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Q: Pachinko Gaming in Japan ( Answered,   0 Comments )
Question  
Subject: Pachinko Gaming in Japan
Category: Sports and Recreation > Games
Asked by: ammie53-ga
List Price: $100.00
Posted: 18 Jul 2006 21:07 PDT
Expires: 17 Aug 2006 21:07 PDT
Question ID: 747606
Topic: Pachinko Gaming in Japan
Question: Request for an overview of the Pachinko market - i.e. brief
history, size, manufacturers and if possible information on any US
licensed games (Star Wars, Matrix, Looney Tunes) by manufacturer if that
can be found easily, and current climate of government regulation (I
understand the government is looking to curb or regulate this industry
more - why?).  Since I am paying for this myself, I can't afford nor
do not need a thesis, just pertinent information I
can include in a powerpoint report I am preparing for my boss to
present to the management of a film studio.  I want to communicate the
opportunity and possible risks of licensing our properties in this
industry.  I hope this makes sense. Whatever you can do for the money
I am offering is appreciated.  Thank you for your help.  PS If you
give me a fact or a chart (that I can hopfully copy into the
powerpoint), I need to be able to indicate its source i.e.  2005
Japanese Leisure Industry Report (if there is such a thing).

Clarification of Question by ammie53-ga on 18 Jul 2006 21:19 PDT
Also, are their any demographics/profile on the Pachinko gamer?
Answer  
Subject: Re: Pachinko Gaming in Japan
Answered By: boquinha-ga on 20 Jul 2006 11:35 PDT
 
Hello ammie53-ga!

My husband spent two years in Japan and tells me that he can still
clearly hear the clinking of little pachinko balls in his ears. While
he?s never played personally, pachinko parlors are a ubiquitous piece
of Japanese culture and there are few visitors to Japan that haven?t
passed by at least one of these places. Here is the information that I
found for you.

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HISTORY OF PACHINKO

Details on the history of pachinko in Japan vary from source to
source, but there are a few historical points that seem to be well
accepted.

?Pachinko machines first found their way to Japan in the cosmopolitan
years of the 1920s. However, because Western-inspired activities were
increasingly discouraged during the war years of the next two decades,
the game fell out of favor. In the postwar years, however, the
populace craved new leisure activities. The first commercial pachinko
parlor was opened in Nagoya in 1948. From there, parlors spread
rapidly around the nation. Today, pachinko parlors can be found even
in remote rural villages, and it is estimated that as many as
one-quarter of the population ventures into the ear-shattering din of
pachinko parlors at least occasionally. Particularly avid players
dedicate their time to pachinko parlors as they would to a job.
However, although the payoffs can be great, so can the losses.?
http://www.bookrags.com/history/worldhistory/pachinko-ema-04/

= = = = = = = 

?The word pachinko is onomatopoeic?Pachi-Pachi is the sound that the
little metallic balls inside the pachinko machine are making. A good
pachinko machine will cost a casino owner between 2000 to 3000 US
Dollars. In a small pachinko casino you can find about 100 of these
machines, and in the big casinos you can find 500 of them and even
more?all sorted together, one next to the other.?
http://www.freepachinko.com/read-all-about-pachinko.html

= = = = = = = 

One story of the origins of Pachinko says that after World War II
manufacturers had a surplus of ball bearings, so to put them to use
they made a series of upright pinball machines that became what are
now Pachinko machines.
http://72.14.209.104/search?q=cache:j40nptMMR9kJ:www.commerce.usask.ca/faculty/links/Japan_CIBS/pachinko.htm+pachinko+market+japan+sales&hl=en&gl=us&ct=clnk&cd=15

= = = = = = = 

?The player purchases a large number of small steel balls which are
inserted, in bulk, into the machine. Originally, machines had a
spring-loaded lever for shooting the balls individually, but modern
machines use a round "throttle" that merely controls how quickly an
electrically fired plunger shoots the balls onto the playfield. The
balls then drop through an array of pins, and usually simply fall
through to the bottom, but occasionally fall into certain gates which
make the machine pay out more balls.

Most current machines include a slot machine (these are called
"pachi-slo"), and the big winnings are ultimately paid not from the
balls falling into gates, but from the slot machine matches that
follow. In fact, in many modern machines the balls have nothing to do
with determining winnings, which are based strictly on electronic
random number generators.

The winnings are in the form of more balls, which the player may
either use to keep playing, or exchange for tokens or prizes such as
pens or cigarette lighters. Under Japanese law, cash cannot be paid
out, but there is virtually always a small exchange centre located
nearby (or sometimes in a separate room from the game parlor itself)
where players can conveniently exchange tokens or prizes for cash.
Such pseudo-cash gambling is theoretically illegal, but from the sheer
number of pachinko parlors in Japan, it is clear that the activity is
at least tacitly tolerated by the authorities. (In fact, no pachinko
parlor without a cash payout window has ever been documented.)?
http://en.wikipedia.org/wiki/Pachinko

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MARKET SIZE

?The reported annual income of the pachinko industry exceeds US$100
billion. Some estimate that, including unreported income, the industry
takes in over $200 billion, making it one of Japan's largest
industries (and largest tax evader). The industry is recession proof,
since unemployed workers are more likely to gamble.?
http://www.japanorama.com/pachinko.html

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The Cohen Research Group has an excellent report with many details
regarding the pachinko market. The information collected here comes
from their April 2006 document.

?Pachinko has grown to be Japan?s largest and favorite national past
time, with almost a third of its total population involved in the
gaming. Approximately 16,000 pachinko parlors are operational
currently, and are spread everywhere: in the amusement quarters of
every major city, around every inter-urban and commuter railroad
station and subway, along the truck routes and suburban areas. On a
global level, pachinko is the world?s largest gaming industry, with
Japanese pachinko operators? generating an estimated $277 billion in
2003 in annual gross wagers, significantly higher than the estimated
$224 billion generated by the US casino industry. In terms of gaming
revenues, the industry generated approximately $34.2 billion in 2003
compared to $28.9 billion generated by the US casino industry.?

The report also has details on the sales of so-called ?amusement
machines? (i.e., pachislot and pachinko machines). Sales have been
steadily increasing over the past seven or eight years.

1998 	3.1 million machines
1999	4.1 million machines
2000	4.5 million machines
2001	4.5 million machines
2002	4.7 million machines
2003	5.5 million machines
2004	5.6 million machines


?The number of pachinko parlors has steadily fallen from 17,173 in
1999 to 16,076 in 2003. On the other hand, operators with larger store
size are expanding faster. As a result, the average number of machines
per store has been steadily growing, from 274 in 1999 to 304 in 2003.
. . . While smaller parlors are closing down, the pachinko industry
has continued to grow, as a result of the fast-paced growth among
larger pachinko companies. Large chain operators are likely to gain
substantially from the consolidation trend in the industry.
Financially stronger and large operators have the opportunity to
capture the customers of the small parlors that are closing down.
Consequently, large players like Dynam and Maruhan, which own 240 and
166 stores (at the end of year 2004) respectively, have emerged
stronger in the industry.?
http://www.cohenresearch.com/reports/pchw_04-06-06.pdf

= = = = = = = 

The 2003 White Paper on Leisure released by the Japan Productivity
Center for Socio-Economic Leisure states that while the leisure market
in Japan has been contracting to a certain degree, the pachinko market
has been increasing.

?Due to an increase in the number of slot machines, the pachinko market grew 5.1%.?
http://www.fpcj.jp/e/mres/publication/jp/society/tourism_main.html

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An article by the Bloomberg News on July 12, 2006 discusses some of
the market statistics regarding pachinko.

?Gaia, Japan's third-largest pachinko hall operator with 170 outlets,
plans to use proceeds from asset-backed bonds to buy real estate,
build more outlets and replace its pinball machines, said Kenji
Sawada, 50, general treasury manager.
 
Tokyo-based Gaia added 53 parlors in 2005 to expand its share in a
market that has not grown in more than a decade. The total number of
pachinko parlors in Japan fell for the 10th consecutive year in 2005
to 15,165 from 15,617, according to Zennichiyuren, a pachinko hall
association in Japan. The average number of game machines per hall
rose to 323 from 260 machines 10 years ago, as stronger operators
built bigger halls to attract customers.
 
?There will be only a handful of operators in the near future,
dominating most of the market? said Gaia's Sawada. The December deal
was Japan's first disclosed sale of debt backed by a pachinko
business. This type of fundraising will ?make a big difference in the
reshuffle,? he said.?
http://www.iht.com/articles/2006/07/12/bloomberg/sxpinball.php

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The July 12, 2006 Bloomberg News report goes on to discuss revenue
within the pachinko market.

?The number of pachinko players dropped 40 percent to 18 million in
2005 from 29 million in 1995, according to Japan's Productivity Center
for Socio-Economic Development. The industry's total revenue dropped
4.6 percent to 29.5 trillion yen in the same period. As the big
operators fund expansion, smaller players are losing out.?
http://www.bloomberg.com/apps/news?pid=20601101&sid=amrdfrAYAXE0

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MAJOR MANUFACTURERS

There are a number of manufacturers of pachinko and pachislot
machines, most located in Japan. According to the Sega-Sammy 2003
Annual Report, here are the major manufacturers of these machines,
along with their market shares reported as a percentage of the total
machines made.

Major manufacturers of pachinko machines

1.	Sanyo Bussan	16.4%
2.	SANKYO		14.8%
3.	Heiwa		10.0%
4.	Kyoraku Sangyo	8.1%
5.	Daiichi Shokai	7.9%
6.	Sammy		2.6%


Major manufacturers of pachislot machines

1. Sammy 	31.2%
2. Yamasa	20.0%
3. Aruze 	19.8%
4. Olympia	11.7%
5. Pioneer	3.3%

http://www.c-direct.ne.jp/english/divide/10106426/6426_03/6426_02.pdf

= = = = = = = 

Alacra Inc. is a corporation that provides business research and other
business solutions for a number of global companies. This is a
description of their services copied from their ?About Us? page.

?The Alacra Store is an e-commerce website offering consumers access
to select reports from a host of Alacra premium databases. Searching
the Alacra Store is free. You register to purchase and download
reports with a credit card. Types of business information available
include company fundamentals and financials, credit research, earnings
estimates, economic data, filings, market and investment research and
news.?
http://www.alacrastore.com/cgi-bin/alacraswitchisapi.dll?app=pubsite&msg=Gethelp&topic=about&sk=guest&_newstoretabset=12-00-00


Here is a listing from Alacra that shows major manufacturers of
pachinko and pachislot equipment, their countries of operation, and
their market share in millions of U.S. dollars.

Sankyo Co. Ltd.				Japan		5,848 	
Konami Corporation Konami Corporation 	Japan 		2,893
Aruze Corporation Aruze Corporation 	Japan 		1,598
Heiwa Corporation Heiwa Corporation 	Japan 		1,597
Fields Corporation Fields Corporation 	Japan 		955.22
Mars Engineering Corporation		Japan 		631.87
Nippon Game Card Corporation	 	Japan 		449.04
Gendai Agency Inc. Gendai Agency Inc. 	Japan 		334.18
Oizumi Corporation Oizumi Corporation 	Japan 		251.42
Taiyo Electric Co., Ltd. 			Japan 		104.59
Entertainment Is Us Inc 			United States 	14.48
Pachinko Inc Pachinko Inc 			United States 	0.01

The following are companies that are privately held, and as such do
not necessarily release information on their market share.

Sammy Corporation Sammy Corporation  	Japan 		Private
NIHON PACHINKO PARTS.CO., LTD.	Japan 		Private
PACHINKO DAIEI PACHINKO DAIEI 	Japan 		Private
PACHINKO ESASHI				Japan 		Private
PACHINKO HODEN KAIKAN 		Japan 		Private
PACHINKO KORAKUEN		 	Japan 		Private
PACHINKO ROCKY			 	Japan 		Private
PACHINKO SEIBU			 	Japan 		Private
Pachinko World Inc				United States 	Private

http://www.alacrastore.com/storecontent/search/PACHINKO

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GOVERNMENT REGULATION

Pachinko is part of a gambling industry that exists despite
regulations that prohibit gambling in facilities not sanctioned by the
Japanese government. One way pachinko parlors circumvent the law is to
not directly provide payment in exchange for winning.

?Technically, gambling for cash payoffs is illegal. Players awarded
bucket loads of winning pachinko balls take their winnings to a
counter inside the parlor and receive small gifts such as chocolate
bars or imitation gold bullion. It is commonly understood, however,
that at a nearby offsite location, players can exchange their winning
trinkets for real cash. As such, the pachinko industry is, in reality,
a flourishing illegality mostly overlooked by law enforcement.
Underworld connections to certain pachinko chains and illegal tax
dodges have also brought disrepute to the business end of pachinko.
Further, as in other gambling industries, pachinko has its fair share
of addiction. It is clear from its ubiquitous presence, however, that
pachinko remains a popular leisure activity in Japan, enjoyed by young
and old, men and women, and persons from all walks of life.?
http://www.bookrags.com/history/worldhistory/pachinko-ema-04/

= = = = = = = 

?Pachinko is unique because the government does not control it. The
government tries to police it only by trying to tax pachinko parlor
owners. It is technically illegal for pachinko parlors to hand out
money directly to patrons, so they hand out tokens instead, which can
be redeemed for cash at nearby cashing stations outside the shop, run
by a separate token-redeeming business. Each pachinko parlor sets its
own machines any way its likes, although most conform to the industry
standard. The word on the street is that the industry standard is roku
wari gaeshi, or a sixty percent return. Compare that to an over ninety
percent return rate on most Las Vegas slots, and you get a pretty good
idea of just how bad a gamble this game is.?
http://www.japanvisitor.com/index.php?cID=359&pID=323&pName=cult-japan-gambling

= = = = = = = 

Manipulation of pay out ratios is one possible reason the government
may eventually attempt to regulate the pachinko industry.

?Though the win ratios are set by the government, parlors are believed
to often manipulate them such as by increasing jackpots on busy days
to draw people back again. On the other hand, resourceful players
resort to using ingenious electronic or magnetic devices to try and
hotwire the digital machines into making big payouts. Parlors are not
legally allowed to actually pay out cash. So you take your trays of
balls and exchange them for prizes like washing powder, cigarettes and
brand goods or tokens that can be cashed in at a nearby
hole-in-the-wall. Similar to cashing in your chips at a casino except
for the fact that it's a flagrant manipulation of the law. These
places then sell the tokens back to the parlor, with their cut on
top.?
http://www.japan-zone.com/modern/pachinko.shtml

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?Though often linked to gangster activity and political corruption,
this form of gambling is technically legal. Converting winning balls
back to cash is done via a middleman at a satellite office away from
the parlor. Given that gambling not controlled by the government in
Japan is illegal, this additional step makes the swap back to cash
legal.?
http://www.bigempire.com/sake/pachinko_player.html

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A large number of pachinko parlors are actually run by foreigners.
North Korean business interests are involved in as many as one-third
of all pachinko facilities in Japan.

?A portion of this pachinko money ends up in North Korea, funneled to
Pyongyang by ethnic Koreans living in Japan. They are the children and
grandchildren of Korean workers forcibly brought to Japan in the first
half of the twentieth century, and some of them still have sympathy
for Pyongyang, which they see as resisting Japanese and U.S.
domination. Shut out of mainstream businesses due largely to Japanese
racism, the Koreans have turned to fringe industries like pachinko.
Today, Koreans loyal to Pyongyang own about one-third of Japan's
pachinko parlors. So, if President Bush is serious about squeezing Kim
Jong Il, he might want to add pachinko profits onto America's list of
North Korean items marked for interdiction. True, pachinko money
accounts for a relatively small share of North Korea's revenue?less
than $100 million annually?but the isolated nation trades so little
($2.6 billion annually) that every dollar counts. And, since the Bush
administration hopes that every crumb of hard currency denied to North
Korea will hasten the day when the Pyongyang regime collapses, it?and
Japan?should start looking into this quirky game.?
http://www.tnr.com/doc.mhtml?i=20030707&s=diarist070703

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Here is another excerpt from an article that discusses the North
Korean connection to pachinko.

?There are some 300,000 North Koreans in Japan, many with successful
businesses. The infamous Pachinko gambling shops found in thousands of
Japanese districts are run by North Koreans. Much of the proceeds go
to fund the otherwise under funded North Korean military. Some
Japanese know this. Many stories of addiction style gambling come out
of the Pachinkos. Newspapers increasingly write articles of babies
dying of heat exhaustion in overheated cars while a parent is inside a
noisy, smoke-filled Pachinko parlor gambling. Yet, teenagers and
others can be seen at the doors of these Pachinko's well before the
door opening of 10:00 am, waiting to sit at their favorite, ?good
luck? machines.?
http://www.tparents.org/Library/Unification/Talks/Bikal/Bikal-NK2.htm

= = = = = = = 

Gambling addiction is another concern for Japanese society in general.
Here is an excerpt from an article that appeared in the Asahi Shinbun,
a major newspaper in Japan. It is dated 2/11/2006.

??Loneliness and anxiety are at the root of this affliction [pachinko
addiction], and anyone can become an addict in this society of diluted
communication with real people because of collapsed family ties and
the wide-spread use of the Internet,? said Taizo Kato, professor of
psychology at Waseda University.?
http://www.asahi.com/english/Herald-asahi/TKY200602110229.html

= = = = = = = 

This is from a Nightly Business News interview conducted in June 2006.
It discusses a few of the problems facing the pachinko market.

?Despite market size approaching that of Japan`s auto industry,
Pachinko`s reputation hovers somewhere between prostitution and
loan-sharking. Some of its earnings have ended up in North Korea. It`s
been linked to the Yakuza, Japan`s underworld. Owners have been
convicted of tax evasion. Ever-souped-up game machines have spurred a
rise in hardcore addicts and even child neglect, by Pachinko-crazed
parents. But now, the Pachinko industry is trying to shed its unsavory
association with gangsters, gambling addiction and North Korea.
Several of the largest chains have gone on a charm offensive. They`re
seeking modern management, social approval and shareholders.?
http://www.pbs.org/nbr/site/onair/transcripts/060619b/

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U.S. LICENSING

Information on the details of U.S. licensed games is difficult to
obtain, as the specifics are often private or hidden behind reports
that cost extreme amounts of money. What I did find are samples of
different machines that are commercially available. Slot-pachinko.com
is a site with a number of such machines for sale. Here is a list of
some of the themes.

* Star Wars
* Rocky the Movie
* Spiderman Neo
* Apollo 13
* Woody Woodpecker
* Maturi
* Gladiators
* Playboy
* Charlie Chaplin
* E.T.
* The Pink Panther
* Lord of the Rings
* Popeye
* Robocop
* Batman
http://www.slot-pachinko.com/2004PACHINKO.HTM

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DEMOGRAPHICS

Here is additional research from the April 2006 Cohen Research Group report.

?As per the survey on Time Use and Leisure Activities conducted by the
Ministry of Internal Affairs and Communication in 2001, the biggest
spenders on the game are people in the working age group. People in
the age group 25-29 and 30-34 form the majority of customers involved
in playing the game. These findings also indicate the importance of
Pachinko as a means of amusement and stress relief for the salaried
person.?

Here is a breakdown showing what percentage of pachinko players come
from each age group.

25-29	15.0%
30-34	12.5%
50-54	12.5%
20-24	11.4%
45-49	9.7%
35-39	9.6%
40-44	8.5%
55-59	7.5%
Others	13.3%


Pachinko companies would do well to target future marketing efforts
toward the women in Japan.

?Women currently form over 20%+ of the total user base. The population
of women is higher than men in Japan (65 million women compared to 62
million men in 2005). This offers an opportunity for pachinko
operators to increase the participation of women in the game.
Furthermore, the average days of participation of female players in
the game are 32 days per year, as compared to 45 days per year by male
players. The improved public image of pachinko and the availability of
exciting new machines provide operators with the opportunity to grow
their women customer base. According to Tokyo-based Yano Research
Institute Limited, women spend about 2,000 more than men per visit to
the pachinko parlor.?


Understanding some of the reasons that people play pachinko in Japan
may help shape future innovations in the market in general.

?The immense popularity of pachinko in Japan has ensured sustained
growth for the industry. Pachinko?s value lies in serving the dual
purpose of gambling as well as a way of spending time. The game allows
customers to relax from the work and family pressures, along with a
chance to win prizes. Pachinko has become a favorite means of
amusement in the Japanese culture. According to a survey conduced by
?Green Belt? magazine between May-August 2005, out of the total number
of pachinko players, 28.2% play the game as a hobby, while 55.2% of
the players play the game to gamble. Another 10% play the game for
stress relief and 5% play the game as a pastime and 1.4% play the game
for other reasons.

According to a report by the Japan Productivity Centre for
Socio-economic Development,
pachinko accounts for the largest entertainment expenditure in Japan.
The game leaves behind all other forms of entertainment such as
sports, sightseeing and others such as movie going, karaoke by a
larges margin. This further indicates that the game is not only about
gambling but it the biggest entertainment activity in the Japanese
leisure industry.?
http://www.cohenresearch.com/reports/pchw_04-06-06.pdf

= = = = = = = 

The following excerpt comes from a paper published by the Japan
Society, a private U.S. nonprofit that exists to promote understanding
of Japanese culture, arts, education, and business.

?The gambling industries face a demographic crisis. The best customers
are old men who picked up the habit 20, 30, 50 years ago. Few kids are
going to the kyotei, because they have much better ways to kill time.
Pachinko parlors have slowed this decline by adding kid-friendly slot
machines, but they still have trouble competing with virtual reality
games and satellite TV.?
http://www.japansociety.org/global_affairs/fellowship_essay.cfm?id_fellowship=1884423561

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I hope that you find this information useful. If you have any need of
further clarification, please let me know how I can help.

Sincerely,
Boquinha-ga


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