Background to Restructuring

Restructuring Based on a Strong Sense of Crisis

Currently, the entertainment industry is on the brink of major structural change. A driver of this change has been the rapid spread of smartphones since around 2008. As the younger generation spends leisure time in increasingly varied ways, competition is transcending industry boundaries.

The pachinko and pachislot market has a serious structural problem because, as the younger generation leaves the market, the player population is declining. The April 2014 consumption tax rate increase has also dealt an additional blow to the conventional amusement center operations market—which has been contracting for eight years—and made further market contraction unavoidable. As a result of amusement center operators' worsening business results, the Amusement Machine Sales Business segment, which once boasted high profitability, has recognized an operating loss for two consecutive years.

The Group has to face the fact that its existing businesses can no longer expect the growth and profitability it once enjoyed. While the Pachislot and Pachinko Machine Business segment is still generating a certain amount of cash, if we do not stop the Groupwide decline in profitability by rebuilding existing businesses and accelerating the earnings growth of the digital game area and other growth areas, it could affect investment aimed at sustained growth, such as investment in the integrated resort business.

Motivated by a strong sense of crisis, I established the Group Structure Reform Division, in which I serve as chairman, in May 2014. This division prepared measures to put the Group back on a growth trajectory. In October of the same year, we announced concrete strategies, which we implemented until the end of the fiscal year under review.