カプコン（9697） – CAPCOM_Integrated Report2021_1/3

CAPCOM CO., LTD. INTEGRATED REPORT 2021Code Number: 9697CAPCOM INTEGRATED REPORT2021EXPANDING VALUECode Number: 9697Create Financial and Non-Financial ValueContinuing to create financial and non-financial valueAchieving eight consecutive yearsof increased operating incomeThe game industry is continuously changing, in step with the evolution of AI, communications, and other advanced technologies. At Capcom, we see these changes as an opportunity, and as a result of our efforts to strengthen our development structure and promote digitalization, the fiscal year ended March 2021 marks eight consecutive years of increased operating income. Though we split our stock on April 1, 2018 and again on April 1, 2021 to improve its fluidity and expand our investor base, as our performance improves, our stock price also continues to rise steadily. We will continue to increase our corporate value (market capitalization) with sustainable business growth so that we can reward our stockholders’ loyalty.Marketcapitalization(billion yen)Stock price(yen)OperatingIncome(million yen)Increasing Corporate Value by Growing Income 10% Each YearStock split1:2March 31, 2018337.6 billion yenStock split1:2April 31, 2021961.6billion yenApril 31, 20213,550 yen42,000million yenMarch 31, 20141,958 yenMarch 31, 20184,985 yen34,596March 31, 2014132.6 billion yen10,29910,58212,02913,65022,82716,03718,144201420152016201720182019202020212022(plan)(Years ended March 31)01CAPCOM INTEGRATED REPORT 2021Providing smiles and moving hearts all across the globeSince Capcom’s founding in 1983, we have continued to move hearts and deliver smiles through the entertainment of games. In recent years, the spread of the internet, PCs, and smartphones has made it possible to enjoy games even without game consoles, while at home, and in any country or region around the world. Further, our game software sales volume has been increasing, driven primarily by digital sales. We will continue to strive in our business activities in an effort to contribute to the improvement of quality of life for people throughout the world by provding high quality entertainment. Totalunits sold(thousand units)Digitalunits sold(thousand units)Providing Games in Over 200 Countries and RegionsAiming for 100 Million Units in Sales Volume per Year25,50025,30024,40032,000thousand units26,500thousand units30,10023,15020,55017,50015,00013,00015,30012,90019,4009,0004,8005,0006,100201420152016201720182019202020212022(plan)(Years ended March 31)CAPCOM INTEGRATED REPORT 2021 02Corporate PhilosophyCapcom: Creator of entertainment culture that stimulates your sensesOur purpose is to be a creator of entertainment culture. Through development of highly creative software contents that excite people, stimulate their senses, and bring smiles to their faces we aim to offer an entirely new level of game entertainment. Since Capcom’s establishment in 1983, we have leveraged our strength in world-class development capabilities an artistic product that fascinates people, elements such as characters, stories, worlds variety of media while being used to support Capcom aims to become a company that by offering the most entertaining and music. This content can be deployed in a the creation of a richer society. Going forward, brings happiness to people and society to create a plethora of products. Game content is consisting of highly creative, multi-faceted content in the world.Contribute tobuildinga richersociety, makingsmiles and moving heartsacross the globeGrow the playerbase worldwideWork to build equality and eliminate poverty,so games can be enjoyed wholeheartedlyContinue to make andprovide superior contentCreate stable revenuePromote ESGinitiatives based on SDGsValue Creation StoryLatest Creative ReportEditorial policycontents01 Create Financial and Non-Financial Value03 Corporate Philosophy05 History of Value Creation07 Major Intellectual Properties (IP)09 Effectively Leveraging IP11 World Leading Development Capabilities12 Digital Strategy Performance13 ESG Highlights15 Value Creation Model17 Financial Highlights19 Business Segments Highlights23 Medium- to Long-Term VisionMedium- to Long-Term Growth Strategy25 CEO Commitment35 The COO’s Discussion of Growth 43 Financial Strategy According to the CFOStrategies03CAPCOM INTEGRATED REPORT 2021Development Strategy47 The Head of Development Discusses 49 Monster Hunter Rise53 Training Human Resources and Environmental ImprovementsFoundation for Sustainable Growth (ESG)55 ESG Information56 Capcom and the Environment57 Society and Capcom63 Corporate Governance63 65 73 Directors Corporate Governance Structure and Initiatives Message from an External DirectorFinancial Analysis and Corporate DataCapcom75 An Analysis of the Market and 77 11-Year Summary of Consolidated 79 Segment Information84 Stock Data85 Corporate DataFinancial IndicatorsCapcom’s Integrated Report conveys initiatives aimed at improving corporate value over the medium- to long-term to all stakeholders. This report is issued with the intent of creating opportunities for further dialogue. Furthermore, we aim to express ideas in a simple and easily understood manner and visually represent important items to aid understanding. Details are available online.Period and scopeThis report reviews the fiscal year ended March 31, 2021 (April 1, 2020–March 31, 2021). When necessary, it also includes references to fiscal periods before and after this timeframe. Unless otherwise indicated, the scope of data presented in this report is on a consolidated basis.Subject index for referenceExternal environment P19-20, P75Senior management perspectives P25-34, P35-42, P43-46, P47-48Growth strategy P23-24, P29-31, P35-42Performance and financial condition P17-18, P21-22, P43-46, P77-83Business details P05-22, P76, P79-83Relationship with stakeholders P13-14, P57-62Company and market analysis P19-22, P75-76World-class development capabilities P47-48, P49-52, P53-54CAPCOM INTEGRATED REPORT 2021 04Superior development capabilities taking us from Osaka to the world History of Value CreationTrend in operating incomeNote: 1983–1988: Fiscal years ended December 311989–2021: Fiscal years ended March 311983 198419851986198719881989 1990 19911992199319941996199719981999 20001995GenesisCapcom Co., Ltd. was established in Osaka in 1983. The Nintendo Entertainment System (NES) came out that same year, but it was difficult to develop high-quality arcade-level content for, so Capcom focused business development on the creation and sales of arcade games using the proprietary high-spec circuit board “CP System.”Big hits drivebusiness expansionIn the 1990s, the arrival of Super NES prompted Capcom to formally enter home video game development. Numerous hit titles were created that drew on Capcom’s arcade game development expertise. The Single Content Multiple Usage strategy was launched in earnest in 1994 with the release of a Hollywood movie and animated movie based on Street Fighter.Title history1983Released our first originally developed coin-op Little League.1984Released our first arcade video game Vulgus.1985Released our first home video game 1942 for the Nintendo Entertainment System (NES).1987Released Mega Man for the NES.1992Released Street Fighter II for the Super NES.1993Released Breath of Fire for the Super NES.1996Released Resident Evil for PlayStation, establishing the genre of survival horror with this record-breaking, long-time best-seller.Capcom and Entertainment CultureStreet Fighter II becomes a major hitThe game became a sensation in arcades across the country, establishing the fighting game genre. In 1992, a national tournament was held at the Ryogoku Kokugikan in what might be called the first ever esports tournament.CP SystemThrough leveraging our proprietary, high-performance circuit board we were able to captivate game players with exquisitely depicted, immersive game worlds of the highest quality, allowing us to produce one hit after another in both the arcade and home video game markets.05CAPCOM INTEGRATED REPORT 2021© CAPCOM, Shogakukan, ShoPro, TV Tokyo 2002© 2002 CONSTANTIN FILM PRODUCTION GMBH /NEW LEGACY FILM LTD.Multi-media roll out of Capcom IP starts in earnestThe Hollywood film adaptation of Resident Evil, along with the animated TV show and movie adaptations of the youth-orientated Mega Man Battle Network, marked the beginning of our foray into branding game-based content.198819912002Foundation forSustainable Growth (ESG)34,596million yen20012002200320042005200620072008201220132014201520162017201820192009 2010 201120202021Increasing sharesin Europe and North AmericaIn 2000, Capcom listed its shares on the First Section of the Tokyo Stock Exchange. In the 2000s, Capcom created one hit title after another that gained popularity overseas. The Hollywood movie version of Resident Evil earned 102 million U.S. dollars globally, part of a six-title hit series that continues to spread the Capcom brand throughout the world.Globalizationand the digital shiftWith game consoles now offering full internet functionality and the popularization of gaming on PCs, the video game market has expanded beyond one segment of developed countries and now permeates the globe. As a result of Capcom’s early initiatives to support digital sales, including releasing past titles onto current game consoles and ongoing sales of catalog titles, operating profit margins and the overseas unit sales ratio have been on the rise.2001Released Onimusha for PlayStation 2, the first gamefor PlayStation 2 to become a million-seller in Japan.2005Released Sengoku BASARA for PlayStation 2.2006Released Dead Rising for Xbox 360; it became amillion-seller, unprecedented for a new title created for a new game console.Released Dragon’s Dogma.20122018Monster Hunter: World isreleased selling a cumulative total of more than 17 million units, the first title to do so in Capcom’s history.2021Monster Hunter Rise and Resident Evil Village are released. We are expandingour brand value globaly with the high-quality game experiences we provide.Cooperative gameplaybecomes standardMonster Hunter Freedom 2 became the first game in the series to top a million units sold. People getting together with their game consoles to play cooperatively sparked the “Monster Hunter Craze.”Acceleration of digital game salesDigital sales of of software accelerated against the backdrop of the global COVID-19 pandemic. Capcom supported the “Stay Home” effort with our rich lineup of games cultivated over the 38 years we have been in business. Capcom officially entered esports, a new form of entertainmentIn 2018, Capcom established a dedicated department to promote the spread of esports with measures such as launching new competitions for pros and amateurs.CAPCOM INTEGRATED REPORT 2021 06202020182007Medium- to Long-TermGrowth StrategyLatest Creative ReportFinancial Analysis andCorporate DataValue Creation StoryMajor Intellectual Properties (IP)Steady output of million-seller titles born from a foundation of popular brandsIn the 38 years since our founding, our eagerness to take on new endeavors has given birth to countless popular brands.These brands have garnered massive followings both domestically and overseas.Mega ManseriesTotal numberof units sold36 million(As of March 31, 2021)Cumulative million-seller titles6 titlesFirst title 1987Latest title 2018Mega ManMega Man 11Units sold: 1.3 million(As of March 31, 2021)Resident EvilseriesTotal number of units sold110 million(As of March 31, 2021)First title 1996Cumulativemillion-seller titles30 titlesLatest title 2021Resident EvilResident Evil VillageUnits sold: 4.5 million(As of June 30, 2021)07CAPCOM INTEGRATED REPORT 2021Foundation forSustainable Growth (ESG)Monster HunterseriesTotal number of units sold72 million(As of March 31, 2021)First title 2004Cumulativemillion-seller titles13 titlesMonster HunterLatest title 2021Monster Hunter RiseUnits sold: 4.8million(As of March 31, 2021)First title 1987Latest title 2016Street FighterStreet Fighter VUnits sold: 5.5million(As of March 31, 2021)Street FighterseriesTotal number of units sold46 million(As of March 31, 2021)Cumulativemillion-seller titles13 titlesCAPCOM INTEGRATED REPORT 2021 08Medium- to Long-TermGrowth StrategyLatest Creative ReportFinancial Analysis andCorporate DataValue Creation StoryEffectively Leveraging IPIncreasing profits and brand value through our Single Content Multiple Usage strategyOur Single Content Multiple Usage strategy maximizes the use of our most popular content.This allows us to build a business portfolio that achieves both greater profitability and risk diversification.Increasing Capcom’s PredominanceBusinessSegmentNewGamesNumerous IPsGlobalPopularityRecognitionbeyond gamesAppealingto a broaderdemographicOtherBusinessesArcadeOperationsAmusementEquipmentsDigitalContentsExpandinginto adjacentmarketsAttractingcasual usersHollywoodMoviesEsports, EventsCharacterMerchandising,BooksArcadesGaming MachinesMobile ContentsMultiple UsageMulti-PlatformDevelopmentGameWorld/StoryUsage strategy allows us to enjoy CharactersPopularContent(Home Video Games)PlayabilityMusicOur original contentplays an active rolein diverse businessesAs we develop our popular proprietary content for multiple game platforms, we are also actively turning it into movies, theater productions, and other non-game media. This Single Content Multiple multi-level profitability and is building a business portfolio diversified against risk. Additionally, it contributes to even further improved brand power for each IP.09CAPCOM INTEGRATED REPORT 2021Further Improved Brand PowerFoundation forSustainable Growth (ESG)RestaurantsEventsBooksAppealing to a broader demographicLicensing BusinessQuality assuranceProvide characters forlimited purposes/periodsCapcomPartnersConsumersLicensing feesPaymentProduct/ServiceOrchestral ConcertsIncreased awarenessCharacter MerchandisingHollywood Movies© CONSTANTIN FILM Production Services GmbHExpanding intoadjacent marketsSales of merchandiseMobile GamesAttracting casual usersPachisloMonster HunterseriesCAPCOM INTEGRATED REPORT 2021 10Medium- to Long-TermGrowth StrategyLatest Creative ReportFinancial Analysis andCorporate DataValue Creation StoryWorld Leading Development Capabilities / Digital Strategy PerformanceFirst-rate creators are the source of our creativityOur R&D facilities, outfitted with the most cutting-edge development equipment and technology, are the stage upon which our more-than 2,400 developers work daily to improve quality in an effort to create world-class entertainment.Development strengthsIn-house production ratio More than 80%Ensuring developmentefficiency and quality Million-selling IPs19seriesNumerous brandsthat are well-knownaround the globe Number of developersMorethan 2,400peopleOne of the largest gameR&D workforces in Japan11CAPCOM INTEGRATED REPORT 2021Foundation forSustainable Growth (ESG)Changing the game business modelby promoting digitalizationWe are maximizing the power of digital sales online, which is in turn improving the sales profit margin while rapidly expanding the number of units sold and the regions in which they are sold. Benefits of digitalization 10-year profit marginimprovement ofapprox. 20points(10 years from 2010 to 2020)Growing reccuringrevenue model / Catalog title sales areUP 583%(10 years from 2010 to 2020)Game software sales area of more than200countries andregionsGlobal sales growth /units sold overseas areUP 111%(10 years from 2010 to 2020)CAPCOM INTEGRATED REPORT 2021 12Medium- to Long-TermGrowth StrategyLatest Creative ReportFinancial Analysis andCorporate DataValue Creation StoryESG HighlightsCreating social value as a game publisherWith the rise in popularity of esports and the WHO’s international recognition of gaming disorder, in recent years gaming has transcended the framework of simple entertainment and is now recognized as content with a profound social impact. At Capcom, we believe that sustainable growth is achieved by delivering social and economic value, while at the same time building healthy relationships with stakeholders from the perspective of a game publisher. This entails tackling social issues through our business activities, such as training a workforce capable of succeeding on the global stage, and the creation of new markets. We believe that the principle of Sustainable Development Goals (SDGs)*, namely that “all cultures and civilizations can contribute to sustainable development,” and our own corporate philosophy, which is that we are “creators of entertainment culture that brings you smiles and stimulates your senses,” are closely related. As such, in order to balance our own sustainable economic growth with a sustainable society, we intend to contribute to the development of social sustainability by selecting and addressing four priority issues within the ESG framework based on our fundamental ESG policy outlined below.Fundamental ESG policyEnvironmentalESocialSGovernanceGThe Capcom Group has been minimizing the negative impact of its businesses on climate change (e.g., CO2 and other greenhouse gas (GHG) emissions), and with respect to pollution, use of resources, etc., we have been striving to reduce our consumption of resources by adopting LEDs in lighting and promoting the digitization of software made available for sale. The Capcom Group will continue to promote these initiatives.The Capcom Group will respect human rights, prohibit discrimination based on race, religion, gender, age, sexual orientation, disability, nationality, etc., thoroughly eliminate inequality by protecting the vulnerable, create a pleasant working environment for employees, and promote the securing and developing of human resources. In addition, we will promote initiatives to build a healthy relationship with local communities and customers, such as engaging in activities to assist children suffering from poverty in the hope of their healthy growth and development.The Capcom Group has been enhancing management transparency and soundness, endeavoring to build a structure that is capable of adapting to changes in the environment and striving to boost its corporate value by enhancing its corporate governance function, including utilizing voluntary committees. Going forward, we will continue to further initiatives to meet the expectations of our stakeholders, including shareholders, customers and employees.Sustainable Development Goals (SDGs)SDGs are 17 goals that were adopted by the over 150 member countries of the United Nations at the United Nations Sustainable Development Summit held in September of 2015 at the UN headquarters in New York. It was determined that in order to eliminate poverty and achieve a sustainable world, we must priotize the resolution of these 17 goals on a global scale.For details, please refer to the United Nations Information Centre “2030 Agenda” site.https://www.un.org/sustainabledevelopment/sustainable-development-goals/13CAPCOM INTEGRATED REPORT 2021Foundation forSustainable Growth (ESG)Material IssuesMaterialIssue1Securing and Training of Human ResourcesKPINumber of Developers (People) /Internal R&D Ratio (%)1,9942,1412,0322,1422,28574.774.673.079.087.3%We are working to secure and train outstanding developers based on our desire to make the most entertaining games in the world. We continue to hire more than 100 new graduates each year to enhance our product lineup and improve quality. Over the last 10 years we have increased our developer numbers by approximately 1,000 people. We are working to improve the technical skills and motivation of our employees by such means as enhancing our system to train new graduates, promoting younger and mid-career employees to work on major titles and achieve their own personal goals. For details see p.53MaterialIssue2Promoting DiversityKPIRatio of Female Employees/Ratio of Foreign Employees (%)Ratio of Female Employees Ratio of Foreign Employees202121224.34.25.65.822%6.5%One of the most important elements in developing world-class games that can keep pace with the globalization of the game player population is securing a workforce with diverse perspectives. For that reason, we have been promoting diversity and working on building a workplace where women and foreign nationals can excel. As a result, the numbers of both women and foreign nationals continue to climb, in turn helping Capcom create captivating content and growth on a global level. For details see p.612017201820192020202120172018201920202021(Years ended March 31)(Years ended March 31)MaterialIssue3Development of Solid Relationshipwith SocietyMaterialIssue4Enhancement of Corporate GovernanceKPINumber of Educational Support Activities (times)KPIRatio of External Directors (%)50.045.545.550.050.0%58402932142017201820192020202120172018201920202021(Years ended March 31)(Years ended March 31)The education support activities that we began in 2005 achieved a certain level of recognition for the results they produced for more than 15 years, and as of the fiscal year ended March 2018, we carry out roughly 30 activities each year on a steady basis. The number of activities decreased in the fiscal year ended March 2021 due to circumstances surrounding the COVID-19 pandemic, but in the same year, we also introduced an online learning program allowing us to hold activities remotely. For details see p.61Generally, an owner-run company excels at being flexible and fast decision-making, though concerns may exist over the issue of succession. At Capcom, we strive to make management more transparent and visible, and have implemented various governance reforms to this end, such as the Nomination and Remuneration Committee. We proactively appoint external directors, and on March 31, 2021, external directors accounted for 50% of the entire board of directors. However, the transfer of one of our directors put the ratio at 45.5% as of June 2021. For details see p.67Support activities to eliminate povertyFor a game manufacturer, while the children who play with our products are our customers, they are also our future as they have the potential to one day become employees. It goes without saying that in order to play games, you need a stable environment, and in order to choose a career, an education is essential. Capcom is helping to create an environment for children today and in the future by donating to the “Children’s Future Support Fund,” a project established in 2015 with the cooperation of both public and private entities.CAPCOM INTEGRATED REPORT 2021 14Medium- to Long-TermGrowth StrategyLatest Creative ReportFinancial Analysis andCorporate DataValue Creation StoryValue Creation ModelMaking smiles, moving hearts and building a better society with our original contentUtilizing the capital we have cultivated over the years and our foundation for sustainable growth, we create popular original IP through business activities while guided by our corporate philosophy.We are expanding our business by further extending that original content into a variety of areas.These activities provide both financial and non-financial value; to put it another way, by providing the happiness brought about by games, we are able to contribute to solving societal issues.CorporatePhilosophyCapcom:Creator ofentertainmentculture thatstimulatesyour sensesDesire for anenriched lifestyleGenerationaland interregionalcommunicationgapsNumber of Amount invested in development 25.3billion yendevelopers 2,285peopleProperties (IP) 19Million-sellerseriesIntellectual Financial Strategy According to the CFO, p.43The Head of Development …p.47Major Intellectual Properties (IP), p.07Cultivated capitalBusiness activitiesSocial issuesPlanningDevelop-mentQualityassuranceSalesandpromotionCreatingPopularContentIndustrialmetabolismSluggish localindustriesDecline of Japan’sinternationalstatusFoundation for Sustainable GrowthEducation and utilization of developersRelationship with societyCustomers, Regional Communities,Employees, Business Partners, ShareholdersCorporate governanceThe Head of Development … p.47Society and Capcom, p.57Corporate Governance, p.6315CAPCOM INTEGRATED REPORT 2021Effectively Leveraging IP, p.09At Capcom, we operate our own Plaza Capcom amusement facilities, develop and sell gaming machines, and hold esports tournaments.Development ofproprietarymultimediaEsportsProviding a healthygame culture30.1milliongames sold during the yearp.0214educationalsupport activitiesp.612,582senior tour participants(cumulative)p.58Home Video GamesArcade Game MachinesMedal games, pachinkoand pachisloStimulatingcommunicationPC OnlineDevelop games formultiple platformsNet sales for the yearended March 31, 2021 75.3billion yenArcade OperationsFacilities at shopping centers,large format locationsMultimedia expansionof contentNet sales for the yearended March 31, 202120.0billion yenIPOUTPUT(Non-financialresults)SocialcontributionsMobile ContentsMoviesHollywood movies,animated movies, CG moviesGame market-basedinnovationHired 163new graduatesp.476p.60cooperative projectswith local governmentsContributing tolocal revitalizationDigital DownloadContentsCollaborativeexpansion intoother mediaPublishing,Character MerchandisingStrategy books, illustratedcompilations, figures, etc.2Hollywood movieprojects announcedEventsConcerts, theatricalproductionsBy collaborating with other companies, we have turned our original content into Hollywood movies. We have also expanded into a variety of other mediums, including animation, live theater, events, and publications.Effectively Leveraging IP, p.09Earning trust andbuilding apositive imagefor JapanCAPCOM INTEGRATED REPORT 2021 16Medium- to Long-TermGrowth StrategyLatest Creative ReportFinancial Analysis andCorporate DataValue Creation StoryFoundation forSustainable Growth (ESG)Financial HighlightsFinancial HighlightsOperating Income/Operating MarginsOperating Income (million yen)34,596 million yenUP 51.6%Operating Margins (%)36.3 %UP 8.3points34,59622,82718,14416,03714,29512,31810,151 10,299 10,58213,65012,02914.615.010.810.116.515.615.717.018.136.328.02011201220132014 2015 2016 20172018 20192020202120112012201320142015 2016 2017 2018 201920202021(Years ended March 31)(Years ended March 31)In the fiscal year ended March 2011, we promoted profit structure reforms aimed at more efficient development investment. We promoted business restructuring by transitioning to in-house production and strengthened our digital sales strategy in response to rapid changes in the market beginning in the fiscal year ended March 2013. Financials were therefore sluggish that year while these reforms were implemented. From the following year onward we have achieved eight consecutive years of increased operating income with measures such as improving the highly profitable digital sales ratio in our Consumer sub-segment. The fiscal year ended March 2021 was the fourth year in a row we succeeded in breaking our operating profit record. This was due to a new major hit title and the accumulation of catalog sales, in addition to the fact that the highly profitable digital sales trend continues to grow.Net Sales (million yen)Net Income Attributable to Owners of the Parent(million yen)95,308 million yenUP 16.8%24,923 million yenUP 56.3%97,716102,20094,07582,06587,17077,021100,03194,51595,30881,59164,27724,92315,94912,55110,9377,7506,7237,7456,6168,8792,973 3,4442011201220132014 2015 2016 201720182019202020212011201220132014 2015 2016 20172018201920202021(Years ended March 31)(Years ended March 31)In the fiscal year ended March 2012, net sales declined due to the postponed release of titles. However, the promotion of structural reforms in the Consumer sub-segment resulted in Capcom achieving net sales of 100 billion yen in the fiscal year ended March 2014 for the first time. Revenue declined in the fiscal year ended March 2020 due to lowered unit prices accompanying digitalization, but in recent years, we have been experiencing stable growth as the Consumer sub-segment continues to release multiple major titles each year.In the fiscal years ended in March 2013 and 2014 respectively, (1) structural reforms to the Amusement Equipments business, (2) development structure revisions in line with enhanced digital sales in the Consumer sub-segment and (3) strengthened Mobile sub-segment management capabilities in line with organization integration resulted in special losses on restructuring and business restructuring expenses. From the fiscal year ended March 2015, net income increased eight years in a row in step with operating income, due to the benefits from structural reforms beginning to manifest.17CAPCOM INTEGRATED REPORT 2021Foundation forSustainable Growth (ESG)Please refer to “Financial Strategy According to the CFO” on p.43-46,and “11-Year Summary of Consolidated Financial Indicators” on p.77-78R&D Investment Costs (million yen)Balance of Work in Progress for Game Software(million yen)25,375million yenDOWN 1.8%24,443million yenUP 15.2%30,64830,97826,08626,691 25,30127,25527,72029,07727,03825,84325,37530,15027,22024,72825,63524,44321,22216,92622,37318,88814,90210,4432011201220132014 2015 2016 201720182019202020212011201220132014 2015 2016 20172018201920202021(Years ended March 31)(Years ended March 31)We believe the generation of creative and original content is our source of growth, thus approximately 90% of our annual development investments are allocated to the Digital Contents business. Recently in the Home Video Game market, development costs have been trending higher in line with increasingly high-performance devices, but we have been able to streamline development by building a cutting-edge development environtment and through increased employee utilization rates. Due to expanding our pipeline, we expect costs to be approximately 30 billion yen going forward.There was a decrease in the fiscal years ended March 2011 and 2014 due to the release of major titles, but since the fiscal year ended March 2015 it has been on the rise as a result of pipeline expansion. In addition to the release of major titles in the fiscal year ended March 2019, reassessment and closing of overseas studios resulted in a significant decrease. However, in the fiscal year ended March 2020, there was an increase due to work on major titles we will continue to release in upcoming fiscal years.Return on Equity (ROE) (%)Dividend per Share/Dividend Payout Ratio22.6 %UP 5.7points22.616.913.414.413.811.59.810.611.64.95.4Dividend per Share (yen)Dividend Payout Ratio(%)71.0 yen 30.4 %UP 57.8%UP 0.3points77.565.5(Stock split) 1:230.534.534.029.031.230.030.330.130.440.0040.0040.00 40.00 40.00 40.0060.0050.0071.0045.0035.002011201220132014 2015 2016 201720182019202020212011201220132014 2015 2016 201720182019 20202021(Years ended March 31)In the fiscal years ended March 2013 and 2014, ROE was lower due to decreases in net income from the recognition of special losses on restructuring and business restructuring expenses. However, from the fiscal year ended March 2015, we have maintained a high ROE level following the elimination of special losses and improved profitability mainly due to digitalization.(Note) With an effective date of April 1, 2018, Capcom performed a 2-for-1 stock split of its common stock. For the years ended March 31, 2018 and earlier, dividends paid show the actual amounts prior to the stock split.(Years ended March 31)Based on Capcom’s basic policy of maintaining stable dividends, in the fiscal year ended March 2011, the annual dividend was raised 5 yen. Since the fiscal year ended March 2017, the dividend policy has been to maintain a consolidated payout ratio of 30% and to strive for stable dividends. As a result, the payout in the fiscal year ended March 2019 was reduced due to the stock split, but effectively dividends increased, and we were able to maintain our unbroken record of paying out dividends since listing publicly. In the fiscal years ended March 2020 and 2021, we once again continued to increase dividends paid.CAPCOM INTEGRATED REPORT 2021 18Medium- to Long-TermGrowth StrategyLatest Creative ReportFinancial Analysis andCorporate DataValue Creation StoryBusiness Segments HighlightsMarket AnalysisMarket TrendsConsumer Market (Package + Digital)In 2020, the consumer (package + digital) market grew to 42.9 billion dollars (up 22.2% from the previous year). This was due primarily to favorable packaged and digital sales. Digital sales have continued to expand in North America and Europe where such sales account for 81% of the market. The highly profitable digital contents market now accounts for roughly 71% of the consumer market. The forecast for 2021 is for the market to reach 51.8 billion dollars (up 20.7% from the previous year) owing to continued growth of the digital market and revitalization of the market with the popularization of new hardware. In the medium term, we see the digital market expanding rapidly in Southeast Asia and other developing regions and new game delivery methods such as streaming and subscriptions growing. As such, we expect the market to grow to 70.6 billion dollars by 2025 (up 64.6% compared to 2020). We also expect continued growth in the mobile market.Consumer Market (billion U.S. dollars)658136597143454522518138380429126303351134217201920202021(Estimate)2022(Estimate)2023(Estimate)PackageDigital(Years)Source: International Development GroupArcade Operations MarketThe domestic arcade facilities market grew during the previous fiscal year (ended March 31, 2020) for the fifth year in a row to 540.8 billion yen (up 4.0% from the previous year). The total number of facilities remained flat at 12,212 (up 0.4% from the previous year), and annual sales per store grew to 44.28 million yen (up 3.6% from the previous year.) This fiscal year (ended March 2021), the market was severely impacted by COVID-19 as stores were forced to suspend operations or shorten operating hours during states of emergency while foot traffic decreased due to efforts to avoid crowds. The market situation next fiscal year (ending March 2022) is expected to remain harsh, although we can expect some recovery due to the operational know-how we have acquired thus far in the pandemic.Gaming Machines MarketsIn the previous fiscal year (ended March 31, 2020), the gaming machine market shrank for the seventh consecutive year to 564.7 billion yen (down 16.1% from the previous year). This was due to diminishing investment appetite for gaming machines at halls due to the sluggish performance of machines with gambling restraints (implemented in response to model certification methods changes), and fewer new stores. This fiscal year (ended March 2021), the new machine types showed promise, however COVID-19 created a tough market environment. Next fiscal year (ending March 2022), we expect some demand for new machines replacing older types (which was initially delayed due to COVID-19), but believe the situation will remain harsh from increased investment burdens on halls and operational suspensions due to COVID-19.Esports MarketThe Esports Market last fiscal year (ended March 2020) was 940 million U.S. dollars, and because people were consciously avoiding crowded events, that remains almost unchanged from the previous year. In 2021, we expect the market to grow to 1.08 billion U.S. dollars (up 14.5% from the previous year) owing to increased sponsorship and media rights fees, primarily in China, which accounts for the largest share. The future remains unclear due to the prolonged COVID-19 pandemic, but the growth of live broadcasts has resulted in a steady increase of viewers, and it is expected to grow to 1.61 billion U.S. dollars by 2024.Arcade Operations Market (billion yen)5,2015,4084,6204,8594,3382016201720182019 2020(Years ended March 31)Source: JAMMA “Survey on the Amusement Industry”Gaming Machines Markets (billion yen)9,8278,8346,1305,2587,5915,1576,7315,6475,0463,4503,6973,5762,4341,6852,19720172016Pachinko2018Pachislo2019 2020(Years ended March 31)* Source: Manufacturer sales base complied by Capcom using Pachinko Maker Trends (2019, 2020); Yano Research Institute Ltd.Esports (million U.S. dollars)1,6179579471,0842019 2020 2021(Actual)(Actual)(Estimate)2024(Estimate)Source: Newzoo “2020 Global Esports Market Report”19CAPCOM INTEGRATED REPORT 2021Foundation forSustainable Growth (ESG)Major opportunities and risks (Opportunity Risk )Addressing major opportunities and risksCreation of highly competitive products using new technologyMore channels for product distribution with the appearance of new platformsExpanded number of sales regions using digital distribution Achievement of extended product life cycles through digital salesReduction of the used market due to penetration of digital salesRising development costs with the appearance of new technology and improved device performanceDependence on popular seriesPlatform adoption trendsChanges in user purchasing trends with the next generation of platformsRisks due to a country’s politics, culture, or religionIn-game purchases becoming a social issueInformation leakageAcquisition of new customers through multifaceted roll-out of stores including themed venues, merchandise specialty stores, VR experiences, etc.Increased awareness with new business formats and new technologiesReduced ability to attract customers due to the COVID-19 pandemicChanges to the market environment due to the diversification of leisure activities and declining birthrateFocusing on improving quality and reducing development costs by building our own development engine and enhancing our development team New customer acquisition through a steady release of new major titles, creating new IPs, and the Single Content Multiple Usage strategyDiversifing profit risk through multi-platform development and strengthening PC platform development to hedge against dedicated console trendsLengthening product life of games with increased digital sales rates and increasing unit sales through pricing strategiesDeveloping sales approaches to meet local needs and localization by an in-house team of experts Monetizing without incentivizing in-game purchasesEstablishing the Information Technology Security Oversight Committee, receiving instruction and advice, and implementing various security strengthening measures to prevent a recurrence Acquisition of new fan demographic and increased awareness through multifaceted business developmentsAttraction of customers using our home video game content and other assetsExpanded sales volume by responding to regulations appropriatelyDevelopment of machines using popular IPs created for home video gamesNon-compliance with model testing of pachislo machinesBuilding a system to perceive regulatory trends that allows us to respond immediately to changes in regulations through membership in industry associationsExpanded fan base from non-game players watching eventsCreation of new profit opportunities such as licensing rights to hold events and stream videoPromotion of online tournaments that leverage game characteristicsReduced number of events due to COVID-19 pandemicDecreased enthusiasm for competition due to rampant cheatingCompeting with new titles from other companiesSpread of online competitonsFlexible adjustment of competition rulesContinous supply of new content with title updates CAPCOM INTEGRATED REPORT 2021 20Medium- to Long-TermGrowth StrategyLatest Creative ReportFinancial Analysis andCorporate DataValue Creation StoryBusiness Segments HighlightsBusiness activity achievementsBusiness OverviewOperating Results for This Fiscal YearDigital ContentsThis business develops and sells digital game content for consumer home video game and PC platforms. It also develops and manages Mobile Contents.Consumer games produces creative, original content that provides recurring revenue by utilizing digital distribution. Many of these million-seller titles are used for smartphone, tablet device and PC games, and are distributed worldwide in order to maximize earnings. For details see p.79Arcade OperationsWe operate amusement facilities, primarily Plaza Capcom arcades, in Japan. These arcades are predominantly in large commercial complexes. We have diligently followed a scrap-and-build policy to maximize our efficiency in arcade operations, and have been hosting various events designed to attract families and younger customers. For details see p.81Amusement EquipmentsThis business utilizes the content from our home video games. We focus primarily on the development, manufacture and sales of software, frames and LCD devices for gaming machines. For details see p.82Consumer (Package + Digital)New titles Resident Evil 3 and Monster Hunter Rise were hitsMajor catalog title hits Monster Hunter World: Iceborne, Monster Hunter: World, Resident Evil 2, and Resident Evil 7 biohazard performed wellHighly profitable digital sales grew furtherMobile ContentsLaunched both in-house as well as alliance titles, such as Rock Man X Dive and Street Fighter: DuelWe are focusing on steadily opening and operating stores while working to minimize the impact of COVID-19 To address the spread of COVID-19, we changed the operating hours of some stores and suspended operations of others Same store sales were down 22%We opened Capcom Store Osaka, a showroom in Osaka’s Shinsaibashi district that sells Capcom merchandiseWe opened one new storeSold a total of 27,000 units of three modelsIncreased sales and profits after releasing multiple models designed to current regulationsOther BusinessesBased on our Single Content Multiple Usage strategy of leveraging game IP across different media, we pursue a variety of copyright-related business opportunities. In addition to adapting game content into movies, animated television programs, music CDs, character merchandise and other products as part of our licensing business, we are also devoting resources to our esports business. For details see p.83We held events and sold merchandise leveraging IPs like Monster Hunter and Resident Evil, creating multifaceted opportunites for earningsIn our licensing business, we strengthened our expansion into visual media and merchandising to coincide with the release of new home video game titlesWe made efforts in eSports to expand the player and fan demographics by holding online tournaments in light of the COVID-19 pandemicPhotos: Red Bull Content Pool21CAPCOM INTEGRATED REPORT 2021Foundation forSustainable Growth (ESG)Main Products for This Fiscal Year (Output)Monster Hunter RiseThis was developed as a new addition to the Monster Hunter series with our proprietary development engine, RE ENGINE. Prior to release, we distributed demo versions that allowed cooperative play twice, and due to the high acclaim and amount of attention it received, 4.8 million copies were sold.Resident Evil 3Released in 1999, Resident Evil 3: Nemesis, which sold a total of 3.5 million copies, was remade for the first time in 21 years using the latest technology and concepts. Based on a digital sales strategy, we were able to increase the sales percentage of the download version, and 3.9 million copies were sold during the fiscal year. ShowroomCapcom Store OsakaWe opened Capcom’s first showroom in the Kansai area selling popular character novelty items in Shinsaibashi, Osaka in November 2020. By opening this store in the Kansai area, in addition to the showroom we opened last year in Shibuya, Tokyo we are able to more broadly communicate the appeal of our content. PachisloMonster Hunter: WorldThis pachislo machine is based on Monster Hunter: World, our all-time best-selling home video game with more than 17 million units sold cummulatively. Released in November 2020, 17,000 units were sold. Hollywood movie Monster HunterOne of our most popular brands, Monster Hunter, was adapted into a Hollywood movie for the first time. After opening in North America in December 2020, it was rolled out to theaters around the world.©CONSTANTIN FILM Production Services GmbH.CAPCOM INTEGRATED REPORT 2021 22Net Sales/Operating Margins28.149.140.382,98275,30059,94220192020(Years ended March 31)2021Net Sales75,300million yenOperating Margin49.1%Net Sales/Operating Margins9.910.012,09611,0501.59,871Net Sales9,871million yenOperating Margin20192020(Years ended March 31)20211.5%Net Sales/Operating Margins31.933.9Net Sales6,5337,0903,4227,090million yenOperating Margin20192020(Years ended March 31)202133.9%Net Sales/Operating Margins31.518.032.4Net Sales2,5753,0183,0453,045million yenOperating Margin20192020(Years ended March 31)202132.4%Medium- to Long-TermGrowth StrategyLatest Creative ReportFinancial Analysis andCorporate DataValue Creation StoryMedium- to Long-Term VisionSeeking increased operating income annually with a stable growth business portfolio We are seeking sustainable growth in the medium and long term based on expanded sales in the Consumer sub-segment by enhancing our title lineup and shifting to digital.Medium- to long-term goalsAim for annual operating income growth (10%), driven by stable earningsAverage annualgrowth rateUP23.2%420345249300Average annual growth rateUP25.4%Operating incomeNet income (billion yen)2281591811601091251201367788201620172018201920202021(Years ended March 31)2022(Plan)Important strategies for successExpanding sales in the Consumer sub-segment1Bolstering digital sales2Achieving stable growth with long term sales of high-quality titles3Enhanced global sales with the promotion of digital marketingDigital unit sales (Thousand units)23,15020,55026,50012,90015,3009,000(ten thousand units)Resident Evil 7biohazardMonster Hunter: WorldResident Evil 2Monster Hunter World: IceborneResident Evil 3Monster Hunter Rise20172018 2019 20202021350160125 100 150790450420320 140160240(Plan)2022Titles continung toi contribute as cataog titlesl520240390480(Years ended March 31)Overseas sales volume (Thousand units)19,400 21,600 21,450 15,100 24,35026,4002017 2018 2019202020212022 (plan)(Years ended March 31)2017 2018 2019202020212022 (plan)(Years ended March 31)Medium- to long-term growthProfitLicensing + Mobile + EsportsPeriod to cultivate our brand in order to strengthen itConsumerPeriod for us to enhance the lineup, strengthen digital sales, and grow on a global levelAmusement Equipments, Arcade OperationsPeriod of stabilization amidst a deteriorating environmentMedium-term23CAPCOM INTEGRATED REPORT 2021Foundation forSustainable Growth (ESG)Growth strategyBolstering movie adaptationsLicensingMobileEsportsBusiness alliances within Japan and overseas and promoting technological research for the future Having established a dedicated esports division, expand the base by holding events in JapanNew Titles (Consumer)Regularly release new titles for major IPPromote utilization of dormant IP and remakesOverall (Consumer)Strengthen digital sales of both new and catalog titlesCatalog Titles (Consumer)Long-term product lives for past titles through pricing strategiesPachinko & PachisloBuild development structure to handle current regulationsLicensing + Mobile + EsportsOptions for further growthIncrease in unit salesNew Titles (Consumer)Growth driverCatalog Titles (Consumer)Base profits from recurring revenue modelAmusement-RelatedStable earningsLong-termPeriodCAPCOM INTEGRATED REPORT 2021 24Medium- to Long-TermGrowth StrategyLatest Creative ReportFinancial Analysis andCorporate DataValue Creation StoryCEO CommitmentCommitmentKenzo TsujimotoChairman andChief Executive Officer (CEO)25CAPCOM INTEGRATED REPORT 2021CEOValue Creation StoryFoundation forSustainable Growth (ESG)Rooted in our unwavering philosophy,we are generating sustainable corporatevalue with our world-class developmentcapabilities and management foundation.To everyone battling this global challengeIn 2021, the COVID-19 pandemic continues to grip the world in fear. Cybercrimes taking advantage of this situation are now a frequent occurrence. In November 2020, Capcom was also a victim of one such incident. Despite putting our best efforts into our information systems, ultimately personal information was compromised. I would like to offer my sincere apologies once again to all of our stakeholders for any complications or concerns caused by the incident. COVID-19 is one of the many difficulties society is forced to contend with. Unlike vaccines and other medicines, or infrastructures, such as networks, entertainment is not essential to our daily lives. However, in times like this, I believe that entertainment can bring people some joy and hope. It is my hope that our business activities bring the people of the world the energy to fight through whatever difficulties they are facing.Creativity and formidable IP assetsOur unwavering philosophy since the company’s inception1 Corporate philosophy and culture2 Business model3 Achieving our medium-term management goals4 Management strategy5 ESGDevelopment and marketing strategy enabling stable growthOur commitment to stable growth in a hit-driven industryInitiatives geared toward sustainable growthCreating the world’s most entertaining games to realize sustainable growthCAPCOM INTEGRATED REPORT 2021 26Medium- to Long-TermGrowth StrategyLatest Creative ReportFinancial Analysis andCorporate Datahave firmly taken hold.content acclaimed throughout the world and the Disney, which I once aspired to emulate, began growth potential of our esports, mobile and licensing as a producer of cartoons and expanded all the way businesses, I am certain Capcom will be leading the into the theme park business, growing into a giant charge into the coming digital age.in the world of entertainment. With our original CEO Commitment12Corporate philosophy and culture ––– Our unwavering philosophy since the company’s inceptionAiming to be #1: delivering the world’s best content”From Osaka to the world”I jumped into the world of entertainment more than 50 year ago with the idea that “games are luxury items, not essentials. This is why the brand must be of world- class quality.” I still believe this to be true even today. Accordingly, Capcom’s basic philosophy is to create an entertainment culture through the medium of games by developing highly creative content that excites and stimulates your senses and brings a smile to your face. In other words, we help make people happy and in turn build an emotionally rich society by creating the world’s most entertaining games. For details, please refer to “Corporate Philosophy” on p.03 In 1983, I founded Capcom under the motto of “originality and ingenuity,” with the vision of developing games offering world-class quality. Underpinning this was my belief that increasingly sophisticated graphics and more immersive worlds would eventually make games as moving and impressive for the world as a Disney film. 38 years later under the banner of Capcom, I have amassed more than 3,000 colleagues who share this vision. Under the slogan “From Osaka to the World,” these values have become our corporate culture, with (1) a spirit that is always eager to take on new challenges and (2) a sense of pride to constantly strive to be world-class deeply ingrained in every Capcom employee. Our games are enjoyed across the entire world in more than 200 countries and regions, outnumbering the membership of the United Nations, because of the fertile soil of a corporate culture cultivated over many years.Business model ––– Creativity and formidable IP assetsMaximizing utilization of high-quality content in a wide range of marketsCapcom’s strengths are (1) the development and technological capabilities to create the world’s finest, high-quality games and (2) numerous popular branded IP known the world over. In addition, since fiscal 2013, we have strategically hired over 100 new graduate developers every year in anticipation of focusing on in-house development, increasing our development staff to over 2,450 people (as of May 31, 2021) and further enhancing our strengths. From game market characteristics and competitive factor analysis, the Consumer sub-segment has high entry barriers; combining the aforementioned strengths with our capital and the relationships of trust we have with hardware manufacturers creates significant competitive advantages (profitability). In addition, with the spread of PC as a game platform and the standardization of selling software digitally over the Internet, the home video game market that was once limited to only some developed nations has now expanded across the globe. For details, please refer to “An Analysis of the Market and Capcom” on p.75 At Capcom, we see this market expansion as an opportunity. Since the latter half of the 2010s we have achieved sustainable performance growth by releasing PC versions of new titles and promoting the rerelease of major titles that were originally created for older game consoles for current-generation game consoles and PC. Furthermore, in businesses and sub-segments other than Consumer, our rollout of popular IP across multiple mediums contributes as a stable source of earnings. This is because, in addition to the fact that our IP consists of products developed 100% in-house, possessing numerous global IPs amplifies the effect of our multiple usage strategy. Additionally, expansion into other areas leads to increased brand value and subsequently an influx of new users to the game. In particular, marketing activities utilizing Hollywood adaptations of content further enhances the global competitiveness (brand power) of our IPs and maximizes synergistic effects. In recent years, as a result of these sustained branding measures, we are increasingly seeing multiple generations of fans at event venues as IPs enjoying long-term popularity 27CAPCOM INTEGRATED REPORT 2021Value Creation StoryFoundation forSustainable Growth (ESG)have firmly taken hold. Disney, which I once aspired to emulate, began as a producer of cartoons and expanded all the way into the theme park business, growing into a giant in the world of entertainment. With our original content acclaimed throughout the world and the growth potential of our esports, mobile and licensing businesses, I am certain Capcom will be leading the charge into the coming digital age.3Medium-term management goal ––– Commitment to stable growth in a hit-driven industryWe have set a goal of 10% profit growth for each fiscal year as our medium-term management goal1. Analysis of management performance in the fiscal year ended March 2021(summary)Our performance this fiscal year (the period ended March 31, 2021) exhibited an increase in operating income for the 8th consecutive year and all of the profit items from operating income down reached record highs. This fiscal year, social activities were generally restricted due to the spread of COVID-19, but thanks to the strong performance of the major titles Monster Hunter Rise and Resident Evil 3, in addition to a solid performance from highly profitable digital versions of catalog titles, we were able to achieve over 50% in profit growth compared to the previous year. In response to these results, those in the stock market have asked if the lockdowns had a significant positive influence on demand. It is true that the lockdowns due to COVID-19 became a great opportunity for those who do not normally play games, to try them. It seems everyone is concerned that this demand is something temporary and once we have resolved the COVID-19 issue, we will see the pendulum swing. However, I am not concerned about this at all, as evidenced by the 20% increase in profits we have guided for in the fiscal year ending March 2022. Most of our major titles target core gamers, and I believe that compared to our competitors, the benefits we received from any influx of light users was relatively small. Still, I see this as an opportunity for these first-time game players to become repeat customers who will now continue to play games. I am starting to see a future where Capcom continues to expand the game market and new users with annual sales someday exceeding 100 million units.2. Medium-term management goal assumptions and indicators(1) Management direction—Handling the global trend toward digitalIn corporate management, it is important to always think about things in terms of the future. For example, nearly 10 years ago I gave an interview to a business magazine where I said, “if we are able to sell world-class quality products at a low price digitally, we will see even greater improvement in our performance.” At the time, packaged sales were the mainstream and there were very few customers who purchased digital versions, so that idea may have been inconceivable to most people. Also, because packaged sales were the mainstream, pirated versions of games prevailed in most developing countries, but I also spoke about how that “will become a sort of promotion if we look at in the long term.” As a result, now that digital sales have spread throughout the world, we are selling the more than 300 different titles we have created in more than 200 countries and regions, a number that exceeds that of the United Nations’ membership. Creating top-class content not only produced this fiscal year’s performance, it will be the tool that paves the way for our future. That is precisely why our management policy is to (1) create exciting, world-class content (IPs), and (2) maximize earnings by leveraging our rich library of IPs across multiple platforms and media, while (3) maintaining these policies to become a company of continuous, sustainable growth.(2) Medium-term management goalSince the fiscal year ended March 2018, our sustainable medium-term management goal has been to increase operating income each fiscal year. Rather than struggling to coordinate major title launch periods for this, we intend to take a natural approach of establishing a model of stable growth through build- up by expanding our title lineup, among other efforts, in order to enable institutional investors managing pensions and individual investors on fixed incomes to maintain long-term holdings with confidence. Historically, we had not set forth a specific profit margin growth goal, but from the fiscal year ended March 2021, when we were able to see the distinct results of the shift to digital, we have set a goal of 10% profit growth for each fiscal year.CAPCOM INTEGRATED REPORT 2021 28Capcom’s strengths are (1) the development and At Capcom, we see this market expansion as technological capabilities to create the world’s finest, an opportunity. Since the latter half of the 2010s we high-quality games and (2) numerous popular branded have achieved sustainable performance growth by IP known the world over.releasing PC versions of new titles and promoting In addition, since fiscal 2013, we have strategically the rerelease of major titles that were originally hired over 100 new graduate developers every year created for older game consoles for current-generation in anticipation of focusing on in-house development, game consoles and PC.increasing our development staff to over 2,450 Furthermore, in businesses and sub-segments people (as of May 31, 2021) and further enhancing other than Consumer, our rollout of popular IP across our strengths.multiple mediums contributes as a stable source of From game market characteristics and competitive earnings. This is because, in addition to the fact that factor analysis, the Consumer sub-segment has our IP consists of products developed 100% in-house, high entry barriers; combining the aforementioned possessing numerous global IPs amplifies the effect of strengths with our capital and the relationships of our multiple usage strategy. Additionally, expansion trust we have with hardware manufacturers creates into other areas leads to increased brand value and significant competitive advantages (profitability).subsequently an influx of new users to the game. In In addition, with the spread of PC as a game particular, marketing activities utilizing Hollywood platform and the standardization of selling software adaptations of content further enhances the global digitally over the Internet, the home video game competitiveness (brand power) of our IPs and market that was once limited to only some developed maximizes synergistic effects. In recent years, as a nations has now expanded across the globe.result of these sustained branding measures, we are For details, please refer to “An Analysis of the Market increasingly seeing multiple generations of fans at and Capcom” on p.75event venues as IPs enjoying long-term popularity (3) Key performance indicators (KPI) and to that growth. In order to continue achieving shareholder value creation achievementsincreased profits for the future, we need to increase In terms of management, in addition to operating unit sales and increase our actual net sales.income (growth indicator), which is the basis of Before we began the roll out of our full-scale corporate earning power, and operating margins digital strategy in the fiscal year ended March 2016, (efficiency indicator), which are the basis of profitability, sales volume varied greatly depending on whether or I also place importance on current net income and not we released a new major title. However, in recent cash flows, but our CFO offers a fully detailed account years, units sold displayed steady growth due