Japanese pachinko hall operator Okura Holdings has outlined plans to expand by taking advantage of increasingly tough regulations governing pachinko and pachislot machines to acquire smaller operators.
The details of Okura’s ambitions are outlined in the company’s annual report and come despite a difficult year in which gross pay-ins declined 12.2% to ¥37.7 billion (US$334.9 million) and revenue 8.5% to ¥9.2 billion (US$81.7 million) for the year ended 30 June 2017. Okura operates 18 pachinko halls of which 12 are in the Kyushu region, four in the Kanto region and one each in the Kansai and Chugoku regions.
Pointing to recent amendments to pachinko machine regulations implemented by the National Public Safety Commission, Okura said that these “significant threats” also present consolidation opportunities for larger market players.
“For instance, any further enforcement of the Amended Voluntary Regulations and the constantly changing market trends and customer preference on machine types and playing costs are likely to demand that pachinko hall operators replace machines more frequently and strategically,” it said. “The expenses in relation to machine replacement are burdensome for Small-sized Pachinko Hall Operators as most of these halls do not have the financial resources to enable frequent machine replacement.
“Thus the pachinko industry remains relatively favorable for Mid-sized Pachinko Hall Operators and Large-sized Pachinko Hall Operators as they may further develop their business by absorbing the market share of Small- sized Pachinko Hall Operators.
“We are optimistic that we can continue to tap into the potential acquisition opportunities of Small-sized Pachinko Hall Operators to achieve economies of scale in operations. Furthermore, as long as our management remains responsive to the changes and flexible in adjusting our strategies to ensure our operations remain efficient and the mix of machines types in each of our halls remain optimal for each operating location, the directors reasonably believe that we can operate and expand our business sustainably notwithstanding the continued contraction of the pachinko industry and the competition with other forms of entertainment in Japan.
“Building on our key strengths, we aim to continue to strengthen our market position and further expand our business by strategically expanding our pachinko hall operations through establishing new or acquiring pachinko halls and to enhance our appeal to the younger population, a significant source of revenue to our group.”
The enforcement of Amended Voluntary Regulations in 2016 effectively banned 138 types of pachinko machines and resulted in 700,000 units being withdrawn from the market. The National Public Safety Commission subsequently issued its “Draft Regulations to Amend Partially Regulations on the Entertainment and Amusement Trades Rationalizing Act and Regulations on Certifying Machines and Conducting Type Test on Machines” in August 2017 which will further limit the payout ability of pachinko and pachislot machines.
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