Second year in red for Capcom

Capcom has recently posted a loss for the second fiscal year in a row. For the 2004 fiscal year ended March 31, 2004, Capcom's sales were down 15.1 percent to 52.67 billion yen ($461.5 million). Its operating profits took an even greater fall of 79 percent to 1.4 billion yen ($12.29 million).

While Capcom's losses were not as bad as those posted 12 months earlier, the company still recorded a figure of 9.16 billion yen ($80.26 million) in red ink. Back in the 2002 fiscal year, Capcom's sales were down by one percent to 62.03 billion yen ($543.55 million), while its operating profits fell by 31.3 percent to 6.68 billion ($57.66 million). Capcom's overall losses in the 2002 fiscal year totaled 19.59 billion yen (171.65 million).

Surprisingly, Capcom attributes its lack of sales and income in its 2003 fiscal year almost entirely to disappointing performances in America and Europe rather than in Japan's mature market. In America, sales of Mega Man Battle Network 3 for the GBA and Chaos Legion for PlayStation 2 were a success, but a number of other titles such as Dino Crisis 3 on Xbox and the GameCube version of Viewtiful Joe did not sell as well as expected. The delayed release of Resident Evil Outbreak and campaigns to liquidate market inventories also hurt the company. As a result, sales in North America were down by 52.1 percent, contributing to a North American operating loss of 4.6 billion yen ($40.31 million) for the company.

Chaos Legion, Dino Crisis 3, and Viewtiful Joe also did not perform as well as expected in Europe, where a lack of any other major titles saw Capcom's sales plummet by some 34.8 percent. Capcom Europe still managed to post a profit for the 2003 fiscal year, although its operating profits of 330 million yen ($2.89 million) are down over 50 percent on those for 2002.

In Japan, Capcom suffered at the hands of increased competition from the used game market, but still managed to post 8 billion yen ($69 million) in operating profits from its three different sectors. In the console game sector, Capcom's major titles such as Onimusha 3, Monster Hunter, Resident Evil Outbreak, and Mega Man Battle Network 4 sold as well as expected. In addition, Grand Theft Auto III, which the company is publishing under license in Japan, sold surprisingly well.

Capcom's amusement facility businesses were also successful throughout the course of the year, largely thanks to its community-based operations and collaborations with shopping malls. In the arcade games sector, Capcom broadened its sales with Mobile Suit Gundam Z: AEUG vs. Titans, which was later released on the PS2.

Aside from its losses in the gaming sector, Capcom will also be posting 7.73 billion yen ($67.74 million) in special losses as a result of unrecoverable liabilities from its banking house subsidiary and the restructuring of its gaming sector. Capcom has been re-examining its internal organization since 2002, and the company recently announced the establishment of its new Clover Studio.

After posting losses for two years in succession, Capcom now considers the reorganization of its corporate structure a top priority. Together with the re-examination of its research and development departments and finding ways to cut costs in all its sectors, the company will be looking into ways of reforming its management structure and business processes on a worldwide basis.

For the fiscal year of 2005, Capcom expects to make 65.5 billion yen ($574.06 million) in sales and 3.9 billion yen ($34.18 million) in net profit. In terms of aims in the gaming sector, Capcom expects to continue making profit from the current generation of home consoles while also looking into the development of games for the upcoming PSP and Nintendo DS platforms. Capcom also sees benefits in expanding its businesses in the online gaming and mobile gaming markets, and plans to create a business model to address the used game market, which is affecting its sales.