Pachinko industry needs new business model

Pachinko, barbecue Oasis

Even before the Covid pandemic it was apparent that the pachinko industry, at least in its current form, possessed a dying business model. Recent events have only accelerated the trends.

A story this week in the Yomiuri Shinbun gives one account of the crisis.

Looking at the situation in Chiba Prefecture, the Yomiuri noted that prefectural police counted 451 pachinko parlors as recently as 2016, but the number as of the end of last year had fallen to 379, a 16 percent decrease, which appears to be accelerating during the pandemic.

Across the country, there was in March alone a net loss of 111 parlors that had been members of the All Japan Amusement Business Cooperative Association.

Pachinko parlor revenues appear to be running at about 75 percent of the levels that they attained before the onset of the Covid pandemic—and this was before the latest state of emergency set in.

It’s not just the pandemic that has created the crisis, of course. Prices of new pachinko machines have been rising for the parlor operators, and models with a higher gambling content have been subject to stricter regulations.

There is also the issue of demographics, as Japan’s population falls by about half a million people each year. Moreover, young people have been showing a marked preference for mobile phone games over the venerable pachinko halls of the older set.

Related to this factor is the whole society’s movement towards digitalization, which also seems like it will be another big negative for the parlors. If people stay in their homes due to the pandemic, and get more comfortable with home entertainment options, that bodes ill for the pachinko industry.

The racing industries—horse racing, boat racing, bike racing, etc.—might have fallen into a similar ditch as the pachinko parlors, but in fact their ticket sales are now booming. This is because betting on online and mobile platforms has given them new life. People can watch the races and lay down their bets from their living rooms.

By its very nature, however, pachinko is inextricably tied to a brick-and-mortar model. There can be no such thing as internet betting at your local pachinko parlor.

The Yomiuri drew attention to what could be a partial solution for some desperate pachinko parlor owners, which is to pioneer new hybrid or diversified business models that can capture entire families.

It highlights the Kimitsu city-based Oasis Group, which last month opened what it calls BBQ Oasis, offering a sort of campground experience where an outdoor barbecue space can be used and alcoholic drinks are conveniently available. It is located in Kimitsu city next to one of the firm’s pachinko parlors and its spa facility, Kimitsu no Yu. It also has an ample parking lot made available without charge to customers.

Perhaps this might be kernel of a new business model that could see future pachinko parlors take a page from the IR industry, creating smaller but multifaceted entertainment venues that allow families to visit together, drawing them out of their homes for pachinko and other physical activities in one convenient spot.

This may or may not be the future direction of the pachinko world, but if there was ever an industry in need of fresh thinking, this is the one. (AGB Nippon / AGB Nippon – JP)