Market Data:Pachislot and Pachinko machine

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Pachinko and Pachislot Machine Market

Long-Term Downward Trend in the Player Population

The digitally distributed games market is trending toward expansion due to increasing online distribution.
Further, Japan’s mobile games market is seeing fiercer competition and increased domination by certain titles. As for the amusement center market, partial regulatory relaxation has produced a clear recovery trend.

Pachinko and Pachislot—Player Numbers and Market Size

Source: White Paper on Leisure Industry 2019, Japan Productivity Center

Pachinko and Pachislot Machines—Unit Sales and Market Size

Source: Yano Research Institute Ltd.

Pachinko Hall Operators’ Declining Investment Capacity
and Contraction of the Pachinko and Pachislot Machine Market

Facing lower investment capacity as the player population dwindles, stricter regulations, and rising machine prices, pachinko hall operators are replacing machines less often and increasingly selecting only titles and manufacturers that promise consistent returns on investments. This tendency is contributing directly to the shrinkage of the pachinko and pachislot machine market. Further evidence of pachinko hall operators’ cautiousness is that annual turnover*3 is trending downward, even though the development of larger pachinko halls is increasing the number of installed pachinko and pachislot machines per pachinko hall.
*3 :Annual turnover = Annual pachinko and pachislot machine unit sales ÷ Pachinko and pachislot machine installations

Annual Turnover* and Pachinko Hall Numbers

Source: The Company has calculated annual turnover based on data from the National Police Agency and Yano Research Institute Ltd. Pachinko hall numbers are from the National Police Agency.
* Annual turnover = Annual unit sales ÷ Machine installations

Need for Initiatives to Break the Negative Cycle

In an effort to broaden the player base, manufacturers developed and pachinko hall operators introduced pachinko machines with weaker gambling elements. Although lowering ball rental fees increased utilization rates*4, it led to a decline in sales per machine for pachinko hall operators, exacerbating the deterioration in their business results. The resulting reduction in pachinko hall operators’ capital investment appetite delayed the revitalization of pachinko halls and encouraged pachinko hall operators to seek short-term returns on investments by introducing machine models with stronger gambling elements. However, this change accelerated casual players’ departure from the market.
Further, the emergence of addiction as a problem among frequent players and the discovery of improperly modified pachinko and pachislot machines in circulation led to changes in the prototype-testing operation methods of the Security Communications Association in 2014. These changes forced pachinko and pachislot machine manufacturers to change development schedules and voluntarily recall pachinko and pachislot machines that potentially differed from tested pachinko and pachislot machines. To prevent the improper modification of pachinko and pachislot machines, the scope of manufacturers’ responsibility has been extended to include post-sales maintenance.

Utilization Time*

Source: Daikoku Denki Co., Ltd., DK-SIS data
* Number of hours per business day that pachinko or pachislot machines are utilized
In response to the increasingly tough business conditions described above, pachinko hall operators are seeking reliable returns on the limited investments they can make. Therefore, they have been introducing machines that promise favorable utilization rates. In the pachinko and pachislot machine market, the contrast between winners and losers is becoming even more pronounced due to the difference between leading manufacturersーwho have competitive intellectual properties as well as robust financial bases to support development capabilitiesーand other manufacturers. Meanwhile, pachinko and pachislot machine manufacturers and pachinko hall operators have been stepping up efforts to increase the industry’s soundness and vitality. Manufacturers have been making industry-wide efforts to introduce a series of voluntary regulations aimed at curbing functions that encourage excessive gambling. In addition, although some new-format machines compliant with the new regulations are achieving high utilization rates, pachinko hall operators are being cautious about replacing existing machines with these new machines.
Consequently, the pachinko and pachislot machine market is likely to flag over the short-to-medium term.
With a view to overcoming such impacts and extending the player base to revitalize the industry over the long term, pachinko and pachislot machine manufacturers are advancing initiatives that are a clear departure from traditional practices in the industry. For example, manufacturers have begun marketing directly to consumers. Other initiatives include the forming of partnerships between an industry competitor that would have been unthinkable previously. These partnerships are focused on establishing industry-wide platforms that will increase joint purchasing of components and the use of common components. Also, development-related collaboration among competitors promises to create new gameplay.

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