Inside Asian Gaming

inside asian gaming September 2015 46 Japan’s massive pachinko industry is in decline. Gross revenue from the country’s primary speculative pastime—a form of quasi- gambling played on pinball-style machines—shrunk to 18.8 trillion yen in 2013, down nearly 40% from a peak of 30.9 trillion yen in 1995, according to a Leisure White Paper published this year by the Japan Productivity Center. The number of people playing has dropped 67% over the same period, falling to 9.7 million in 2013 from 29 million, according to the report. Major factors driving the decline include the country’s shrinking population and pachinko’s failure to attract younger players, who prefer games on their mobile phones. Most of Japan’s 12,300 pachinko parlors are managed by small, family-run outfits, with Maruhan Group and Dynam Holdings the giants among the 4,000-plus operators. Maruhan is the biggest earner, generating close to 2 trillion yen in sales—accounting for over 10% of the entire market—across 308 venues housing close to 210,000 pachinko and pachislot machines in the 12 months ended 31st March. Although the entire industry is hurting, Maruhan and Dynam are doing better than the smaller companies, with Maruhan’s sales down 6.3% over the previous year. Maruhan and Dynam are also working to reverse the decline with improved venues and a greater emphasis on customer service. The estimated $4 billion fortune of Maruhan’s self-made founder, Korean-born Han Chang-woo, landed him in 7th place this year on Forbes ’ “Japan’s 50 Richest” list, emblematic of an industry which owing to its disrepute among Japan’s commercial elite is dominated by ethnic Koreans, especially on the operations side. Maruhan was set up in 1953 and incorporated in 1957. As Han Chang-woo Chairman and CEO Maruhan Group Japan prospered in the post-World War II era, pachinko also thrived, and Mr Han did well enough in the ’60s to diversify into bowling alleys, driving ranges for golfers, amusement facilities, cinemas and other leisure-related businesses. In the 1970s, he returned his focus to pachinko and rode the wave of the country’s ’80s economic boom, which left him well-positioned to take advantage of the long slide that followed, when he continued to build the company by exploiting the decline in asset prices to increase Maruhan’s market share. Mr Han, now 85, has expanded his reach into more centralized locations. He’s built multi-story emporiums that lure customers with innovations that include non-smoking sections, free parking and improved odds. The cash flow from these large, successful outlets has helped transform Maruhan into the conglomerate it is today. The company’s Maruhan Japan Bank subsidiary has been expanding in Cambodia, Myanmar and Laos. Mr Han also continues to invest in his homeland, Korea. His latest project is the ambitious 2.4 trillion won ($2 billion) Dream Island, an entertainment hub including water parks, aquariums, luxury hotels, shopping malls, marinas, theme parks and golf courses to be built on reclaimed land on Korea’s Yeongjong Island. Notably, Yeongjong, the site of the nation’s gateway airport serving the capital, Seoul, has become a locus of the Korean government’s integrated resort development strategy. So while Maruhan has expressly said that Dream Island, scheduled to break ground later this year, will not include a gaming component, don’t be surprised if the plans eventually evolve to include a casino. NigelMorrison is positioningNewZealand’s SkyCity Entertainment Group to play an increasingly prominent role alongside Down Under rivals Crown Resorts and Echo Entertainment in an increasingly lucrative competition for Asia’s high rollers. TheNZX-listed six-casino group grew turnover from“international business,” as it terms the VIP sector, a robust 43% in the 12 months Nigel Morrison Managing Director and CEO SKYCITY Entertainment Group ended 30th June, with SkyCity Auckland, the corporate flagship known for its landmark Sky Tower, the standout performer at NZ$6 billion, a 39% increase year on year. “We have taken on more people in Southeast Asia marketing that business, promoting our properties and bringing those players,” Mr Morrison noted when the fiscal 2015 results were released. “The pie is getting bigger.” He may be assumed to have a pretty good idea of how big too. A numbers guy by training, his gaming industry experience spans two decades and has included senior roles at Crown, where he was chief operating officer, and at Macau’s Galaxy Entertainment Group, where he was CFO. He’s also proven himself a savvy negotiator, maintaining the exclusive licenses enjoyed by SkyCity Adelaide in South Australia and