and see that less than 100,000 of that was done in Japan.

Similarly, the Devil May Cry numbers, you can look at Japan and see, okay, they did about, hmm, 300,000-ish. And yet we put out a two million announcement. So you can get the idea. There's a lot of units to be done in the west, but revenues overall are still much larger in Japan as a percentage of that market size.

I think it's fair to say that we're probably going to see the Japan market as a whole -- not just for Capcom -- continue to shrink as it has in the last couple of years as the west continues to expand: we're really just investing against that trend.

Why is it that the revenue would be higher in Japan when you're selling fewer units?

CS: Well, they do also have a number of Japan-specific franchises, or franchises that have done really, really well in Japan. I'll use Monster Hunter as an example: Monster Hunter is a phenomenon in Japan, and we're trying to figure out how to make that here -- if we could do half the numbers that it does in Japan, we'll be very happy. We're going to be investing very heavily in the Monster Hunter franchise over the following years to try and close the gap with them there.

And they do a number of Japan-specific titles that do very well for them, and there are arcade operations in Japan that do very well as well. My hope is that we can keep growing Japan as best we can, but the real growth opportunity for the company is in the west, as far as the mismatch between the revenue that's being recorded and what the market sizes are.

Certainly in the large-scale boxed product arena, it seems the U.S. is really the place.

CS: And to be fair, a lot of the projects that have been done lately are creating content with an eye towards western markets. Even our creators in Japan recognize that they want to sell here.

Dead Rising and Lost Planet are so perfect for the market.

CS: Perfect examples. They were clearly with an eye towards the western market. And RE has always done well in the western markets.

I'm actually curious about the rumors of a sequel to Dead Rising being developed by a western developer.

CS: I cannot talk about anything to do with Dead Rising.

No worries. I want to talk about microtransactions, which were mentioned briefly in the presentation. How far is Capcom going to go with that? How are you going to deal with it?

CS: I think you're going to see Capcom playing with a number of different business models in the coming years. A lot of the projects we're looking at will involve some degree of either additional downloadable content, or additional features, things that perhaps we couldn't get to pencil within the budgets or wouldn't have had time for. But given a little extra time, and seeing if we're actually successful with aggregating a community around this content, we're going to be doing some interesting stuff within that space.

I don't think we're necessarily going to be as aggressive as some of the Korean companies have been historically, but it's an area of increasing interest for us. We certainly want to get as much learning about what works and what doesn't work.

And this is true for all of our digital initiatives. We're really racing the line. We're really trying to get a sense of what content, which business models, make the most sense to audiences. How do we market direct to consumer in as effective and efficient a way as we possibly can? Because the publishers that figure that out will have a leg up over the publishers that don't.

I think it's a good idea to figure out the digital space now while it's expanding, because some people aren't.

CS: And let's be honest: there's going to be mistakes made along the way. Mistakes are okay as long as you learn from them. There's [Oblivion's] horse armor. I think we all know horse armor is probably not the best pricing model for that, but everybody learned from that example. There's going to be times when we give away more content than we should for the price, and there's going to be times when we don't.

It's interesting to see with the platinum release of Lost Planet: Colonies, all the previous downloadable content will be included. It's an interesting way to marry the download and the retail, because you're re-releasing it.

CS: We're re-releasing that content, but there's still a lot of people who aren't connected. As frightening as that sounds sometimes, we often assume that everybody has every box connected to the net, and unfortunately, that's not true. Some people may not have had an opportunity to experience some of that content, and we're hopefully going to be able to enable them to.

You may eventually see plays at retail that follow digital some time. I'm not going to say what that might be, but hypothetically, maybe a year after we release some of our digital titles, we put together an aggregate compilation disc that has four or five titles that performed well so that we can get that content out to people who weren't connected. There's a number of ways that could happen. To be fair, we're probably going to have to talk to our retail partners to see how they feel about that.

In terms of the microtransactions stuff, I know you're not going to go as far as Nexon, but they're going to be releasing Mabinogi, a free-to-play, pay-for-items MMO on Xbox Live. Have you considered that model yet?

CS: It's been very well considered. I think Nexon are more experienced with that than virtually anyone else in the world. They have a better understanding of it. My take is probably at the moment free-to-play is probably a bit further than I see us going in the near term, at least in the west.

I think that budgetarily speaking, even if you could come out at a budget price and the consumers made some commitment to your project, even if it's at a very nominal amount, I don't think it's proven out yet in the west.

Your budgets would be better served building a better project, assuming a little bit of revenue and putting one hurdle in front of at least one person and taxing your service, in that case -- rather than just opening the floodgates and incurring all the service load and not having at least some commitment from the player, even if it's a nominal amount.

I assume that may change as your servers get tested?

CS: The other part of this is that we are crawling before we can walk. I think across all of our content, as we experience success in a certain area, we'll become a little more aggressive. Will we someday do free-to-play? Possibly, but I think that day is far enough away, at least in the west, that it's probably not worth getting into detail on right now.

Monster Hunter seems like a more difficult proposition in the west as it's very grind-oriented. Japan has a good legacy with that -- they love Dragon Quest, but…

CS: You say that, but even in the west, Monster Hunter has a fanatical, fanatical following -- ridiculously fanatical. Half the mail that we get about stuff, as big as our brands are -- we sell millions of units of other things, but half of our fan-mail and outreach from fans is about Monster Hunter. There's something about the game form that is incredibly sticky once people play it.

And grinding, let's face it, there isn't an MMO in the world that doesn't have some form of that. It's certainly not a Japanese-only phenomenon. I think there are things that we could do content-wise that would make Monster Hunter a bit more palatable to western audiences, and frankly, I think online is a huge component of that.

If you enable proper co-op through a mechanism that western audiences are comfortable with rather than being in the same room with other people, then that grinding becomes less of a chore, and more of a fun thing. It becomes a by-product of something fun to do with others.

And believe it or not, in Japan, the playing in the same room phenomenon or playing on the same bus happens, so they already have that in place and it's less of a grind. So it's a matter of stepping up on the marketing a bit and getting some of the features that we're going to need for future iterations. I'm cautiously optimistic that we're going to be able to make that happen somewhere down the line.

It certainly seems like a good downloadable/online scenario.

CS: Without getting into details, Monster Hunter Frontier in Japan is the PC version, very successful in Japan. They actually use a free-to-play -- to a point, but then you have to sub -- model. They're free to, I think, level two or so, and beyond that if you want to keep playing with that character then you've got to pay.

We've given some thought to what happens if you bring that over here, what does the model look like? And there you've got online play, which we think is so compelling for that game, and that's something we're still discussing -- we haven't reached quite the right conclusions as to how that's appropriate for western markets.

It's a tough market to get into as it's so WoW-dominated -- but Monster Hunter is different.

CS: Correct. And Monster Hunter's certainly different. In a lot of ways, I equate it to a very robust, very deep Phantasy Star Online, Phantasy Star Universe experience, that's perhaps even more kinetic than those are.

But looking at the numbers those did, it can't be the most encouraging thing.

CS: No, I agree. There are some other things we have to figure out there.

I haven't heard much about WiiWare yet -- how much have you thought about it?

CS: I'm going to lump WiiWare in with PSP e-distribution, in that we're looking for the right content first -- a lot of the content we have now isn't quite right in value or approach or interface for WiiWare.

I fully expect us to be doing some WiiWare titles very shortly in the west. I won't speak for Japan on that particular issue, but there are interesting things happening at some point there, maybe.

WiiWare has some interesting challenges in terms of interface. I shouldn't say challenges: both challenges and benefits. The cont