Capcom warning as launch postponed

The heavy guns of Activision’s videogame Call of Duty: Modern Warfare 2 scored a direct hit on Tuesday when Japanese rival Capcom postponed the launch of its own titles to avoid competition, triggering a large profits warning.

The highly successful launch of Modern Warfare 2 last month saw the game pull in $550m in sales in its first five days, according to figures released by Activision, sucking up the funds that gamers had available to spend on other new titles.

Capcom’s profits warning highlights both the hit-driven nature of the video-game industry and the knock-on effects of a big launch. The releases of games such as Bioshock 2 from publisher Take-Two Interactive and Splinter Cell: Conviction from Ubisoft were pushed back until after Christmas to avoid Activision’s game.

The increase in competition in early 2010 has now led Capcom, one of Japan’s largest independent game software publishers, to postpone the release of its own Lost Planet 2 to the second quarter, missing its end of March financial year.

Capcom had been counting on 3.7m sales of Lost Planet 2. It also postponed the release of two other games and revised down its sales forecasts for a fourth.

“Capcom believes that delaying the launches of its own titles will avoid competing with these new games, maximise the sales volume of the new Capcom games, and preserve the value of the brands associated with these games,” the company said.

Capcom cut its sales forecast for the year to March 2010 by 32 per cent to Y65bn ($708m). It said that operating profits would be 61 per cent below its previous forecast at Y6bn and net profit would be 77 per cent lower than expected at Y2bn.

The warning came as the market closed, leaving its shares unchanged at Y1,447 in Tokyo.

Kazuhiko Abe, Capcom’s CFO, said that there was no issue with the development of Lost Planet 2, which was ready for release on schedule, but rather it was a strategic decision to maximise sales.

In video game jargon, Lost Planet 2 is a third-person shooter – based on gunplay with the player-controlled character visible on screen – set in a science fiction universe. Its natural audience is similar to that of the Modern Warfare and Bioshock franchises, which are first-person shooters.

Capcom also said it would take an exceptional charge of Y4.5bn, partly offset by a Y1.8bn tax refund, to cover restructuring costs in its amusement arcade business.

Videogame software has grown rapidly as an industry and had global sales of $32bn in 2008, according to market researcher Media Control GfK.

Investors have become frustrated by the risks of game publishing, however. For example, Take-Two made a large profit in 2008 with the success of Grand Theft Auto 4, but fell to a $138m loss this year without a similar hit.