Game Center Operators – A 2004 Snapshot

Game Center Operators – A 2004 Snapshot

This interview from Arcadia offers a unique look at the Japanese arcade (game center) industry from the operators’ perspectives. The header image is a bit misleading: Soyuu and Arisaka bear little resemblance to the candy cab dominated arcades of the 80s and 90s. As anyone who has spent time in Japan in the last decade will have noticed, “arcades” have long been dominated by crane, prize redemption, and large-form games.

Soyuu Corp.

We began our business in 1977, and in 1979 we incorporated as a limited company. We rode the wave of the Invaders Boom, and developed our business by buying and selling Space Invaders machines. However, at the time we didn’t have the trust of financial institutions, so we couldn’t purchase them in large numbers—we had to buy them one at a time. As a result, by the time we had accumulated about 100 Space Invaders machines, Pac Man came out, and Pac Man was in color while all the Invaders cabinets we’d bought were black and white! Right when I thought we’d finally come far enough to compete on a decent level, everything was made obsolete and it was back to zero.

We did re-start our enterprise, but it was a true struggle. Perhaps it was our youth and inexperience, but our plan for developing our business was kind of half-assed and incomplete. We tried renting to drive-ins and cafes at about 10-20 units per order, but there was competition from other businesses, and we were always on shaky ground. Around that time I started thinking about department stores and supermarkets: these places were always busy with customers. “Ah, I wish I was in a business with that much activity. Then things wouldn’t be so unstable.” Of course, I recognized that for a company like ours, that wasn’t a possibility. I could only look on with envy.

Time passed, and about 10 years ago, in 1993, I heard that a new Vivre department store was opening in Hirosaki City in Aomori Prefecture. Through a friend, I asked them if our company could supply 10 or so arcade machines for their store, and they replied, “Instead of just 10, how about you supply all of them?” I determined that we would give it our best shot. Later I learned that they didn’t expect us to be able to fulfill that order, they had just asked out of politeness. Our yearly revenue at that point was only 300 million yen, and the investment for this project alone would require about 450 million, so people were skeptical: “can you really do this?” We heard others in the industry talking too, saying things like “that company’s not long for the world.” But I was resolved to show them we could.

The legendary Invader Boom, which jumpstarted the Japanese arcade industry in 1978-79.

For one thing, I felt that if we continued to operate in the same insecure, uncertain business model, then crises like this one were going to keep popping up. I wanted to put us on solid footing, so I knew we needed to change our thinking about the way we did things, and that requires taking risks. Another thing was our employees. We had many young employees, full of passion and enthusiasm for this industry, and I wanted to show them the same feelings back. As you know, anything that has merit involves taking risks. The tricky part, of course, is: which are the good risks to take? At the time we were “profitable”, but when I look now at how little we made back then, you could just as well say we weren’t. So, was it youth, passion, or ignorance? I don’t know.

I sold the rental business we owned and pulled in 60 million yen from that. Signing that loan for 400 million yen though—I wouldn’t call it fear, it was more like an out-of-body experience. Maybe it was the stress, but as I was on the phone with the lease company, my hands and feet went numb, and it was like I was having a stroke or something. Thanks to that business with Vivre, though, our overall sales went up, and one year later we were doing well as a business—we were even able to open a second branch store, which was also successful. In business trust is paramount: if you say you’re going to do something, you’ve got to do it.

As for the way we do things now, our first principle is to limit our game center locations to shopping centers. There’s a reason for that. Even though the biggest profits come from roadside locations, those locations also entail more risk. We decided, therefore, to limit ourselves to shopping centers, where consistent profits are a sure bet. Perhaps we’ll expand our business in the future, but for now we don’t do independent roadside locations. In shopping centers you don’t have to worry about competitors next door either, so even though the profits are lower, that fact acts as a risk hedge, I think.

There’s another reason, and maybe it will sound impertinent to say, but I have at times been very worried about the longevity of the arcade and game industry: will I be able to do this work for my whole life? We’ve dabbled in food production and other industries. The reason is that I think the “game center” business, overall, isn’t doing well. That’s why I’ve sought out shopping center locations: they help lend some health and stability to this business.

The majority of our customers in the game center business are children, so that means that expanding our business and seeking more profit will have a direct impact on our youth. As game center owners, I think it’s imperative that we think about how to balance the health and well-being of the children with our business interests. Resisting that question means our industry will not have much of a future. But if a good answer can be found, then the growth of this industry could double or triple.

For instance, look at prize and medal machines. Customers aren’t looking for direct “compensation” from prizes; they come and play because the games are fun. Collecting stuffed animals itself can be a game, and there’s people who have dozens of the same item in their house! Since customers aren’t seeking that 1:1 equivalent value in these games, I wish the games had a bit more gameplay to them. I want makers to release games that are simple, that anyone can enjoy playing, and that are fun. There is also a danger that game centers will be overrun by medal and prize games, so I’d love to see some new type of machine that shows customers a new kind of entertainment, something that would really fire up this industry.

Soyuu and Arisaka (rebranded “Urban Square” in 2009). The Soyuu model of “department store” game center is still thriving today, though they are dominated by crane and medal/ticket redemption games and scarcely resemble the “traditional” game centers of the 80s/90s. Meanwhile, independent “roadside” game centers like Urban Square have fared less well.

Arisaka Corp.

I started out helping President Junzou Arisawa with his leasing business in 1977. We’d have the arcade machines in tow as we searched the cities for good leasing locations. Then came the Invader Boom, which enlarged the scope of our industry, but there were still so many limitations on our ability to find suitable leases: the foot traffic would be too low, or the shop owners would say we had to place the machine off in a distant corner of the store… gradually this led us to the conclusion that we should open our own game centers.

After officially incorporating our business, we embarked on a series of experiments (and failures) with trying to open new stores. For a time it seemed we would never be able to compete with the developers like Sega and Namco, who ran their own game centers. After opening a modest sized game center in Miyazaki, we tried going to northern Kyuushuu, but the level of knowledge about these games very low there, and the people were very direct and brusque in their dealings with us. I think, though, that this experience inspired us: “we can teach them about games!” President Arisawa had told me about how tough it was in the past, when people knew even less about arcade games and this industry.

Both of us actually love video games, and we play them a lot ourselves. The thing is, you can’t know how fun a game is until you try it out yourself. Sometimes a game could be too fun: after playing it, you look down and suddenly realize how much money you’ve just spent! I think it’s the same for our customers: a game might be really fun, but then they look and see that they’ve just spent their whole week’s worth of spending money. After that they won’t be able to visit the game center again for awhile, even if they wanted to. So choosing the right games and running your game center in such a way that you don’t overly burden customer’s wallets is actually the secret to long-term, stable success in a game center, I think.

The Right Location

When choosing locations, the first and foremost thing is a place with lots of people. In areas with few people you’ve got to spend a lot of energy marketing to the same crowd over and over, but in a busy location you can make a good profit without that extra burden. Yes, it’s true that the initial reaction, when you open a store in a more rural area, is lots of excitement and customers: but then the drop-off is big.

The second big thing is the contract, and making sure it adequately considers the future of the business. Recently the competition for opening branches has grown fierce, which means the leasing contracts have become stricter too. You might find a perfect location, but if the contract is too onerous, you will end up regretting it. No one can see 5 or 10 years into the future, but things are always changing. If we open a new game center today, there’s no guarantee it will be there in 5 years. People get tired of places, tastes change. What will you do then? Should you just close the store and open a new one, or try and rejuvenate the existing store and re-capture the support of your customers? This is stuff you need to think about when you first open the store and sign that contract. Will the terms of the contract make sense considering the profits you can expect to make 5 years from now? That’s how we handle our negotiations.

Nowadays, I think it’s important for a game center to have some kind of theme. Those old game centers, that were simply a collection of arcade machines… there’s a big chance that those game centers may be near the end of their lifespan. Of course when you give a store a theme, it will be terrible when 5 years from now that theme goes out-of-fashion. In that event, though, I think you can probably just re-brand the store with a new theme and bring it back to life. Today a game center without a theme will not be able to grab customers’ attention; it will be overlooked and forgotten. Ideally, we’d open and close new stores every 5 years, keeping the business span as short as possible and always coming up with something new. Of course, that is just an ideal… things don’t always work that way.

Milaiya, a future “themed” game center run by Namco in the 80s. Large developer-run game centers like these were the direct competitors of operators like Soyuu, Arisaka, Third Planet, and others.

The Merging of Game Centers

Like others, I think that the consolidation and merger of smaller game centers into single larger ones is a good thing. For one thing, it allows for a richer variety of machines and goods. And another reason is that it allows operators to create a relaxing space for everyone. Take smokers, for example. If a smoker takes the time to come out to your establishment, only to be told he can’t smoke, then he won’t come back a second time. Smokers and non-smokers both benefit from having a large space that can divided between them. In the small, narrow type of buildings you see near train stations, that simply isn’t possible. On the other hand, take the Aeon Town shopping center. It’s part of a spacious mall with tall ceilings, it’s great. Rather than being a place you go just to shop, it feels more like a destination where you can spend a whole day relaxing. We think it’s the ultimate place for a game center: good service, a fun environment, the fees aren’t too expensive… put those three things together and you’ve got the recipe for a winning store.

Five years ago, there were very few game centers that could offer the level of service of a big center like Arisaka. But what was rare then is commonplace and expected today. I imagine that, from that perspective, five years from now the service we can offer will be of a higher caliber yet. In that sense, what we’re offering now will no longer distinguish us from our competitors. Such is the way of the world.

Basically, I don’t think we can avoid small game centers closing, and merging into big ones. But there are gamers who don’t want to go to some entertainment “theme park”—they identify as gamers, and we still want to appeal to them too. So I think it’s important that we provide a space for them in these large, multi-level game centers.

Game Center Operators and Game Makers

The Japanese tendency to imitate is reflected in the fact that new releases tend to cluster together around the same genre template. Everyone chases after the hit product, and it’s no different with new arcade games: companies try to make something similar to that initial hit, and then it becomes a competition to see who’s version is best. There’s nothing that can be done about it; in times like that, if a developer tries to release a brand new game, no one will even pay attention, and if developers can’t sell their machines, then they can’t make a profit. The PCB sales business, you see, is very dependent on customer needs, and what customers want to play in that moment. With development budgets getting tighter, too, developers really have to ask themselves if their product fits into the current trends. If a development company wants to let their developers make something new that they themselves will enjoy, well, that might produce a great game—but I suspect that only developers with some budget leeway can afford that luxury.

Every year the number of developers is decreasing, and I feel like there is less competition between them. This is happening to game centers too, but at least we can cluster our businesses in the same general vicinity, and get lots of customers that way. For developers, I want them to give us good products that are the result of healthy competition. Where competition is warranted, they should compete; but where unity is required, they should work together. That is my wish for developers. And speaking from an operator’s point of view, if our business slows down, then developers won’t be able to sell their games. And if operators don’t have the money to buy developers’ games, then no matter how good a game they make, it won’t sell. The profits of game center operators, therefore, are the lifeblood of this whole industry, I think.

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