Capcom Arcade Income Looking Up…Slightly

You may recall we reported in May, that Capcom, along with other publishers, have been making aggressive efforts to revitalize a declining arcade market in Japan for some time now, with little luck.

Part of the efforts involved holding special discount days, and trying to create a “comfortable environment” in arcades, order to to help attract more women and families. Capcom also introduced Mario Party Fushigi no Korokoro Catcher and partnered with Namco Bandai as part of their revitalization operations.

At the time, however, a decrease in consumer spending, swine flu fears, and a general move toward home entertainment in Japan offset these initiatives, leading Capcom to close down two arcades and reduce costs to cope with the decline. Ergo, though the arcade market declined, Capcom still managed to improve their income through cost-reduction.

The company’s latest report tells a similar story. While sales of arcade machines to third-party arcade operators remained sluggish due to a trend of arcades restricting their purchases in the face of the overall decline, Capcom managed to improve profitability in their arcade segment.^*

Although Capcom had to close yet another unprofitable arcade centre, which led to lower revenue, operating income increased over the April – June period last year by 56.1% this year. This is attributed primarily to cost-controlling measures.

“Operating income” is a synonym for “earnings before interest and taxes.” It’s calculated by subtracting operating expenses (such as power consumption costs etc.) from revenue. Further subtracting interest and tax expenses from operating income leads you to net income, commonly referred to as the “bottom line.”

To put it simply, while arcade revenue decreased as compared to last year, Capcom’s earnings relative to their investments improved.

Capcom believe part of the blame for the overall arcade decline falls on a lack of appealing products in the market. Some time this year, Capcom plan to release Super Street Fighter IV in arcades, possibly with new characters, as part of their arcade strategy. Further details are expected at the Tokyo Game Show in September.