Our Group is a pachinko hall operator in Japan. Customers come to our halls to play pachinko and pachislot games, one of the most popular forms of entertainment for adults in Japan. According to Yano Research, in terms of the aggregate gross pay-ins, our Group ranked 74 out of the top 600 pachinko hall operators as at 31 December 2015; and in terms of the number of halls in Japan, our Group ranked 58 out of 3,421 pachinko hall operators(1) as at 31 December 2016.
With 12 halls in the Kyushu region, we were the 7th largest pachinko hall operator(2) based on the number of halls as at 31 December 2016 and ranked the 10th in terms of aggregate gross pay-ins in the Kyushu region. We currently have 18 pachinko halls, out of which, 13 are in the Kyushu region, three in the Kanto region and one each in the Kansai region and the Chugoku region, respectively.
Our Pachinko Hall Operations
Pachinko and Pachislot Games
A pachinko machine resembles a vertical pinball machine (but without pinball flippers and with a large number of playing balls). The objective is to collect as many pachinko balls as possible, in order to exchange them for prizes at pachinko halls. The customer fires the balls into the playing field in rapid succession, while controlling the velocity of the pachinko balls by turning a handle located next to the tray. Currently, playing costs generally range from around ¥0.5 to ¥4 (including consumption tax) per ball.
A pachislot machine is similar to a traditional western slot machine, with three reels of different images in the playing field. The objective of pachislot is to collect more tokens by stopping the spinning reels such that the images on each reel match up to form a winning combination. The customer inserts tokens into the machine and pulls the start lever, which causes the three reels to begin to spin. While the reels are spinning, the customer presses the stop button under each reel to stop the corresponding reel. If, after the three reels have been stopped and the winning combination of pictures appear, the customer wins more tokens. Currently, playing costs generally range from around ¥2 to ¥20 (including consumption tax) per token.
Players aim to collect the most number of balls and tokens, which can either be exchanged for prizes or saved for subsequent visits.
Prizes provided by pachinko halls consist of:
General prizes: These are typically the types of daily goods sold in convenience stores, such as accessories, fragrances, food and snacks, household goods, drinks (including liquor), cigarettes and toys.
G-prizes: These are decorative cards with a small embedded piece of precious metal (such as gold) or coin-shaped pendants of precious metal (such as gold), and can be subsequently sold by customers to independent G-prize buyers for cash.
Our Pachinko Halls
During the course of our business development, we have established four brands, namely, “Monaco”, “K’s Plaza”, “Big Apple.” and “Big Apple. YOUPARK” to cater to customers preference and address the competition in the area. The majority of our halls provide a mix of low and high playing cost machines or just low playing cost machines. The majority of our pachinko halls have a mix of pachinko and pachislot machines, whilst some only have pachislot machines, depending on the customers’ preference in the area.
Big Apple. YOUPARK
Customers and Suppliers
As a pachinko hall operator, we have a large and diversified customer base in the regions where we operated our halls. Our suppliers consist of (1) machine suppliers; (2) G-prize wholesalers; and (3) general prize suppliers.
The pachinko industry in Japan is highly fragmented. According to Yano Research, the aggregate gross pay-ins recorded in 2015 by the top five and top ten hall operators, accounted for about 15.3% and 19.8% of the entire market respectively, while the aggregate number of halls operated by these top five and top ten operators merely represented approximately 8.9% and 11.1% of the total 10,986 halls, respectively as at 31 December 2016. As at 31 December 2016, there were only 50 hall operators that operated over 20 halls.
According to Yano Research, the pachinko industry remains relatively favorable for mid-sized pachinko hall operators with 15 to 19 halls and large-sized pachinko halls with more than 20 halls. As at 31 December 2016, there were 3,421 pachinko hall operators, of which over 95.0% were small-sized pachinko hall operators with less than 10 halls.