Inside Asian Gaming

INSIDE ASIAN GAMING | April 2011 16 Gravity Takes Hold Pachinko play is trending up again—but revenues are on the slide B efore the recent crisis there was evidence of a modest upward trend in the number of pachinko players after four straight years of decline between 2004 and 2007 (see Table 1 below). That revival in participation has been attributed by some industry commentators to more sophisticated marketing techniques being applied to the sector. They include: smoke free rooms in pachinko parlours, double seats for couples, and machines that temporarily offer jackpots of more than US$1,000 for an investment of a few yen. The bad news is that pachinko revenue has fallen sharply since the end of 2006 (see Table 2 below). Revenue dropped 23.2% between the end of 2006 and the end of 2009. This suggests the ‘new’ players (either people returning to the market or novices) are more likely to play the low denomination games mentioned above. Nonethless, in financial year 2009-10 (ending 31st March 2010) the sector still generated an impressive ¥21.1 trillion (US$254.7 billion) in revenue. That’s nearly 17 times as much as the gross revenue generated by casino games in Macau in the approximately equivalent calendar year 2009 (US$14.9 billion). It’s also more than twice the amount of cash Japan plans to raise for its emergency reconstruction budget (US$120 billion) due to be announced this month. There’s also evidence of consolidation in the industry in terms of a shrinking number of parlours and falling numbers of installed machines (see Tables 3 and 4 below)—although machine installation had been showing some return to upward movement prior to the March earthquake disaster. The point about market consolidation is it could actually create operational efficiencies capable of boosting the profitability of those operators remaining in the market. The Japan Productivity Center—an economic think tank based in Tokyo— published its most recent research on pachinko in its ‘White Paper of Leisure 2010’ in July. It said as of 31st March 2010 Japan had 17.2 million pachinko players. That was 1.4 million more than at the end of the previous financial year and equal to 16.8% of the population at that time said the Center. As of October 2010, the adult Cover Story Source: Japan Productivity Center/Vision Search Inc. Table 2: Pachinko revenue trends in Japan 1995-2009 1995 Yen (trillions) 20.0 22.0 24.0 26.0 28.0 30.0 32.0 30.9 30.1 28.4 28.1 28.5 28.7 27.8 29.0 29.6 29.5 28.7 27.5 23.0 21.7 21.1 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Japan’s National Police Agency/ Vision Search Inc. Table 3: Pachinko hall numbers in Japan 1995-2009 Pachislo dedicated shops Pachinko shops 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Japan Productivity Center/Vision Search Inc. Table 1: Pachinko participation trends in Japan 1995-2009 1995 500 1,000 1,500 2,000 2,500 3,000 2,900 2,760 2,310 1,980 1,860 2,020 1,930 2,170 1,740 1,790 1,710 1,660 1,460 1,580 1,720 1996 1997 Participant population numbers (10,000’s of people) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0 population of Japan (those aged 20 and over) was 111 million according to the Statistics Bureau at Japan’s Ministry of Internal Affairs and Communications. The Japan Productivity Center’s chief researcher Naoya Yanagida said in a commentary to the 2010 White Paper of Leisure that the increased pachinko participation rate might not be sustainable.