Capcom has predicted a significant fall in its packaged game sales come 2017, but believes other areas of its business will help make up for the drop in revenue.

In its annual report the Japanese giant revealed it shipped 14 million units overall in the 12 months ending 31st March 2013, with North America being its largest market, making up for 38 percent of all sales. Japan was the second biggest market with 32 percent, Europe came third with 26 percent, while 4 percent of all boxed copies were sold in Asia.

However, after analysing the consumer market by platform, Capcom said it expects to see a "severe contraction" in the packaged game market, claiming it will drop by a significant 28.8 percent compared to 2012, representing $5.3 billion.

However, the company forecast strong growth in the downloadable content market, which will jump by a staggering 109.9 percent from 2012, an extra $7.8 billion. Unsurprisingly, Capcom said it would be allocating management resources to DLC within the consumer market "to ensure sufficient earnings".

Currently, DLC is 11.3 percent of Capcom’s business and the firm is looking to increase that figure to strengthen its digital strategy. According to the report, DLC now accounts for 27.8 percent of the consumer market and the company sees plenty of merit in boosting production in this area. Firstly, it states the reduced production costs of digital distribution and the ability to avoid inventory risks are attractive in the current environment, while "the ability to realise long-term, stable additional sales by capturing users with the ongoing distribution of DLC" is another plus.

It went on to say it will be providing additional content strategically after the launch of major titles like Resident Evil and Street Fighter to lengthen the product's lifecycle and will also expand download only titles such as Dungeons & Dragons: Chronicles of Mystara.

There are signs that Capcom already has the wheels in motion as Phoenix Wright: Ace Attorney - Dual Destinies is being released in North America and Europe as a downloadable only title, while its predecessors were all packaged. The company clearly sees value in the distribution of digital content as it reduces production costs and shortens the time needed to localise.

Meanwhile, the firm said it would be migrating DLC development in-house to counteract a number of quality issues that have arisen in using overseas development companies. It said since announcing its intention to move work abroad in 2009, there has been "a notable trend towards polarization among overseas development companies in response to considerable technological innovations in the market".

It explained that some companies like Blue Castle Games, which was acquired by Capcom in 2010 and is now simply known as Capcom Vancouver, were able to develop hit titles, but others were plagued by quality issues and frequent delays.

Migrating development in-house allows us to use our accumulated expertise to improve quality and strictly enforce schedules while creating a mechanism enabling development and marketing departments to respond to digital advances in an aim to increase the proportion of DLC and improve profitability.

Based on this annual report it looks like we'll be seeing a lot more downloadable software and additional content from Capcom in the years to come, while its packaged offerings may become less prominent.

Do you think packaged games will still be going strong in 2017 or are Capcom correct to shift some focus to its DLC operations? Let us know your thoughts in the comment section below.