Creating a High Revenue Structure with 20%
In the consumer market, we are concerned about diminishing profitability from investors due to a rise in development expenses and increased competition with overseas makers resulting from the arrival of next-generation consoles. However, this is still a major market expected to represent about one-third of the overall game market in 2018. Possessing a large amount of popular content, Capcom positions this as a core business able to ensure an operating margin of 20% or higher by improving highly profitable DLC operating margins.
We will promote additional improvement measures on the back of our 1st stage achievements to create a high revenue structure with 20% operating margins.
To this end, we will (1) strengthen DLC, (2) accumulate expertise and improve product quality by transitioning outsourced work to in-house production and (3) revise our title lineup to create a portfolio of titles enabling sustainable growth over the medium- to long-term.
Structural Reform of Growth Engine Online Business
In terms of online business measures, Capcom is (1) strengthening marketing and monetization, (2) revising title lineups and (3) promoting PC Online business overseas development.
We are fighting an uphill battle in the high growth rate online market, and aware that some investors are concerned about Capcom’s growth Strategy.
However, we think it is possible to once again reach operating margins of 30% over the medium-term because (1) we maintained operating margins of 30% or higher in the online business for the three years ended March 31, 2013 and (2) at the end of this fiscal year (March 31, 2014), we reviewed measures and carried out organizational improvements based on analysis of the cause of unachieved goals and issues that arose this fiscal year.
Next fiscal year (ending March 31, 2015), although we do not expect a sufficient recovery in net sales, we do expect to improve cost efficiency and increase operating margins 10% or more through the following measures.
Generating Earnings Through the Development of
100% Capcom-Owned Content in a Variety of
Regions and Media
A “home video game” is an artistic media product that consists of highly creative, multi-faceted elements such as images, storyline, a worldview, music and interactive gameplay. This is exactly why each of these constituent elements can be individually developed into an attractive product through different facets of media.
Therefore, we can expect the following four effects by developing each of these elements into different business fields: (1) creating new profit opportunities other than the consumer business; (2) creating heightened excitement through increased exposure by simultaneous multiple-field development (promotional effects); (3) absorbing customers obtained from other business segments as home video game users; and (4) reducing profit fluctuations through business portfolio creation (risk hedge).
We own scores of intellectual properties based on popular content. We are now creating a business model to enjoy multiple profits by promoting Single Content Multiple Usage strategy in several applications.
While other companies in our industry are rolling out similar strategies, Capcom’s competitive advantages are (1) more 100% owned content than any other company, able be developed in a variety of ways using our strength in creating original content and (2) an ability to maximize earnings, compared to companies that only operate in Japan, due to the global development of content popular around the world. In particular, we are putting more effort into movies based on Capcom content, which is expected to have a significant promotional effect on the sale of consumer games. Other domestic game makers are undertaking similar efforts, but comparing the number of titles made into movies and box office revenues, it is clear that Capcom leads the industry in this regard.
This strategy will allow us to leverage the success of our consumer business with the aim of maximizing profits and achieving success in other businesses (Mobile Contents, Pachinko & Pachislo, Arcade Games, Movies, Publishing, Character Goods, etc.).