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Capcom is re-evaluating its video game outsourcing

Although Capcom was on course to record notably improved profits for the last fiscal year, the company today revealed that it has been forced to book a special loss following restructuring efforts.
Although Capcom was on course to record notably improved profits for the last fiscal year, the company today revealed that it has been forced to book a special loss following restructuring efforts. The company had previously forecast revenues of 93.5 billion yen ($950.0 million) and profits of 6.5 billion yen ($66.0 million) for the fiscal year ended March 31, 2013. However, "the sudden and significant changes in the operating environment of the Digital Contents business" have forced the company to review its business strategy, and in turn record a special loss of 7.3 billion yen ($74.0 million) on a non-consolidated basis. Part of this restructuring included re-evaluating the games it currently has in development. The company says that it plans to change its strategy when it comes to retail video games, including a larger focus on DLC, and bringing more of its development in-house, rather than outsourcing. The company says in particular that there has been a "decline in quality of titles outsourced to overseas developers." It did not state specifically which games it was referring to. As a result, Capcom has revised its forecast and now estimates reduced profits of 2.9 billion yen ($29.6 million) for the year, down 55.4 percent compared to its previous forecast. However, the company notes that stronger than expected sales in its Resident Evil 5 Pachinko business, along with favorable foreign exchange gains, mean that the reduction in profits isn't as bad as it could have been. Indeed, the revised revenue actually increased by 500 million yen ($5.1 million). As for Capcom's flagship video game retail titles, the company has further reduced its sales forecast for multiple titles. Although the company originally forecast 7 million sales of Resident Evil 6 for the last fiscal year, this was later reduced to 5 million. The company now expects the game to sell 4.9 million in the last fiscal year. Elsewhere, Monster Hunter 4 is expected to sell 2 million on Nintendo 3DS, while Devil May Cry has been reduced down to 1.15 million sales, nearly half of the original 2 million forecast.

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