Japanese distributor Gaga Communications has blamed its release strategy for Hollywood films as one of the reasons for cutting its earnings forecast earlier this month.

At the beginning of August, Gaga said it would post a consolidated net loss of $12.3m (Y1.47b) for the financial year ending September 31.

The company has seen disappointing box office results for Hollywood titles such as John Q and The Core, which were released up against Harry Potter And The Chamber Of Secrets and The Matrix Reloaded respectively. John Q took $6.9m (Y830m) while The Core earned $12.5m (Y1.5b).

Gaga has long had a reputation for buying everything from Hollywood majors to straight-to-video titles in package deals. However, the company has streamlined its acquisition business under the new president and COO, Nishiho Marumo, who plans to select only top quality Hollywood titles and art-house films for the company's upcoming line-up.

Gaga will release Quentin Tarantino's Kill Bill in October 2003 and two of this year's Cannes competitors, Francois Ozon's Swimming Pool and Lars Von Trier's Dogville in 2004.

Meanwhile, a Gaga spokesman said that Gaga was planning to work on two to three co-production projects a year with international partners, particularly from the US and Europe, to target the worldwide market.

Gaga publicist Rie Hirosawa added: "We are expecting to post a net profit of $900,000 (Y110m) from the film production business for the fiscal year ending September 31, 2004, $2.5m (Y300m) in the 2005 and $4.1m (Y500m) in the 2006."

Gaga has become known for the strong releases of its art-house titles, with recent hits including Bowling For Columbine which took $4m (Y500m) and 8 Women which earned $3.3m (Y400m). The company also enjoyed box office success with the Chicago which grossed $30.4m (Y3.65b) on 260 screens.

Gaga is also eyeing game-to-film adaptation deals for Japanese games, animation and comics.

Most recently, the arcade game maker Capcom and Gaga concluded a film option deal for Devil May Cry, a Capcom game series that has sold 4.37m units internationally. The estimated budget for the film is $40m, with a planned release date of 2005.

Capcom and Gaga previously announced a similar co-production deal for Onimusha, another popular Capcom game with 4.8m units sold, together with Metropolitan of France. In February 2002, Gaga announced the production of a film based on the Namco game Tekken, together with Crystal Sky of the United States.