Capcom : On Average, We Can Recover Development Costs Within About One To One and a Half Years After Release

[Ryuichi Naruhodo]

This is an interesting tidbit and a rare insight from a Major Company , It was covered in the Q&A Thread in Japanese but Machine Translation didn't make it clear they mean their own games or the industry in general , but Official Translation its confirmed they mean their Own Games

Considering the sales performance for new titles like Kunitsu-Gami: Path of the Goddess and catalog titles such as Dragon’s Dogma 2, how will you adjust your marketing strategies going forward?

Recently, there has been a trend in the industry of spending large amounts on advertising and promotions just before and after release to kickstart initial sales, but we have not traditionally used such methods. We calculate the costs for promotions based on expected performance and take a long-term approach to sales. On average, we can recover development costs within about one to one and a half years after release, so even if we lower the selling price afterward, once costs are recouped we expect profit margins of 80-90%. Our marketing approach remains unchanged.

https://www.capcom.co.jp/ir/english/data/result.html

This is little surprising for me , Since While Most Capcom games are AAA nowadays , but From the look of it they aren't relatively Mega AAA , so I thought the average to recoup costs would be lower than that

 

[Danny]

Its probably in part because of how much of their sales are digital due to PC being the majority of their sales, and also a lot of their console sales are digital these days as well. More digital sales mean better profit to sales ratio.

 

[MegaXZero]

This is an interesting tidbit and a rare insight from a Major Company , It was covered in the Q&A Thread in Japanese but Machine Translation didn't make it clear they mean their own games or the industry in general , but Official Translation its confirmed they mean their Own Games



https://www.capcom.co.jp/ir/english/data/result.html

This is little surprising for me , Since While Most Capcom games are AAA nowadays , but From the look of it they aren't Mega AAA , so I thought the average would be lower than that

Depends if there are developmental deficiencies resulting in them using more resources than needed.

I am surprised it takes that long to break even. I’d expect that number to increase with time given dev isn’t getting cheaper but games price isn’t really moving. Guess their gaas and mtx pushes make sense in that regard.

 

[Danny]

Depends if there are developmental deficiencies resulting in them using more resources than needed.

I am surprised it takes that long to break even. I’d expect that number to increase with time given dev isn’t getting cheaper but games price isn’t really moving. Guess their gaas and mtx pushes make sense in that regard.

Yeah, that seems to mean that Capcom only starts to recoup development cost after they've lowered the price of their games, meaning that they don't recoup development cost from full priced game sales during the launch period. I would have thought Resident Evil, MH games would recoup development cost already from sales during the launch period, given that they sell a few million copies for such games at launch.

 

[enpleinjour]

I think a big part is because Capcom does massive discounts for their titles. Within 3 months its like 15-20%, 6-9 months and its like 50% off.

I'd say at most these Capcom budgets are $100M (maybe MH exceeding that), so it works out that it takes 12-18 months.
People forget, physical retailers take a cut like 10%, platform holders take 30%, COGS is ~10-15%, at the end of the day what you have is <50% of gross revenue.

 

[mbolibombo]

I think a big part is because Capcom does massive discounts for their titles. Within 3 months its like 15-20%, 6-9 months and its like 50% off.

I'd say at most these Capcom budgets are $100M (maybe MH exceeding that), so it works out that it takes 12-18 months.
People forget, physical retailers take a cut like 10%, platform holders take 30%, COGS is ~10-15%, at the end of the day what you have is <50% of gross revenue.

Yeah I feel Capcom outside of the clearcut champion in "price management" Ubisoft, Capcom is one of the fastest to deep cuts on their games.

 

[fiendcode]

Capcom has one of the highest operating margins in the industry. Among traditional console pubs only Koei Tecmo, Nintendo and Falcom are higher.

 

[Terrell]

Capcom has one of the highest operating margins in the industry. Among traditional console pubs only Koei Tecmo, Nintendo and Falcom are higher.

Yeah, I’m certainly not going to question the wisdom of how they operate their business with that consideration in mind.

Depends if there are developmental deficiencies resulting in them using more resources than needed.

I am surprised it takes that long to break even. I’d expect that number to increase with time given dev isn’t getting cheaper but games price isn’t really moving. Guess their gaas and mtx pushes make sense in that regard.

It’s an average figure, so it is accounting for whiffs that take time after launch to recoup costs (if they ever do) AND games that recoup within the launch week. So taking it as an average, that’s a pretty good timeline to profitability across ALL their software.

EDIT: And looking at their margins, one might reasonably assume that number would be larger for other publishers if calculating the same way Capcom has.

 

[Ryuichi Naruhodo]

It’s an average figure, so it is accounting for whiffs that take time after launch to recoup costs (if they ever do) AND games that recoup within the launch week. So taking it as an average, that’s a pretty good timeline to profitability across ALL their software.

Its possible , but Won't that be a Fixed number if it was a literal average ? but here they are saying a wide range that is third of the max value they presented ( 6 months out of 18 ) , This wide range gives the impression thats the period that usually their games recoup its costs ( I believe they included marketing too ) unless a game goes out of the usual and goes towards the end of either spectrum

 

[Oregano]

I would doubt they're talking a purely mathematical average instead of just meaning their typical releases, especially given their relatively slow release cadence.

 

[AstroB]

once costs are recouped we expect profit margins of 80-90%

Does this mean that for publishers like Capcom, the sales commission on Steam and PSN is much lower than 30%?

 

[Ryuichi Naruhodo]

Does this mean that for publishers like Capcom, the sales commission on Steam and PSN is much lower than 30%?

What I know is on Steam , Publisher cut increases to 75% after it hits $10M Revenue , and to 80% after $50M , Also platforms doing custom deals with some publishers isn't unheard off , IIRC I vaguely remember from MSxABK Court Files it was revealed there was a custom deal made for Activision on Xbox Consoles

 

[Terrell]

Does this mean that for publishers like Capcom, the sales commission on Steam and PSN is much lower than 30%?

It could also be that commissions to digital retailers are pre-factored in as cost of goods sold and not deducted against profits the same as R&D costs, which makes sense, since that cut applies to every copy sold that way. That 10-20% is likely more related to post-launch debugging and maybe retailer returns in markets that allow them.

 

[Undead Warrior]

Does this mean that for publishers like Capcom, the sales commission on Steam and PSN is much lower than 30%?

As mentioned, licencing isn't really accounted as a "cost" (regardless of what Sony tries to tell investors).

 

[Maabus1999]

How Capcom amortizes costs probably goes a long way into this statistic.

 

[foxisdabest]

Capcom has produced a good number of evergreen titles in their more recent years. RE2Remake, RE3Remake, RE7, RE8, Monster Hunter World / Iceborne, Monster Hunter Rise, Dragon's Dogma, SF6. Couple that with their collections and they have a healthy amount of post launch sales.

They always seem to have a title that I am willing to buy for "the right price". Definitely picking DD once it reaches like $30.