• Thu
  • Oct 30, 2014
  • Updated: 10:49pm

Jackpot for the pinball wizard?

PUBLISHED : Monday, 06 August, 2012, 12:00am
UPDATED : Wednesday, 15 August, 2012, 11:04pm

Left to himself, Yoji Sato would have been a fish dealer. But like some of the pinballs in his trade, life took an unintended course and he ended up as the biggest fish in Japan's booming pachinko industry.

His company, Dynam Japan, which was a small operator when he took it over four decades ago, is today the largest pachinko parlour operator by the number of halls. It is now listing in Hong Kong, hoping to raise up to HK$1.5 billion, and starts trading today.

Like any other college grad, Sato wanted to chase his dreams, which in his case lay in the fish business. To everyone's surprise, after graduating from Tokyo's elite Waseda University with a bachelor's degree in commerce, he joined supermarket chain Daiei instead of the family's pachinko business.

'All I wanted was to be a top player in the international fish industry,' Sato said, adding that his happiest years were cutting fish and sashimi as an apprentice in the supermarket.

In Japan, he explained, it was a well-respected job because of cultural reasons.

But then, at 24, his father died, and the course of Sato's life changed. 'If I didn't take over the business when I was 24, I would be the No1 fish buyer worldwide today,' he lamented.

He was destined to be No 1 in something else. Starting from the two pachinko parlours he inherited in 1970, Sato grew it to 355 parlours in four decades, making Dynam the top player in the field.

Though hardly known outside the country, pachinko is Japan's most popular pastime. The parlour game is similar to vertical pinball, where players fire small metal balls in rapid succession into a playing field. A recreational and gambling device, pachinko is comparable to the slot machines of Western gaming.

'Pachinko is a national hobby. It is indispensible to us,' Sato said.

He said it was a great way for people to relax in a high-pressure society, which explains its overwhelming popularity.

The overall pachinko industry's revenue stood at 19.4 trillion yen (HK$1.8 trillion), accounting for 28.6 per cent of Japan's entertainment market in 2010, according to the Japan Productivity Centre.

That makes it seven times the size of Macau's gaming industry, which in turn takes in six times as much as the Las Vegas Strip.

Macau, the world's largest casino gaming hub, last year reported gaming revenue of 268 billion patacas (HK$260 billion).

Dynam Japan, where Sato is both chairman and chief executive, wants to use the capital raised in Hong Kong to grow its market share. Even though it is the leading player in Japan's gaming industry, Dynam has merely 2.7 per cent of the market by number of parlours, a sign of just how fragmented the market is.

More than half of the 4,000-plus pachinko operators only have one parlour. Dynam is one of the three operators with more than 100 parlours in the country.

Sato said this fragmentation was also an opportunity for the likes of Dynam. 'We will increase the market share by building new parlours as well as acquiring other operators' halls,' he said, declining to elaborate on the targets.

He said 75 per cent of the IPO proceeds - about HK$1.2 billion - raised from the initial public offering would be used to finance 75 new halls in the next three years.

Based in Tokyo, Dynam's 355 pachinko halls are spread across 46 of the 47 prefectures in Japan. It posted a net profit of 15.9 billion yen for the financial year to March, compared with 16.2 billion yen a year earlier.

Sato believes that although the pachinko industry may have plateaued, adding new halls, especially the so-called Yuttari Kan halls, will help Dynam achieve higher revenues and expand its player base.

'Traditional halls are mainly frequented by men and the cost is relatively [high], at four yen a ball,' he said.

'Yuttari Kan halls are cheaper, with a ball coming for just one yen. These parlours also have a broader range of players. The number of high rollers is decreasing but the medium-low market is on the up.'

He said Dynam also looked to attract more female customers, who account for just a quarter of the players.

Some 60 of the 75 Dynam plans will be Yuttari Kan. The revenue margin for these halls is 32.2 per cent, compared with 15.1 per cent for traditional halls. There were 16.7 million pachinko players in Japan in 2010 and the number is expected to increase to 18 million in 2015, according to Japan's Entertainment Business Institute.

According to Sato, the most challenging part of expanding the business will be finding the right people. That, and following the needs of customers, is in Sato's book the key to success for any business.

Sato speaks English and, with the IPO, is considering learning Cantonese or Putonghua.

'I think it would be better if I spoke some Cantonese or Putonghua as I will spend half my time in Hong Kong after the listing,' he said.

On his personal involvement in pachinko, he said that when he was young he would play it every day. Ironically, it's a luxury he can't afford as the chief executive of the top pachinko chain.

'But I still play pachinko sometimes these days,' he said.

Married with three sons, Sato hopes his children will, unlike him, have the freedom of not joining the family business if they don't wish to. 'If they want to work in this industry, it will be purely out of their own will. I hope they join, but they must be interested in it.'

TOP SCORER

Name: Yoji Sato

Company: Dynam Japan

Title: Chairman, chief executive

Age: 66

Marital status: Married with three sons

Stake in Dynam before Hong Kong IPO: 80.3 per cent

Stake after IPO: 68.2 per cent

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