Okura Holdings, a Japanese pachinko company, has recently announced that it will be closing its Big Apple, Ofuna Pachinko Hall located in Kanagawa Prefecture due to low customer traffic and intense competition. The closure is set to take place on May 7, 2023.
What led to Okura Holdings latest closure?
In a recent filing, Okura Holdings attributed the decision to the lack of customer traffic since early 2020 and increased competition in the pachinko industry and other forms of entertainment in Japan. Despite some recovery in customer traffic in the second half of 2022, the slow pace of recovery compared to other pachinko halls led the company to make the difficult decision to close the Ofuna Pachinko Hall.
Okura Holdings has been implementing measures to minimise further losses from weaker performance, and as such, decided to focus its resources on other more promising pachinko halls.
In the second half of 2022, Okura Holdings reported a 13.6% increase in revenue to JPY3.1bn (US$23m). The company also reported an operating profit of JPY254m (US$1.88m), a significant improvement from an operating loss of JPY279m (US$2.06m) in the second half of 2021.
This news is not the first of its kind from Okura Holdings. The company previously closed three pachinko venues in September 2021 and two in May 2021, leaving them with 11 pachinko venues, most of which are located in Nagasaki Prefecture.
According to Okura Holdings, the three parlours that were closed down were underperforming and were still recording losses. The closures were a strategic move by the company to focus its resources on other more promising pachinko halls.
The intense competition in the pachinko industry and increasing competition from other forms of entertainment in Japan were also cited as reasons for the closures.
In a statement, Okura Holdings said, “Taking into account the general adverse operating landscape, the intense competition in the pachinko industry and the increasing competition from other forms of entertainment in Japan, the management considered it would be more beneficial to the group to focus its resources on other more promising pachinko halls. The closure of the halls will help to stabilise and improve the group’s financial performance in the longer term.”
According to the company, shutting down the parlours contributed towards stabilising and enhancing the group’s financial performance in the long run.
Pachinko: Japan’s popular low-stakes gambling game with a legal twist
Pachinko, a popular mechanical game in Japan, is widely used for gambling purposes. The game is comparable to slot machines in the West, and serves as a form of low-stakes and low-strategy gambling.
The game is widely played in Japan, with Pachinko parlours being a common sight across the country. These parlours often have a number of slot machines on offer, which gives them a similar look and feel to casinos. Modern Pachinko machines have both mechanical and electrical components.
Gambling for cash is illegal in Japan, but a legal loophole exists that allows Pachinko to be played for low stakes. Players can win Pachinko balls from the game, but they cannot exchange them directly for cash within the parlour.
Instead, players can exchange them for “special prize” tokens which can be “sold” for cash to a separate vendor off-premises. These vendors, which are often owned by the parlour owner, sell the tokens back to the parlour at the same price paid for them, plus a small commission. This creates a cash profit without technically violating the law.
In 1994, the Pachinko market in Japan was worth ¥30 trillion (nearly $300 billion), and by 1999, revenue from Pachinko parlours accounted for 5.6% of Japan’s ¥500 trillion GDP. Pachinko parlours provided employment to over 330,000 people, which was 0.52% of all employed individuals in Japan.
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