In his occasional feature for Arcade Heroes, immersive amusement and attraction entertainment specialist Kevin Williams (KWP) looks at the major issues impacting the international amusement sector, particularly in regards to Japan and their current amusement scene.
Kevin Williams: Having observed the video-amusement market since the 1970’s, I have always had a soft spot for the industry in Japan (colloquially referred to hereafter as the Japanese Factories). I have followed their developments from their emergence in electro-mechanical gaming to fledgling video amusement, emulation, and direct copying of popular iconography, (as well as direct rip-offs) that made up the titles of the early 70’s; Then through the ‘Golden Era,’ with investment and innovation in both games and hardware. The latter saw not just an increase in graphical prowess and immersion, but also in the creation of the profitable Japan Amusement Machine and Marketing Association (JAMMA) video board standard that transformed the business in the late 80’s into the 1990’s. The Japanese amusement trade has shaped the video game landscape and beyond.
Sadly, as with all great empires, the amusement trade in Japan has reached a transition point where it will either fall or reinvent itself. The issues that have brought the industry low are not new and cannot be blamed solely at the feet of the Global Health crisis, but COVID has been the last straw to break the once mighty, and influential, edifice created.
The influence that the Japanese Factories used to wield on the Western amusement scene was immense. First with TAITO’s Space Invaders, and then after the success of NAMCO’s PAC-MAN, represented in the West by a distributor (Midway), the Japanese influence grew, seen as a powerhouse for innovative and popular amusement releases. Soon, American amusement business was populated with Japanese amusement subsidiaries; names such as TAITO, Capcom, Universal, Nintendo of America, Centaur, SNK, American Sammy, Data East, Seibu/Fabtek, Irem, Kaneko, Mitchell, Hudson, JALECO, CAVE, Seta, Toaplan/Romstar, Banpresto, Tatsumi, ATLUS, Tecmo, as well as KONAMI USA.
But in the late 1990’s, the period of dominance and influence evaporated, partly as consumer console gaming offered more lucrative revenue streams for game developers, partly through mismanagement and excess. The amusement trade was evolving from a coin-operated street route industry, into a dedicated Family Entertainment Center (FEC) and leisure entertainment business. By 2019, all that remained of Japanese Factory subsidiary operations were SEGA Amusement, BANDAI NAMCO Amusement (with their respective European and American operations), Square Enix along with their Taito division, and Konami. Many of these companies also have been involved in operation a modest amusement venue business, to further bolster their bottom line.
Within Japan, a tectonic shift in influence and control was taking place. Mismanagement on many boards had seen merger and acquisition, as the only valuable currency for these once powerful operations was their library of IP, and their assets through physical amusement venues. Aspirations to grow their business through gaming and casino investment, was linked to planned changes in Japanese laws regarding the opening of casinos on the Home Islands. But the cracks were more than visible, and the likes of SNK, TAITO and others were acquired. While those operating amusement held on by their fingernails, hoping to avoid serious investment.
With the loss of Pachinko as a mainstay revenue, the tired and in some cases dilapidated arcade business operation was the mainstay of business for some once powerful Japanese Factories. The ability to sell hardware back to yourself is a lucrative, if tired, model. But all good things come to an end. The changing of the old guard of senior executives, investor pressure, and more scrutiny of practice, saw a domino’s effect on facility business. Those that did not evolve perished. With that we have seen the birth of the new generation of amusement venue operators, personified by GENDA, emerging from an influential background of associations, and the influential Round1 operation.
The loss of political power with the senior executives has seen an internal war erupt within the once calm waters of the Japanese amusement trade. Older gatekeepers, chafing with younger executives. With the impact of COVID and the lockdown on facility business, the strain on already depleted capital has been extreme. Drastic measures of closing unprofitable locations or abandoning expensive leases and asset drains. A death-march of once iconic Japanese arcades closing has littered social media. While the once strong trade association has imploded and merged, now represented by the Japan Amusement Industry Association (JAIA), the gathering has proven wanting, suspending their once formative trade convention in the face of revolt.
Is this the end?
Many casual observers would be wanting to make sweeping assumptions at this point, saying that all that has been charted is indication of a slow death. All compounded by the news of SEGA selling their stake in amusement facility business in Japan to GENDA, soon followed by GENDA then acquiring the flagship American amusement venue (PAC-MAN Entertainment) from NAMCO USA. Things are clearly in transition. These sites have been neglected, but still there is value, but the needed investment seems to be beyond the original owners, now focused on capitalizing on their assets. This was rammed home by the announcement that amalgamated game giant SEGA Sammy Holdings would sign a strategic alliance with Microsoft, towards their long-term strategy to develop on their brands. This is an aside to the recent management buyout of their Western amusement interests, known as Sega Amusements International.
Now the only remaining Japanese amusement subsidiary division in the West is BANDAI NAMCO Amusement, directed fundamentally from their European (BNAE) operation, with a US (BNAA) division – one that has just divested its interest in amusement venue business through their NAMCO USA operation, while acquiring the repair operation known as Speedy’s One Stop. Meanwhile, the European operation has also seen several of their ‘NAMCO Funscape’ amusement venues shuttered. All this while there is a resurgence from newcomers in amusement and location-based entertainment business. More restructuring of the Japanese subsidiary is expected in the near future.
But in Japan, BANDAI NAMCO Holding’s is reinventing themselves for the new market as they see it. They have invested considerably in new technology and branding, launching their ‘VS Park’ chain of active immersive entertainment sites, also becoming one of the largest operators of the new “Gacha-pod” vending entertainment venues, as well as rebranded amusement sites – all this in an effort to shake off the old image. While the company has experience with VR through their VR ZONE brand concept, this proved to be less than successful and has been shelved for new investment. BANDAI NAMCO the latest amusement factory to turn to ‘Live Play’ – partnering with Amazon Fire TV to allow players at home to remotely play physical crane machines, prizes delivered to their door. Innovation driving some factories future ambitions.
Those that hope to survive are investing heavily in a new generation of Japanese entertainment venue, looking more at the social entertainment model, than pandering to the traditionalist interpretation of what an amusement venue should be. Examples that are starting to gain traction include new sites from TAITO (owned by Square ENIX), the operation has developed a new chain style. While CAPCOM has been rolling out a new version of their popular arcade centers, now developed to be incorporated into retail and mall locations, the changes in the playing habits of the new generation of audience requires for the entertainment to follow the audience.
Prominent Japanese Factories have also turned their gaze to the opportunity of competitive entertainment. Esports is playing a major component in new investment and thinking. The leading corporations supporting and funding their own eSports teams. While KONAMI has built an eSports Arena in the heart of Tokyo that they hope to drive a new business model. Competitive play has been the backbone for much of the renaissance of the Japanese amusement scene. The competitive league and tournament play, a factor previously of video arcade society has evolved into the Twitched Streamed, vast live audience play environment. The amusement trade in this country keen to play a dominant role in this profitable business.
What lies ahead for the Japanese Factories is unclear – still sitting on valuable IP and brands, they have attempted to capitalize, partnering first with Chinese game developers to create cost-effective releases. Even now Chinese amusement factories such as WAHLAP are being represented in the West through partnership with distributors once part of Japanese subsidiaries. While many of the previously owned Japanese controlled distributors now come to depend wholeheartedly on the latest video releases from America manufacturers such as Raw Thrills, seeming to turn full circle from the days of Atari and Midway. The next couple of months will continue to see a restructuring of the influencers in the current amusement scene.
The question must be, how relevant Japan, and the amusement trade in general will be to the new resurgence of Out-of-Home entertainment?
About the Author – Kevin Williams is a widely-respected specialist on entertainment and technology. A regular presenter at international conferences, Kevin is also a regular speaker at the Foundations Entertainment University (FEU) and the Amusement360 events, bootcamps for LBE and FEC investors. He also holds the role as one of the senior judges of the VR Awards.
Kevin’s consultancy KWP Ltd specialises in helping international clients develop immersive and interactive entertainment. Kevin has recently become Co-Owner and Technology Director for Spider Entertainment, a Global leader in Out of Home Entertainment for retail destinations and beyond. Along with advisory positions with other entrants into the market.
Kevin is publisher of the Stinger Report, a-must-read for those working or investing in the amusement, attractions, and entertainment industry. Along with this, he is also a prolific writer with regular columns for the main trade publications in this market, while presenting numerous conference sessions on the sector and its global impact. He is also the co-author of the only book on this aspect of the market – currently working on the next edition, scheduled for publication soon. Kevin can be reached at email@example.com.