Pachinko Vs Plinko
Hey, the grids got little circles in them. And it looks a bit like a pachinko machine. Could be some letter swirling going on here. Although that was in the back of my mind from the very start, I wasn't sure if it would be all that easy. Preamble sounds rather generous - two consecutive letters must be removed, leading to a rather long message. Long messages aren't my forte, but when you have to take two letters out of each clue then they're probably going to stick out.
From today's episode of the Price is Right. Pachinko vs Plinko. Although they differ in various aspects, the game of pachinko and plinko seem to be often mentioned together. This could be due to the fact that both involve balls and/or chips that fall into holes and, in doing so, establish prizes for the players. The Future of Pachinkos.
And they do in 1 across - B,IA,S and we've got EN to start with and we're away.
The day this Listener came out was a rather happy one for me. I'm running a series of comedy shows over summer, and we serve beer at them because things are funnier with beer. Catatonia makes me hilarious. So the day this came out, my assigned task was to go meet with brewers and talk about sponsorships and beer options. Most of the time I had to wait to meet with the boss, so the only polite thing to do was to buy a beer, open up Playtime, and away we go.
First stop was The Wedge Brewery. They were having production limits and couldn't supply us, but I enjoyed a few of their Iron Rail IPA and got most of the top half of the grid filled. The clues are very well-written and fun, I like that most of them make sense when you remove the letters (I guess some abbreviations are necessary). I particularly liked clues where the last letter of one word and the first of another were removed, such as 15 across SHARPS FACE becoming SHARP ACE.
At French Broad Brewing (their Altbier wasn't on tap but 13 Rebels makes a fine replacement), I worked on the message to try to sort out the bottom half. It was those last 9 down clues that were stumping me, trying to get real words (if you can see on my scan, the only one I was sure of was 29 down - I started working out letter combinations on the second page of the printout which is where those clues were). Finally I had the last part of the message - WH EE LS HA LF TU RN. I still didn't have a solution to 27 across, 25 down, 28 down, 29 down 31 down or 26 down. Maybe Samuel listened to the argument that the easy clues are at the end most of the time and put the hard ones there?
Next stop was Green Man Brewing (who lack a website) - their production bar is called Dirty Jacks and is an interesting gathering spot for Asheville's soccer fans (is it true that Setanta sports shut down? the two TVs at Dirty Jacks have been set to Fox Sports Soccer and Setanta forever).
Did I mention that Asheville was also named Beer City USA recently?
Green Man were testing out a Pub Ale, so I gave it a go (they haven't quite worked out how to get a nice head on it, but kudos for trying). I had a small crowd gathered around me trying to figure out why on earth I was copying a crossword from one grid to another and ending up with something that looked like gibberish. I had almost all the grid done, and there it was - EUREKA, I'VE GOT IT, and ARCHIMEDES appear when the words form. The P falls through the wheels and ends up on the bottom (right side up, might have been an interesting twist to have one more wheel and have a P end up a D), and with P--NYA-R-P-, I was thinking PENNY ARCADE, but that's not two groups of five letters, so it's PENNY DROPS. I put in PENNY drops and went back to the first grid to figure out those last few clues (I hope I'm right).
Here's the end result
This was on the easier side, but I really liked re-copying the grid, and the way the messages appeared. Another fun day with beer and Samuel! Speaking of which, for a short time there was a drinking version of a Pachinko/Plinko machine that a friend got for me before they were forced to remove it from the shelves. You drop little counters into shot glasses. I tried using my old digital cam to make a movie of it - the sound doesn't work and the production values are shoddy, but in honor of this Listener, here's DRINKO!
Victory for George! 2009 tally - George 17, Listener 7. Current streak: George 3.
Feel free to leave comments, and see you next week for some Intimacy with Bandmaster (did he really mean that?).
Thinking Points
- Japan’s $205 billion USD pachinko industry isn’t as big as it sounds when taking a closer look at how revenues are recorded.
- The industry is on a long-term decline, but there are still pockets of opportunities left
- Many key players are looking at business areas outside of the industry, but one is going all-in on a low cost growth strategy in pachinko.
Each year, the Japanese slot machine, better known as Pachinko or Pachislot, generates more revenues than Las Vegas, Macau, and Singapore’s combined gambling revenues. Though mainstream media highlights Japan’s recent openness to gambling, Pachinko is one of the few forms of “legal gambling” historically available in the country. Despite its long history, the details on how Pachinko halls operate has largely remained a mystery, thanks to negative impressions typically associated with the gaming industry. In fact, there isn’t a single Pachinko hall operator listed on any of the Japanese exchanges.
What is Pachinko?
Pachinko is an Electronic Game Machine (EGM) which operates much like a pinball machine, except with louder music and even brighter lights. Here is what it looks like:
Source: Pachinko Village
In a 2016 post about JP Holdings (TSE: 2749), I provided a brief description of what a Pachinko machine is. The keyword here is brief. JP Holdings got its start by serving coffee at Pachinko halls. It has since taken a sharp turn and evolved into the largest childcare center operator in Japan. Hence, I didn’t see the need to dig too deep back then. In any case, I decided to take a closer look at the Pachinko industry after talking to Daniel Sims (Hidden Value Blog).
Pachinko players rent small steel balls in order to play. The steel balls bounce around in the Pachinko machine. With some luck, the ball falls into a special hole and the player hits the jackpot. The player is rewarded with a flood of balls, which he can later exchange for prizes. The further reality is that players typically sell the prize to a nearby shop, which is often resold to the pachinko hall’s prize supplier, and then found again in the pachinko hall.
How big is the Pachinko industry?
At its peak in 1995, the Pachinko industry generated 34,862 billion yen ($331,189 million USD) in revenues. The industry has continuously declined since, accounting for 21,626 billion yen ($205,447 million USD) in 2016, or 4.16% of Japan’s 2016 GDP. More recently, the Japanese government has placed even more restrictive measures for the Pachinko industry, mainly reducing the jackpot payout as well as the chances of hitting the jackpot for machines purchased after February 2018.
wpDataChart with provided ID not found!Source: Pachinko Industry Web Reference
As of 2016, the industry consists of 10,986 stores, 2,833,133 machines, and 9.4 million players. This equates to 1,969 million yen ($18.7 million USD) in revenues per store, 7,633,246 yen ($72,516 USD) in revenues per machine, and 2,300,638 yen ($21,856) in revenues per player each year. According to these figures, you would think the entire population of Japan is addicted. The reality is that a considerable percentage of Japanese people are Pachinko addicts, but not to the extent that you might imagine. This is because Pachinko industry revenues are blown out of proportion, at least when compared to Las Vegas, Macau, Singapore, or any one of the casino hubs. In fact, the comparison should not exist at all. A quick look at basic accounting explains this.
Distorted industry size
The global standard for gaming accounting records revenues as the aggregate net difference between wins and losses. In comparison, the Pachinko industry size is gauged by ball rental revenues. This revenue figure does not take into account the cost of prizes, which distorts revenues considerably.
In the first paragraph of this article, I mentioned that there isn’t a single pachinko hall operator listed on a Japanese exchange. This made it difficult to piece together the real picture of the industry. Fortunately, Dynam Japan Holdings (HKG: 6889), the largest pachinko hall operator in Japan by store count, went public on the Hong Kong exchange in 2012. This made a flood of industry information available. The cost of prizes as a percentage of ball rental revenues in particular was information which nobody in the industry dared to share (Japanese).
Here are a couple things to take into account when looking at Dynam’s operations. Dynam is:
- The largest operator (4.1% market share) in a highly fragmented industry – 446 Dynam stores (2017/3 report) out of 10,986 total stores (All Japan Federation of Gaming Businesses).
- Focused on low cost, chain operations.
Source: Dynam Japan Holdings 2013 & 2017 reports
When we compare the Pachinko industry to gambling hubs like Las Vegas, Macau, or Singapore, the “Net Revenue” figures above would be more appropriate. Considering Dynam is a low cost chain operator in a highly fragmented industry, I believe it is reasonable to assume that most Pachinko hall operators generate net revenue margins of around 12 ~ 17%.
On the high end of estimated net revenues, the Pachinko industry would account for 3,676 billion yen ($34,925 million USD). Still larger than Nevada’s $10.76 billion and Macau’s $28 billion in gambling revenues, but smaller than the two combined.
Are there any opportunities?
The key publicly traded pachinko related players include:
wpDataTable with provided ID not found!Half of the companies above are all-in on the pachinko industry while the other half either already had other business areas or recently started looking beyond pachinko. Some of the more interesting names are:
Dynam Japan
Since going public in 2012, Dynam increased its store count from 356 to 446. Meanwhile, the industry store count declined from 12,149 (2012) to 10,986 (2016). The company is hyper-focused on low cost operations and building a casual environment. Though it is the only publicly traded pachinko hall operator, I would guess that Dynam is a low cost leader. Dynam is probably best positioned to weather through the Japanese government’s increasingly tougher regulatory restrictions.
Fields
Fields is a fabless pachinko and pachislot maker. The company recently started focusing more on its intellectual property (IP) licensing business. This highlights the industry’s close ties to mainstream media. Pachinko machines come with a small display and is usually tied up with some sort of IP like anime, movies, famous singers, etc. The machine in the picture at the beginning of this article contains a fairly well known (and sometimes problematic) comedian Egashira 2:50.
Pachinko Pinball Machine
Often times, pachinko makers sign licensing deals with the IP owners. Fields started focusing on IP licensing both in and outside of the pachinko industry. The company also owns rights to Ultraman, a famous superhero series.
Pachinko Vs Plinko
Universal Entertainment
Universal Entertainment has stepped into the casino resort industry by opening its Okada Manila Casino Resort in the Philippines. The resort opened in 2017 and is operational, but the company is still adding more features to the facility.
The bottom line
Articles On Pachinko Game
The Pachinko industry is highly fragmented with the largest player holding a mere 4.1% market share. The industry has been on a long-term decline since 2005, but there are still pockets of opportunities, even among players fully exposed to the industry like Dynam Japan. Other key players are starting to focus on pachinko-related business areas like IP licensing and casino operations.