By Isabel Reynolds

LOS ANGELES (Reuters) - Sticking power was what helped Japan's Capcom, best known for macho games like Street Fighter and Resident Evil, break out of its niche and score an international smartphone hit with the gentler Smurfs' Village, the company's president said in an interview.

"At one point a lot of Japanese companies were buying up American and European mobile gaming companies, hoping to move into the market, but they found it didn't go as well as they expected, so they pulled out," Haru Tsujimoto said in an interview at the E3 games convention on Wednesday.

"We kept mobile gaming as part of our multi-platform strategy," he added.

With the advent of smartphones, that persistence paid off. Launched last year, Smurfs' Village, a farming-style game featuring the familiar blue elf-like characters, caught on with users of Apple Inc's iPhone. Users design and build their own village, complete with houses, gardens and other items.

A "freemium" game, it is free to play, but gamers can pay to obtain additional virtual goods, racking up profits for Capcom's mobile social gaming division, rebranded under the name Beeline Interactive in April.

The company has leveraged more familiar subject matter in another popular iPhone game, Zombie Cafe. The two games together have accumulated 15 million downloads, and have helped the mobile gaming division account for an operating profit margin of almost 34 percent.

"Cafe-themed games were in fashion, but we didn't want to just copy other people, and Capcom knows a lot about zombies," joked Tsujimoto.

Capcom is the first Japanese games publisher to make a profit in global social mobile games, but analysts point out that that the company needs to develop mobile hits under its own franchises, rather than relying on licensed characters like the Smurfs.

That's exactly what Tsujimoto is targeting. Frustrated that Capcom's massive Japanese hit franchise Monster Hunter has never caught on to the same extent overseas, he plans smartphone versions that he hopes will attract users to console-based versions of the game.

Despite the push into new markets, Tsujimoto, who took over the post of president and COO in 2007 and whose father remains chairman and chief executive officer, has no intention of dropping the less profitable arcade business where the company's roots are anchored.

"It is our point of contact with the customer, so we want to continue with it," he said. "Arcades won't disappear, because children in Japan don't have many places to play. And recently we are seeing more older people visiting arcades with their families."

(Editing by Gary Hill)