Inside Asian Gaming

MAY 2018 INSIDE ASIAN GAMING 31 A 2013 survey by the Health, Labor and Welfare Ministry estimated more than five million gambling addicts in Japan, well above global norms. ReNeA Japan CEO and founder Masa Suganuma calls that “very silly information.” IN FOCUS Korea, though the flow has diminished this century. The new regulations will likely hasten pachinko’s longstanding decline, a trend that results from a population decrease, changing tastes in entertainment and gaming options with more compelling content, starting with gaming consoles and now smartphones. “Added restrictions are likely to put hundreds, if not thousands, of parlors out of business,” Union Gaming’s Grant Govertsen, who follows Hong Kong listed pachinko parlor owner Dynam Holdings, says. “This in turn will provide the bigger operators like Maruhan and Dynam the opportunity to roll-up the industry at attractive valuations. Bottom line, look for further consolidation of the industry while at the same time seeing the total number of parlors shrink.” IMAGE PROBLEMS Despite using anime and other trendy content, uptake of pachinko remains depressed. “For young people, pachinko is not cool,” Tanaka, who has covered pachi since 2000, says. “It costs too much money compared to smartphone games. There is no mobility. It is not connected with social networking.” IRs will also contribute to the decline, according to a consumer survey of 4,900 adults, including pachinko players and non-players that Tanaka, a former marketing executive, conducted over the past two years. If a casino opened within two hours of their home, 8% of the sample said they would play there. Among high frequency pachinko players, the industry’s best customers, playing at least three times a week, 46% said they would play at the casino. But Tanaka emphasizes that competition will occur within a limited geographical area since there will be no more than three IRs in Japan to start. Add the proposed ¥6,000 casino entry tax for Japan residents and occupy a separate area, here 100 units upstairs, taking three ¥20 tokens per spin. Manager Yoshihito Motegi says P Ark Ginza averages 350 players daily who typically stay for two to three hours, pay in ¥10,000 to ¥20,000 (US$93 to $186) and get 80% to 90% returns. One secret to pachinko parlor profits: redemption value of balls and tokens is below their so-called rental fees; a ¥4 ball returns the equivalent of less than ¥3. PICK A WINNER Readouts across the top of machines give three-day jackpot histories, data players use to search for big payouts. Unlike conventional slots, pachinko manufacturers set payment rates, layout and content, which operators can’t alter under Japanese regulations. At ¥400,000 each, pachi machines are far less sophisticated than conventional slots that cost at least four times as much. Capabilities include TITO (ticket in, ticket out) technology and accepting membership cards that can also store funds. For operators, machine popularity matters most. Management systems record machine occupancy, with unpopular machines replaced as often as three times monthly. Machine production has expanded from a handful of companies to more than 20, any of them capable of creating hits. New arrivals from established lines or featuring hot anime or other pop culture content are advertised to attract customers. Successful machines can stay on P Ark’s floor for three years and there’s a market in used machines. In urban settings, parlors cluster near train stations. In rural areas today, they’re often in complexes with other leisure and convenience services. Opened in 2014, Zent Nagoya Kita has Japan’s largest parlor with more than 1,200 machines in a shopping mall with a child daycare center – useful for parlor employees and for avoiding blame if players leave children alone – laundromat, art gallery, ramen shop and wine cellar. Other chains include entertainment options such as bowling alleys, golf driving ranges or karaoke, trying to broaden pachinko’s dwindling appeal. Amusement Japan Chief Editor Tsuyoshi Tanaka largely dismisses that strategy. “There’s no synergy between pachinko parlors and other amusements – non-pachinko players don’t try pachinko and other amusements don’t attract pachinko players.” One business showing synergy with pachinko, according to Tanaka? Cash dispensers. Japan’s biggest pachinko company, Maruhan , is expected to swallow up many smaller pachinko operators as the industry shrinks and consolidates.