During the fiscal year ended March 31, 2017, signs of major changes to our industry became evident, such as the successive releases of VR (virtual reality) devices that are highly compatible with games. With an eye to creating a new market we entered a new era many are calling “VR year one.”
Under such circumstances, the Company has carried out reorganization and strengthened its management structure aiming to reform its development divisions, which are the core of its business operations. At the same time, the Company promoted speedy decision-making and agile business development by clarifying reporting lines and responsibilities.
Moreover, the Company strove to enhance its presence and increase its brand value by generating synergy with its flagship titles through a mixed media strategy leveraging its rich content assets. This included an animated TV program based on Monster Hunter Stories that began airing in October 2016 (Fuji Television Network); the musical theater performance of Resident Evil: Voice of Gaiain Tokyo and Osaka, which is the first ever musical theater performance based on a survival horror game; and the Hollywood film, Resident Evil: The Final Chapter, which is based on the Company’s popular game series and was first released in Japan in December 2016, followed by a worldwide run.
Under the Corporate Governance Code of Japan, the Company has been engaged in measures to make its corporate governance effective, which include the proactive promotion of constructive dialogues with domestic and foreign institutional investors and the adoption of some of their suggestions in company management.
Status of Each Operational Department
Digital Contents business
Resident Evil 7 biohazard (for PlayStation 4, Xbox One, Windows PC), which features the ability to play the full game in the included optional PSVR Mode for PS4, gave an overall solid performance, while Monster Hunter XX (Double Cross) (for the Nintendo 3DS family of systems), is off to a promising start following its March 2017 release.
Re-releases of the Resident Evil series for current-generation console re-releases performed steadily thanks to a stable fanbase for the brand. Further, Monster Hunter Generations, known as Monster Hunter X (Cross) in Japan and Asia (for the Nintendo 3DS family of systems), achieved solid sales overseas thanks to Capcom’s established brand capabilities. On the other hand, Dead Rising 4 (for Xbox One and Windows PC) and Monster Hunter Stories (a game targeting younger audiences, for the Nintendo 3DS family of systems) underperformed.
In online games and mobile contents, the Company broke new ground amidst ongoing efforts to achieve progress in this static sub-segment by reviewing its development framework and operation methods. This led Toraware no Paruma (an enterprising romance game for Android devices and iOS that was developed primarily by female staff) to reach the top of the App Store paid application rankings on its release date.
The resulting net sales were 58,704 million yen (up 11.7% from the previous fiscal year), and operating income was 11,096 million yen (down 8.8% from the previous fiscal year).
Arcade Operations business
In the Arcade Operations business, signs of recovery to our industry are becoming evident, partly because regulations on the entry into stores at night were relaxed by the amendments to the Act on Control and Improvement of Amusement Business, etc. effective June 2016. Under such circumstances, efforts were made to capture a broad customer base by securing repeat customers and attracting persons of middle or advanced age and children accompanied by a parent. This was done through community-based arcade marketing to win the support of local residents by holding various events and operating stores that offer comfortable experiences to customers under the banner of “No. 1 arcade in the community.”
To develop new business opportunities, the Company also pushed forward innovative new business formulas, such as opening “Chara Cap” shops, which primarily sell character merchandise inside stores. During the period under review, three new stores were opened while one store was closed bringing the total number of stores to 36.
The resulting net sales were 9,525 million yen (up 5.2% from the previous fiscal year) and operating income was 752 million yen (up 7.5% from the previous fiscal year).
Amusement Equipments business
In the Pachinko & Pachislo sub-segment, Monster Hunter Kyoryu Sensen, this fiscal year’s major release, was a mega hit thanks to synergy with home video games, and drove sales expansion. In the Arcade Games Sales sub-segment, the Company launched Mario Party Fushigi no Challenge World and focused on repeat sales of existing products.
The resulting net sales were 16,856 million yen (up 26.3% from the previous fiscal year) and operating income was 5,106 million yen (up 81.6% from the previous fiscal year).
The net sales from Other Businesses, mainly consisting of royalty income from licensing and sale of character merchandise, were 2,083 million yen (up 2.0% from the previous fiscal year) and operating income was 969 million yen (up 89.8% from the previous fiscal year).