Capcom has cut its profit forecast by more than one half for the entire financial year and is now planning a massive £46 million ($70 million) effort to restructure the company to fit the modern marketplace.
In an open letter to investors, reported by CVG, the publisher blames the loss of money on the shift to digital distribution and the "decline in quality" in outsourced games overseas. Executives claim that the funds will be used to refocus on digital distribution and returning to developing games in house.
"In view of the sudden and significant changes in the operating environment of the digital contents business, Capcom reviewed its business expansion strategy for the sector and restructured its game development organization."
The cost of the restructure has lowered their initial projection at roughly £43 million ($65 million) to about £19 million ($29 million.) Despite the drop in profits, Capcom is still expected to bring in about £625 million ($1 billion) in sales thanks to the sales figures put up by Resident Evil 6. The company is projecting 2014 to be even bigger.
Following CVG's report, Capcom also confirmed with them that several unannounced projects being developed overseas were being put on hold for the time being while they rethink their business strategy.
With this report, it seems Capcom will be joining the same ship as Square Enix, who also posted financial woes and blamed it on poor sales from their Western developed projects. Capcom has outsourced many of its largest franchises to Western studios, including Devil May Cry, Bionic Commando, Lost Planet, Dead Rising, Resident Evil and even a canceled Mega Man X reboot.
Capcom does point to the slightly disappointing sales of Resident Evil 6, which is seeing its second forecast drop to 4.9 million sold. This follows a drop which already occurred in February when Capcom lowered the forecast from 7 million to 5 million. The quality of their own games isn't letting them off the hook, at least.
Hopefully, this restructure will do a little good in letting the company calm down and get back in touch with its roots. Both Square Enix and Capcom have fallen under the weight of trying to become huge publishers like their Western counterparts, and hopefully the rest of Japan's players will catch on that this is just not a path the world wants them to take.
You make Japanese games by Japanese gamers for Japanese audiences. If the West wants to play along, then just simply let them. Don't try to be something you are not. Give them a reason to believe that Japanese games are still worth their hard-earned money, and don't hold back the best games you have to offer. That is the only way you are making it through this.