Capcom Expects Mobile-Phone Games to Generate 30% of Profit in a Few Years

By Naoko Fujimura and Masatsugu Horie - Oct 21, 2011 8:53 AM GMT+0700

Capcom Co. expects the proportion of its profit generated by “Smurfs’ Village” and other games played on mobile phones to rise to 30 percent as users of Apple Inc. (AAPL)’s iPhone and Google Inc.’s Android system download titles.

Capcom, creator of the “Resident Evil” video series, in May forecast mobile-phone games will make up 6.6 percent of operating profit in the year ending March. That proportion will probably increase about five-fold “in a few years,” Chairman Kenzo Tsujimoto said yesterday in an interview.

Tsujimoto, 70, said purchasing Canada’s Cosmic Infinity Inc., developer of the “Who Wants to Be a Millionaire” handset game, in 2006 gave Osaka-based Capcom a head start in the sector. “That allowed us to wait in ambush,” he said.

The company is building up its line of games played on Facebook and other social-networking sites as the sector reshapes Japan’s $10.6 billion video-game market. The domestic market for social gaming will almost triple to 305 billion yen ($4 billion) in 2013, according to Mitsubishi UFJ Morgan Stanley Securities Co.

“The gaming population is expanding thanks to the rising popularity of applications played with smartphones,” Tsujimoto said. “We hope these casual users will eventually start to play games on video-game consoles.”

The company forecasts operating profit, or sales minus the cost of goods and administrative expenses, of 12.1 billion yen for this fiscal year, down 15 percent from a year earlier.

‘Tectonic’

Capcom, which introduced the Beeline Interactive brand for social games this year, began last month offering “Smurfs’ Village,” in which users cultivate land and build a town with the blue characters, to smartphones that run on the Android operating system. The title has already had more than 15 million downloads via Apple Inc.’s App Store, Capcom said.

“The video-game industry has seen about 10 ‘tectonic movements’ in the past 40 years,” with perhaps the biggest being the shift from pinball machines and juke boxes to arcade machines that use sophisticated chips, said Tsujimoto, who founded Capcom in 1983. The rise in social games played on mobile devices may be the next shift, he said.

Capcom fell 0.4 percent to 1,948 yen as of the 10:48 a.m. on the Tokyo Stock Exchange. The shares have jumped 49 percent this year, compared with a 15 percent drop in the benchmark Nikkei 225 Stock Average.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Masatsugu Horie in Osaka at mhorie3@bloomberg.net

To contact the editors responsible for this story: Drew Gibson at dgibson2@bloomberg.net; Anand Krishnamoorthy at anandk@bloomberg.net