Capcom doubles down on digital games, promises shorter dev times

Capcom plans to start leaning out and trimming the fat from its books with a new digital diet.

Capcom just reported its third straight year of record profits, and digital sales helped spark the milestone. Now that Capcom has had a taste of digital, it wants more. The company confirms it will double-down on digital games in an effort to reduce costs.

The plan is simple: Capcom wants to reduce overall expenses by reducing physical media costs. Selling retail games requires manufacturing costs, shipment costs, and warehouse costs--all of which add up fast. Capcom won't stop selling physical games, and retail games won't simply dry up, but it's making a conscious effort to lean into digital.

"One of the reasons for increased profits in the fiscal year under review is the expansion of digital download sales. The Company will continue to accelerate the focus from physical packaged sales to digital sales in step with advances in internet technology and the overall trend of digital transformation."

The digital shift had a tremendous effect on Capcom's earnings. Digital dropped net sales, but spiked both operating income and profits by over 25% year-over-year. That's a sizable increase considering the previous fiscal year was also another record-breaking period of earnings.

One interesting thing to note is how much Capcom's expenses shrank in FY2019, and it's all because of digital.

Capcom's overall net sales dropped by 27% due to less package game sales, but its overall expenses dropped from 62.8 billion yen to 40.64 billion yen, a hefty 35% reduction.

The Monster Hunter developer also promises to reduce the time it takes to ship new games. Capcom will bolster its dev teams with more employees to help speed the process along, as well as continue optimizing its proprietary games tech like the powerful RE Engine.

This acceleration bodes well for gamers with next-gen PlayStation 5 and Xbox Series X consoles releasing in 2020. Capcom's new FY2020 earnings guidance telegraphs new big games are on the way, and the company has confirmed it's already working on next-gen titles.

"The Company boasts a robust development structure that produces million-selling titles each year through creating engaging content that delights customers.

"It intends to further enhance its competitiveness by concentrating management resources in the development of home video games based on its medium-term development map, while at the same time developing a breadth of content tailored to the needs of the market through greater in-house production.

"To this end, the Company is improving its core competence, i.e. its development structure, through reducing both costs and the span of each development cycle with increased staff and an improved production environment, thereby improving profit management."