Today Capcom released its financial results for the nine months ended on December 31st, 2017. As showcased in the table below, sales decreased slightly year-on-year, but both operating and ordinary income increased sensibly.
The accompanying press release also includes a breakdown of the results for the period. Capcom sees “major growth” for home consoles due to the “greater penetration” of PS4 and the “strong performance” of the Switch. The publisher focused efforts in developing software for home consoles, which is described as “the source of its competitiveness.”
“During the nine months ended December 31, 2017, our industry saw major growth in the market for home video games, both in terms of software as well as hardware, due to greater penetration of the PlayStation 4 home video game console and the strong performance of the new Nintendo Switch game console.
In addition, “esports” (Electronic Sports), which are becoming increasingly popular in the U.S. as well as other markets, are raising hopes for further market growth, driven by games coming to be recognized as a new sport following esports adoption as an official event in the 2022 Asian Games.
Furthermore, the Company’s efforts to create new business domains in Japan have been gaining traction, as evidenced by the overwhelming audience response at the esports event held during the Tokyo Game Show 2017 for the Company’s popular title, Street Fighter V, the latest in the series many consider to be the origin of esports.
Given this situation, the Company strove to bolster its management structure, enhance its development team and improve its development environment, enabling it to focus on the development of software for home video games, which are the source of its competitiveness. It also concentrated its efforts in expanding its digital offerings, which promise recurring revenues, in addition to one-time package sales. Moreover, in an effort to shore up its stagnant mobile contents performance, the Company made organizational reforms, developed appealing titles and provided software collaborations, aiming to increase customer satisfaction. In order to diversify its revenue, the Company advanced its “Single Content Multiple Usage” strategy, utilizing popular titles across movies, animation, stationery, toys and food and beverage products. However, in the Pachinko & Pachislo sub-segment, the repercussions of recent changes in model-testing methods have forced the Company into a challenging situation.
As a result, for the nine months ended December 31, 2017, consolidated net sales were 47,740 million yen (down 10.8% from the same term in the previous year). In terms of profitability, thanks to the contribution made by licensing revenue from utilizing our intellectual property (IP), operating income was 7,009 million yen (up 36.9% from the same term in the previous year), ordinary income was 7,099 million yen (up 71.2% from the same term in the previous year), and net income attributable to owners of the parent was 4,439 million yen (up 60.7% from the same term in the previous year).”
We also get a specific breakdown for the Digital Contents business, which is Capcom’s console segment. We learn of “strong” continued performance of Resident Evil 7 biohazard, Monster Hunter XX, and Ultra Street Fighter II, while Marvel vs. Capcom: Infinite’s performance is described as “soft.”
“In this business, Resident Evil 7 biohazard (for PlayStation 4, Xbox One and PC) and Monster Hunter XX (Double Cross) (for Nintendo Switch) performed strongly, in addition to Ultra Street Fighter II (for Nintendo Switch) becoming a smash hit. Meanwhile, sales of Marvel vs. Capcom: Infinite (for PlayStation 4, Xbox One and PC), which was launched in September 2017 targeting the European and US markets, tended to be soft.
In online games, Monster Hunter Frontier Z, a perennial favorite which underwent a major update commemorating its 10th anniversary, gave a solid performance. In mobile contents, amid business reforms including alliance strategies carried out by the Company to bring about a breakthrough in the business, Monster Hunter Explore remained steadily popular, as licensing revenue utilizing our IP also contributed to the increase in profits.
The resulting net sales were 30,844 million yen (up 8.5% from the same term in the previous year) and operating income was 6,257 million yen (up 328.2% from the same term in the previous year).
In the fourth quarter of the fiscal year ending March 31, 2018, the Company plans on an aggressive sales campaign with the release of its flagship title, Monster Hunter: World (for PlayStation 4 and Xbox One).”
Cumulative shipments for Resident Evil 7 biohazard topped 4.8 million units, with 1.2 million sold during the nine months between April and December 2017. Marvel vs. Capcom: Infinite shipped one million units between its release in September and December 31st.
Consumer shipments (including games for consoles and related PC ports) between April and December were five 5.75 million for packaged titles and 8.1 million for full-game digital downloads, for a total of 13.8 million units.
We also get the forecast for the full fiscal year, which will end on March 31st, 2018. Capcom predicts both net sales and income numbers to enjoy a sizable increase year-on-year.
Highlights of the current quarter include the release of Monster Hunter World, with a “strengthened roll-out across the world” and the goal to grow Monster Hunter into a “global brand.” We already know that plan has been successful, as Capcom recently announced that the game shipped five million copies in the first three days.
You can also check out the results of the prior quarter for the sake of comparison.