Capcom predicting "severe contraction" of packaged market

Resident Evil publisher expecting traditional physical goods market to shrink by $5.3 billion by 2017; company will invest more heavily in DLC going forward.

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The traditional packaged game market is facing tough times, according to Resident Evil and Dead Rising publisher Capcom. As part of its 2013 Annual Report published today, the company spoke about "rapid changes" in the consumer market that it will face going forward.

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"Analyzing the consumer market by platform, we forecast severe contraction in the package market, which is expected to shrink by $5.3 billion in 2017 (down 28.8 percent from 2012)," the company said. "At the same time, we forecast significant growth in the DLC market by $7.8 billion (up 109.9 percent)."

In 2012, the packaged market was worth $18.4 billion, Capcom said, down 17.9 percent year-over-year and the fourth straight year of negative growth.

Going forward, Capcom said it will allocate management resources to downloadable content to "ensure sufficient earnings." To this end, the company will increase the staff in its Consumer, Mobile, and PC online development areas by 100 people each during the next fiscal year.

Capcom president and COO Haruhiro Tsujimoto explained that in the traditional packaged games business model, the company used to recoup investment costs by simply pushing more titles out the door. However, the company is now shifting to a more DLC-focused approach.

"But now, even after game sales, the provision of digitally distributed content (DLC) facilitates longer enjoyment of each title, resulting in a business model with the potential for earnings on a continuous basis," Tsujimoto said.

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Tsujimoto acknowledged that Capcom has not been quick enough to adapt its business to be more DLC-oriented, but said the company will shift this attitude going forward.

"I regret to say that, up to now, we had few plans for the full-scale implementation of DLC," he said. "From here on out, we need to focus on the long-term provision of content starting at the earliest stages of development."

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