Japan’s pachinko industry is in trouble.
Faced with a declining audience, tighter regulations and the birth of a new casino industry in Japan, pachinko’s death seems all but certain. However, is there a potential light at the end of this tunnel? Has the industry really done all it can to try and stimulate growth? Is it too late for pachinko?
The answer is a resounding no. The pachinko industry has not done nearly enough or even scratched the surface of available opportunities to grow its audience and attract new, younger players. While the reasons for this are many, this short examines the use of currently untapped marketing channels with a focus on digital to promote awareness and build a new, younger, more affluent audience for the industry as a whole.
Pachinko marketing consists of a few very traditional mediums, attracting a traditional customer base. Newspaper and magazines have been the medium of choice by the industry for decades. These have often been constrained to specific publications and pages (sections) where one may find similar types of ads pushing horse and boat racing. These forms of legalized entertainment have continued to attract a repeat customer-base, but one that is aging quickly without any visibility or interest from new, younger clientele. Regulations to pachinko advertising and promotions have also hurt traditional medium’s ability to have a visible impact.
An interesting example was a parlor in the Kansai Region who attempted to run an ad promotion free coffee and breakfast items to patrons who arrived early. This ad was met with a note from the local police force (the police in Japan govern pachinko from a local prefectural and city level) asking the parlor to remove the ad, as it had shown a clear “benefit” to attract players. The local advertising ordinance had made it clear that this was not allowed, and any benefit, even a simple cup of coffee, would be considered a ‘grey area’ for advertisers. While these local ordinances differ from prefecture to prefecture and even from city to city, they have not been conducive to the industries ability to re-invent or grow itself.
Other costly advertising and promotional gimmicks have also been undertaken. A very popular form of promotion is the use of idols and celebrities to appear at parlors for signings or meet and greet events. Many pachinko machines are themed with popular anime or idol-spokesgirls. What better way to attract a drove of players than to have a member of Japan’s popular idol group AKB48 show up at the pachinko parlor to sign autographs? With a significant older-male (salaryman) demographic, these types of promotions generally fare quite well in attracting interest from customers.
These initiatives do not, however, do anything to grow the industry and attract a new market. You may notice a missing channel from the above listed initiatives – digital marketing.
With the exception of large multi-national pachinko operators, many small and medium local parlors don’t even have a website, much less any other presence in the digital world. In a country where LINE rules and digital girlfriends are a real thing, does it not make sense for the industry to look at a shift into this medium? HOGO believes the industry has a an opportunity, a crucial one, to make or break its future. While the specifics of this channel are many, this short focuses on several including website, digital media and social media marketing.
As noted above, the majority of pachinko parlors, with the exception of large corporate groups, do not own or operate any web or digital presence at all. The building block of any companies digital shop front, pachinko websites do require some level of censorship in order to not stir the ire of local authorities. While there are very few written rules with regards to how these websites look, feel and operate, some basic regulations do apply. For example, similar to the above “coffee” example, parlors must be careful in how they actively promote financial of physical benefits to players. Lucky draws, giveaways and
promotion of “jackpots” are generally frowned upon. Soft benefits, such as events, parlor operational benefits (amenities) and the like, including machine types (with a focus on popular characters and themes) are very much allowed and offer a way for operators to differentiate themselves online. Simple sites that promote locations, LINE@ accounts, operational hours and give users a feel for the experience should be the bare minimum digital presence every pachinko operator utilizes.
Digital media is key to the industry placing itself in front of a new audience. While also highly regulated and with the understanding some advertisers and third party platforms have banned pachinko altogether, there are still many online resources and ad networks in the country willing to accept and promote soft-sell pachinko ads to their networks. This includes networks such as Doubleclick that not only allow for some pachinko advertising, but offer a variety of mediums (including video) as well as re-targeting options to ensure that the target audience sees different ads based on time of day, their own digital footprint and personal habits, as well as how many times they have seen a particular ad. For example, if a customer sees a parlors ad and clicks through the website, they may see a second ad later promoting a specific game or with more detailed information about the parlor, as the customer has then been tagged as a “high potential” client. While it is unfortunate that giveaways and promotions are somewhat restricted, event promotions (such as the previously mentioned idol signings) can be advertised. Digital media and advertising channels give a new opportunity to pachinko operators who, while still operating some more traditional promotional tools, want to place these in front of a new audience.
Facebook and Instagram are huge in Japan, but for pachinko, LINE@ is where its at. LINE@ is the corporate function, similar to a Facebook business page, allowing companies in Japan to collect fans and followers to push content and communicate. Like Weixin (WeChat) in China, LINE is very much used a communication tool and has been quickly adapting to integrate eCommerce and other business functions into its mix. LINE@, in its most simple function, allows pachinko operators to create an opt-in database for future marketing communication as well as a direct line of discussion with customers. LINE@ followers may get access to special promotions or insights, or VIP tickets to one of those idol signings. Whatever the promotion, LINE@ allows parlors to directly create opportunities to market to highly interested customers. Creating these followers is as simple as adding a QR code to the website, whose traffic has been driven by the use of digital media (advertising).
The pachinko industry does have an opportunity to reinvent itself. The industry can fight back against the rapidly declining figures. To give some context, in 2011, gross pachinko revenue reached ¥246 billion, with visible yearly declines down to ¥223 billion in 2015. Total parlors in operation has fallen significantly from 12,323 in 2011 to 10,986 in 2015. Overall “active” customers have decreased from 1.6 million in 2010 to around 1 million in 2015.
And the future development of the integrated resort industry? The pachinko industry has rightfully dismissed this concern, citing that existing customer bases, especially those in rural areas far from existing IR sites, will have little to no impact with the opening of gaming operations. Pachinko patrons, at least those of today, often utilize the game as a break – a time to escape and “relax”. The wagering is small, with many small-stakes machines only offering single-ball bets of ¥1. This means for many in pachinko’s mass market, a ¥10,000 bill (~USD100) could last an hour or more. These patrons have little to no interest in other games outside of pachinko and pachi-slot and are not in positions to be paying the ¥6,000 entry levy that will be imposed by casinos on Japanese citizens. Distance, lack of desire and expense mean that these customers, while rapidly disappearing, will not be lured away from the pachinko halls by the promise of glamorous integrated resorts.
With that said, the industry is still suffering a major decline and is at long-term risk of disappearing altogether if it does not reinvent itself and find a new audience to call its own. And in this regard, the future, while shaky, can still be altered.
HOGO will soon publish the results of an existing trial with Kansai-based pachinko group Rakupachi. This test includes a use of multiple digital channels and advertising methods to prove the market opportunity within the industry. These results are expected to be published in August 2018. For more information or queries, contact us via firstname.lastname@example.org.