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What's the plan, Capcom? SVP Svensson looks ahead
What's the plan, Capcom? SVP Svensson looks ahead Exclusive
March 15, 2012 | By Kris Graft

Since even before the beginning of the current console generation, Osaka, Japan-headquartered Capcom has been very aware of the fact that in order to compete on a global scale, there needs to be tight integration between operations in the East and the West. Localizing the latest version of Street Fighter or Resident Evil wasn't going to cut it.

Now, Capcom finds itself in a rapidly evolving global industry that is merciless to those who take a misstep. Part of the job for Christian Svensson, SVP at San Mateo, CA-based Capcom Entertainment, is to avoid those missteps, and steer the game publishing giant in the right direction making sure Capcom's various branches around the globe play nice together.

There's a lot happening at Capcom. Here, Svensson offers his unique insight into Capcom's business on Sony's new Vita handheld, social games that aren't like Zynga social games, and his hopes for next-gen consoles.

Right now you have games on Vita, and Capcom is supporting that platform, and the Nintendo 3DS. Do you see smartphone games eating into that dedicated handheld market? Or can the two markets keep on growing separately of one another?

That may be a market-by-market question. If anything, we're seeing in Japan that, quite frankly, the handheld market is alive and well, and I think it's going to continue. Nintendo 3DS is very successful there, and the Vita is off to a reasonable start early on. But we'll have to see what happens there longer there, in that particular [Japanese] market.

In our Western market, I think 3DS is off to a very good start, and Vita has, I think, surpassed much of the retail expectations based on our retailers that we've spoken with. Marvel vs. Capcom 3 [for Vita] is off to a good start. Most of our retail partners have us pegged at number two [on Vita] after [Naughty Dog's] Uncharted [The Golden Abyss]. We'll see what the tale of the tape looks like in a few weeks.

Long story short, while there may be some overlap, I think there's still going to be an audience for what I call deeper engagement and deeper funds, for lack of a better word. As a result, I think those two markets [dedicated handheld and mobiles] are going to be viable, and served by content creators.

How does Capcom feel about Vita's performance so far? You're saying it's "reasonable," but it's not really setting things on fire. What's Capcom's view on the Vita right now, and its continued support for the platform?

We obviously will continue to support it, it's too early to call one way or the other. I'll say our sell-through has been reasonably decent. I wish that retail had been a little bit more supportive of the platform from the outset. But I think they're getting in line now that they're actually starting to see some sales. The holidays are going to be much more telling for Vita. The holiday was where the 3DS first solidified.

What do you mean retail didn't really support the platform?

They were a little wishy-washy on what they were taking and how deep they were stocking, versus what the demand was. Retail got caught a little flat-footed on not going deep enough in their ordering, at least on the software side. I can't speak to the hardware side, only Sony could.

I've seen some news recently about Capcom in Japan doing these social games like Resident Evil and Monster Hunter. What is the strategy right now, or roadmap, for Capcom getting into more social games in the West?

Right now, the titles that you're speaking of tend to live on the Gree and DeNA social networks, and they're primarily mobile. When you say "social" in Japan, the first thing that comes to mind for most people there are mobile-social. In the West, most people in the development community here think Facebook, amongst other things.

The focus in Japan for social will remain on the mobile networks. We launched Monster Hunter about two weeks ago on DeNA's Mobage network, and it's been very successful. There's a lot of learning going on. We have an internal group in Tokyo that is handling development on most of those titles, though they may be using some external shops from time to time in the future. Basically what they're finding is that a lot of people want to play in a different way.

In the West, we're still mulling over what we want our strategy to be, to bring those products here, if at all. Some of that is up to the proliferation on those networks in the West, and for more info on that, you need to speak to DeNA and Gree.

However, I will say that we do have some social initiatives underway at our [U.S.] office that I'm not prepared to get into great detail about, other than to say, we won't be following the path of Zynga or the like. We will remain true to Capcom and our audience focus, and the brand expectations they have.

So when you say "social" in that case, you're talking about Facebook and social networks?

More along those lines, yes. [Shortly after this interview, Capcom announced its first browser-based game, Onimusha Soul -- Ed.]

Where do you see Capcom five years from now, when you're talking about digital revenues, and how retail will play -- or not play -- a role in the future.

Retail will always have a place in our future, but I think that five years down the road, the value proposition of retail, to publishers, will change. I think retail's role will shift from planned purchase to impulse purchase, predominantly. And planned purchases will increasingly happen online, just for sheer convenience's sake.

I think five years from now, more likely than not, we'll not have plastic discs in a box, but we'll have tokens in a box, something that is gift-able, and able to be bundled with other hard items like figurines or plushes, or something else that has tangible value that can't be downloaded over a wire.

I'd like to say that within five years, certainly well-north of 50 percent of our revenue will be coming from digital, and significantly higher than [50 percent] of our operating profit will [come from digital]. Very obviously, certainly sometime before five years from now, every game will be digital and retail day and date [same release].

On some platforms thatís already the case, as it is on Vita. In Europe, the PlayStation 3 is already that way. I wish it were that way here in the States as well. But Iíd say thatís an inevitability. No one is really fighting that, but the question is when that will occur.

To quote my friend Paul Raines, the CEO of GameStop, they don't disagree on the inevitability of it, they disagree on the timing of it -- when it's going to happen. I definitely think that's going to happen very, very quickly. It's going to depend a lot on what the first party [console manufacturers] do in the next generation of console hardware. But I'm not privy to those details today, so I couldn't possibly predict what is going to happen there.

Is there anything that you're trying to anticipate for the next-gen consoles?

The networks in general are going to become increasingly important to the future of our content offerings, and the services we offer around them. I think you'll see continued migration to games as a service, and increasingly less discrete products.

I'll tell you something I'm hoping for. I'm hoping for a much more fluid means of providing updates to consumers, being able to have a much more rapid turnaround in between when content is submitted and when content goes live to consumers, to provide a higher level of service to them. I'm hoping that the networking and the processes in the future are built with that in mind.

I'd like to see more server-based backends that are more under publisher-developer control, rather than being forced through systems that are bit more pre-defined by the first-party. That would enable experiences online that are not currently available in today's console marketplace.

In many ways, I hope that first-parties react to what's happening in the PC and smartphone space, in that the barriers between developer and consumer are much lower there. And console makers need to be aware that that's what they're competing against, and that's increasingly what the customer expectation is, in terms of responsiveness and engagement.

A couple years ago, there were some Western-developed Capcom games that didn't do that great, from Airtight and from GRIN. What steps were taken for improvement in that regard?

Just launching this month, we have Resident Evil: Operation Raccoon City, which was done with a Western developer [Slant Six]. We had successes with Dead Rising 2, and subsequently acquired [its developer] Blue Castle, which is now Capcom Game Studio Vancouver. And they have multiple projects that continue to be in development. You will see additional titles announced from them.

DMC is probably also worth mentioning. [UK-based] Ninja Theory has engaged with us very, very deeply, probably the deepest engagement between Capcom Japan and the Western development process. There's been very, very tight collaboration between the two on that project.

So we've done many larger titles that way, and dare I say you'll see us announce some more in the not-so-distant future. Suffice to say, we have not at all stepped away [from Western developer partnerships]. We have sought to improve on our working process, our collaborative process, we have sought to improve upon the quality of the teams with which we work.

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Matt Walker
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That Svensson sure is a classy guy.

Daniel Bashur
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I like the direction Capcom is going from a production standpoint, developing exciting new entries in some of our favorite franchises, most notably the Resident Evil series with Revelations on the 3DS, Operation Raccoon City right around the corner and Resident Evil 6 cooking away, looking very promising.

What I don't appreciate though is how Capcom (and other developers) repackage the same goods with incremental upgrades. This has been happening with Capcom since the days of Street Figher II. In a way, this punishes the most loyal fans who line up to pre-order the original release rather than those who wait for the inevitable upgraded version that arrives down the road with all the extra enhancements, and/or all of the DLC added in (as in the case of Resident Evil 5 vs. Resident Evil 5 Gold Edition). I can never forget or forgive myself for trading in a dozen or so original NES and Game Boy carts in 1992 that were complete with sleeve, box, and instructions to obtain Street Fighter II for the Super NES that sold for $72.99 at the time only to find less than a year later that Street Fighter II Turbo was on the way for $79.99, making all of my trade-in to obtain the original Street Fighter II for naught. After that, I never traded in another game again and started to just wait to buy updated versions of games from Capcom, except when I needed to be rudely reminded roughly 20 years later when I had excitedly pre-ordered Marvel vs. Capcom 3, and sure enough - less than a year later Ultimate MVC 3 arrives, but to add insult to injury it came out for $39.99 rather than the $59.99 I paid.

I don't want to rant forever, but all that I'm trying to say is that while Capcom is running a business and needs to do everything in its power to maximize profits, something different should be done to reward the fans who buy the original versions of games brand new such as exclusive, one-time only extra weapon package, character upgrade package, extra stages, etc. that can ONLY be had within the first few months after the title is released and never included within an upgraded game (unless some sort of special super ultimate edition arrives that actually costs more than the original title did justifying it).

Capcom could eliminate all of the negative sentiment and eliminate the guesswork on who to reward for lining up to buy their games by having players register their games with Capcom when purchased new. That way, only the true early adopters and die hard fans who register their new games within a certain window are eligible for the extra benefits.

Svensson provides some good insight on what's going on at the industry at large right now as well, but I do disagree on one of his key opinions, specifically regarding the prediction of the industry going all digital.

Going all digital is a poor strategy for console manufacturers and software developers alike due to the single reason that people like being able to get used games and enjoy having the power to trade in games or sell them on the open market when they don't want them any longer. By going all digital it takes all of that power away from the gamers that provide the revenue streams for the companies making the games. This will also hurt resell shops and rental outlets, forcing them to only be a source of retro gaming stuff and peripherals going forward as time goes on if physical media goes away, eventually forcing those people out of business in all likelihood.

Svensson envisions a future - a not so distant future, where retailers sell a box with a token of sorts (with maybe just a DLC for the game itself) instead of a physical copy of the game. Gamers will not want that. We want the instant gratification of an awesome game we just got for a gift or just got at the store and want to have the ability to pop it in our console right away. We like box art and a manual that is useful and worth holding in our hands.

Waiting for a 40+ GB title to download would be excruciating, especially around the release date (imagine the traffic and slowdown), and gamers with larger libraries would require an insane amount of local storage. It's just not feasible, and gamers do not want to give up all of their freedom, add crazy amounts of storage, and/or rely on cloud servers. With a PlayStation 3, you can't even put your game data on an external drive, so you are limited to the capacity of the single internal drive. Imagine if you could only get digital games going forward and had the limit of a single internal drive placed upon you to keep the game and/or game data?

On the developer's side, I do realize that when someone purchases a used game that it takes away from the sales that could have gone to the developer rather than the retailer or individual selling the game used, but at the same time, you may have just gained a loyal fan that really liked the game that missed out when it was new and will line up a pre-order for the sequel. I understand that this is another reason why developers (Capcom included) repackage games and sell updated versions. Why not just sell the best version to begin with, and provide something exclusive only when the game is purchased new to entice buyers (such as through the registration method I described or a special code that is packed in)? Then to recoup extra $s on used copies, offer the same exclusives that would have come with the original title as a paid DLC package for $19.99?

The Sony PS Vita could have easily been an all digital device, but look what happened to the PSPGo? It failed miserably since no one wants to pay full price for a game that they don't physically have. Sony got it right by keeping the media physical, giving the gamers the power to use their media when they want and how they want, while retaining a secondhand market. This does drive the price of games up based on the packaging and cost of physical media, but people want that. When the same product is offered for the same price without those things as was the case with the PSPGo, all you did was take away from the consumer. Sure, your company made more $, but the public (aside from shareholders and employees) do not care how much $ you make as long as they get the product they want.

Take away more and more freedom from gamers, and watch the next generation fail terribly. Microsoft with their rumored 1 license per console on the upcoming XB 720 (making used copies worthless) will put a big dent in their installed base. If you are the type of gamer who likes to buy used games (I recommend you do a survey on this - I bet at least 50% of gamers buy 4-6 used games/year), and you take that away, watch all of those gamers go someplace else that keeps the old model. I apologize for the long response, but to Mr. Svensson (and the rest of the industry heads): I would implore you to do better market research on this before you start planning on creating a closed system that shifts all the power and profits your way and takes away from everyone else. In case you are wondering, no I don't own a used game shop, nor am I affiliated with GameStop or another used merchandise outlet. I'm just a concerned gamer who doesn't want to see the continued destruction of a hobby I hold near and dear.

No offense, but it all boils down to corporate greed. You may rebuke with the rising production costs, but every game doesn't have to be a $100 million Hollywood production to survive. Just make a fun game with great gameplay and the gamers will follow.