Capcom Releases Annual Report, Next-Gen Plans

Officials from Capcom have released the company's Annual Report to Shareholders for the year ended March 31, 2006, within which contains statements made by president and CEO Kenzo Tsujimoto concerning the current and future state of the company, as well as Capcom's emphasis on development for the global and online market. The annual report noted that Capcom's net income for the current fiscal year was 6.941 billion yen ($59.3 million), a 91.6 percent increase over the previous year. Looking forward, Tsujimoto noted that the company expects to see sales of 68,400 million yen ($585 million), with operating income of 7 billion yen ($59.9 million) and net income of 3.9 billion yen ($33.3 million). According to Tsujimoto, Capcom is seeing the benefits of structural reforms within the company that began in fiscal 2002. Much of these reforms included expanding Capcom's emphasis on the North American and European regions, markets that according to Tsujimoto represent 80 percent of the total video game marketplace. The executive also noted that Capcom saw “huge successes in the current fiscal year” with titles such as Resident Evil 4 for the GameCube and PlayStation 2 and Monster Hunter Freedom for the PSP, and that these sales, along with other efforts, resulted in “a decrease in product inventory, sales expenses and market distribution inventory levels, and improved recognition of our software titles among customers and retailers.” However, Tsujimoto cautioned that because of the console hardware transition, and a historic reluctance by customers to purchase new software for current generation consoles during the transitional period, the company predicts that the software market for 2006 will decrease to $15.8 billion, down from the company's current estimates of $16.3 billion. Tsujimoto added, though, that Capcom expects the market to rebound following the release of Sony's PlayStation 3 and Nintendo's Wii consoles. That said, the executive added: “We are fully aware that the main market during the next fiscal year will be for current-generation game consoles and portable game consoles. For that reason, we are maintaining earnings based on the sales of our game titles intended for current-generation game consoles, which boast established and prolonged popularity, while making advance investments in the development of software for next-generation consoles.” Currently, the company is developing highly anticipated next-generation titles including Devil May Cry 4 for the PlayStation 3 and Resident Evil 5 for both Sony's upcoming console as well as the Xbox 360. Interestingly, Tsujimoto wrote as part of Capcom's annual statement that the company is focusing on a multi-platform strategy with regards to its titles by “marketing a single title for a number of different types of game consoles, thereby expanding sales and optimizing our profits.” The company is also revising its development process and cost management structure, and is also creating a universal game development engine that can be used by multiple titles developed for for next-generation consoles. Continuing, Tsujimoto wrote that Capcom is expecting “sustained market growth” greater than 10 percent from 2007 onwards, and that the market size of online games to expand “mainly in Asia, namely in South Korea and China.” Because of this, Capcom plans to “upgrade our product series by focusing development on software and online games for the global market, while teaming up with other companies for product development.” Finally, the annual report noted that Capcom is continuing to be interested in investing in the online PC games market, particularly following the success seen by the Monster Hunter online game series for the PlayStation 2 and PSP. Capcom formed an Online Business Division in April 2006, and this month plans to establish a new company together with the Dwango Group to operate a portal website and construct a new business model based on the Japanese market. This plan will be brought to the Europe and North American markets at a later date, and according to Tsujimoto will see this segment become one of the key segments of Capcom's business.