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Market Data

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(as of September 30, 2013)

Overall software market size and our market position are described.

Game Market Size

Home Video Game Software Markets (package)

The 2012 game market was worth 61.4 billion dollars (up 7.0% from the previous year) due to platform expansion, and is expected to increase to 86.6 billion dollars in 2017. There was significant growth in the mobile content and PC online market, which was worth 35.9 billion yen (up 20.9% from the previous year) in 2012.

The main reasons for this include (1) the spread of smartphones and tablets, (2) the spread of social games and (3) high-speed PC and mobile phone communications that enables online game platforms connecting high-performance devices such as PC, smartphone, iPad and a wide range of other consoles to the home video games. As a result, the online game market is expected to grow steadily to 58.6 billion dollars in 2017 (up 63.2% from 2012).

At the same time, the consumer market was worth 25.5 billion dollars (down 7.9% from the previous year) in 2012, although it is expected to continue growing steadily to 28.0 billion dollars (up 9.8% from 2012) in 2017. Following online market compartmentalization, five years from now, we anticipate it will continue to be a cornerstone of the market.

Home Video Game Software Markets
- Package and digitally distributed contents (DLC) -

In 2012, Package Market Contracted 17.9%, DLC Market Expanded 34.0%

PC Online and DLC Market

In 2012, the home video game (package) market was worth 18.4 billion dollars (down 17.9% from the previous year), the fourth straight year of negative growth. As in the previous year, the reasons for this include (1) lower annual unit sales caused by delayed purchases ahead of release of next-generation consoles replacing existing consoles and (2) lower average retail prices of package software as a result of intensified competition, (3) the diversification of sales into digital distribution and other forms, etc.

In the package market, consisting primarily of North America, Europe and Japan, where North America and Europe accounts for almost 80% of the market, the notable decline was connected to the overall market contraction.

Consumer (Package and DLC) Market

At the same time, advancements to global network infrastructure and the establishment of the virtual item sales model have led to a focus on DLC associated with major game company titles, resulting in significant expansion in the DLC market, which grew to 7.1 billion dollars (up 34.0% from the previous year). However, the package market contraction adversely affected the consumer market (Package and DLC), which declined slightly to 25.5 billion dollars (down 7.9% from the previous year).

In terms of outlook for the future, although Sony Computer Entertainment will release the PlayStation 4 (PS4) and Microsoft will release the Xbox One during the 2013 year-end sales season, we think it will take some time before the next-generation cycle begins and market activity picks up.

This is because the DLC market is expected to continue to grow as a result of the digital distribution of an increased number of DLC titles, as well as the assumption that the adoption of new hardware will start small and won’t begin to make a significant contribution until 2014. For this reason, we forecast a slight decline in the consumer market to 24.4 billion dollars in 2013 (down 4.3% from the previous year).

PC Online Market

In 2012 the Market Expanded Favorably by 11.9%

ket Share by Region (CY2011 Amount of Sales for Package Software)

In the PC online market, the adoption of PC games in North America and Europe and the rise of users of a new genre of browser game, the Massively Multiplayer Online (MMO), in Asia, resulted in favorable market expansion and growth to 23.6 billion dollars (up 11.9% from the previous year).

In 2013, this market is expected to continue growing steadily to 25.4 billion dollars (up 7.6% from the previous year). The drivers of this growth include improvements to the global network environment and the expansion of households with broadband. The Asia market in particular is expected to continue expanding, driven primarily by MMO games, from 9.7 billion dollars in 2012 to 11.8 billion dollars by 2017 (up 21.7% from 2012). Accordingly, the PC game market is expected to surpass the package game market and grow to 29.0 billion dollars by 2017.

Market Share by Region (CY2012 Amount of Sales for Package Software)

Our market shares: 3rd in Japan, 10th in North America and 13th in Europe

各地域でのマーケットシェア(2012年 パッケージ販売金額)

In 2012, our market shares in the respective markets where we operate were as follows: Japan 8.8% (up 1.2 points from the previous year), North America 2.76% (up 1.26 points from the previous year) and Europe 2.0% (up 1.2 points from the previous year).

Mobile Content Market

The 2012 Market Expanded Rapidly Around the World, Increasing 43.0%

Mobile Content Market

The 2012 mobile contents market achieved significant global growth, increasing to 12.3 billion dollars from 8.6 billion dollars in 2011 (up 43.0% from the previous year). The main reasons for this were (1) the advance of smartphones and other mobile devices in all countries of the world, (2) the rise of high-performance tablet devices and (3) the spread of social games due to the increase in mobile users.

By region, the North American market was worth 2.8 billion dollars (up 40.0% from the previous year) and the European market was worth 2.0 billion dollars (up 53.9% from the previous year) and the Asian market including Japan was worth 6.2 billion dollars (up 40.9% from the previous year). Furthermore, in emerging and Eastern European markets, as well as other areas, the global market grew rapidly to 1.3 billion dollars (up 44.4% from the previous year).

The freemium (virtual item purchases/in-game purchases), a business model where users download a game for free, then purchase access to additional items and other game content as needed, has been rising rapidly in the market since about 2010. Freemium-type social games appeal to users because of the power of their content (brand/game content), in-game events and other mechanisms to maintain appeal and manageability. For game companies with lots of popular software titles and mobile developers with strong expertise in operations, this represents an even greater opportunity to improve earnings.

In Japan, game distribution is beginning to transition from browsers to direct distribution of native apps via iOS and Google Market Place in line with the shift from traditional feature phones (mobile phones) to smartphones, resulting in the need for development structures able to respond rapidly to dramatic changes in the mobile market.

Furthermore, in June 2013, the Japan Consumer Affairs Agency introduced regulations concerning "complete-gacha" games, but the impact has been negligible. Formulating guidelines regarding in-game representations, each operating company strengthened voluntary initiatives to improve the game environment and provide users with peace of mind, safety and enjoyment. This has led game developers, no longer dependent on speculation, to begin providing wholesome and original game

Looking ahead, we forecast shipments in the 2013 smartphone market to exceed last year's 720 million units and grow to 950 million units (up 32.7% from the previous year), with the ratio of smartphones as a percentage of all mobile phone shipments rising above 50%. Also, the adoption of tablet devices is advancing rapidly, with 290 million units expected to ship in 2013 (up 59% from the previous year), expanding to surpass global PC shipments in 2015 as the number of mobile content users continue to grow. The adoption of tablet devices is expected to drive growth in the mobile contents market to 29.6 billion dollars by 2017 (an average annual growth rate of 19.2%), growth that will surpass even the home video game market.

Arcade Facilities Market Trends

1.7% Contraction Indicates Market Has Bottomed Out

Arcade Facilities Market Trends

During the previous fiscal year (ended March 31, 2012), the size of the arcade facilities market was 487.5 billion yen (down 1.7% from the previous year). This was due to an easing of the impact from voluntary restraint following the Great East Japan Earthquake and electricity conservation on arcade operations and inexpensive, nearby and short-duration leisure activities that fueled the renewal of arcade facilities.

Change in Number of Storefronts

Sales per Facility Surpasses Previous Year with Stable Trend Ahead

Number of Amusement Arcades (by number of machines)

The number of facilities declined slightly to 18,114 (down 2.8% from the previous year) as sales per facility increased 1.2%, signaling that the market has bottomed out and that the rapid decline since 2007 has come to an end. This fiscal year (ended March 31, 2013), along with the closing of unprofitable facilities, there was an increased appetite for investment in facilities. However, repercussions from increased demand after the Great East Japan Earthquake were unavoidable, resulting in a somewhat weak market.

In terms of outlook for the future, as companies make efforts to further improve the profitability of their facilities, they will also continue aggressive capital expenditure, including the opening of new facilities, renovation of existing facilities and investment in new products expected to result in market stability.

Major Gaming Machines Market (New Machine Sales)

Pachislo Machine Growth Underpins Major Gaming Machines Market

Major Gaming Machines Market (New Machine Sales)

During the previous fiscal year (ended March 31, 2012), the major gaming machines market totaled 1,200.8 billion yen (up 2.3% from the previous year), surpassing the previous fiscal year on track toward recovery. Although the Pachinko machine market, which accounts for 60% of the market, continued to contract, Pachislo machine growth underpinned the major gaming machines market with two consecutive years of expansion beginning in the fiscal year ended March 31, 2010.

This fiscal year (ended March 31, 2013), although sales continued to be brisk with the launch of hit Pachislo machines that sold over 100,000 units, conditions remained severe for Pachinko machines, which were unable to break out of their slump. Nevertheless, the major gaming machines market remained on a track overall due to an increase in Pachislo machines associated with the new opening or renovation of Pachislo parlors.

In terms of the future outlook, although the introduction of popular Pachislo machines will continue, we anticipate another round of additional machine installations that may result in a rebound in the Pachinko machine market next fiscal year. This complementary relationship should continue in the market overall, which we expect will remain stable.

Arcade Game Market Trends

Arcade Game Market Expands 7.5% in Second Year of Consecutive of Growth

Arcade Game Market Trends

Next, in the previous fiscal year, in line with the bottoming out of the arcade facilities market, the arcade games domestic product sales market surpassed the previous year for the second year in a row, growing to 173.8 billion yen (up 7.5% from the previous year).

By genre, in addition to high-sales-ratio coin-operated games (accounting for 20.8% of the market), which led the recovery with 36.2 billion yen (up18.3% from the previous year), amusement vendors (accounting for 8.1% of the market) also maintained a favorable trajectory at 14.0 billion yen (up 27.7% from the previous year).

This fiscal year, the aggressive introduction of new products resulting from facility operators' need for capital expenditure resulted in the continued stability of the market.

In terms of the outlook for the future, continued capital expenditure on facilities and increased network game machines including links to smartphones should keep the market moving toward a gentle recovery.

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