New Image for Japan's Pachinko Parlors

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My machine was easy enough to control. There was a knob, which is used to control the angle at which each ball is shot into the machine. That starts up the digital slot machine on a large LCD screen at the center. The goal is to rack up points by getting the balls to land in certain cups around the machine.

I chose the equivalent of the penny arcade. I paid for 1,000 balls with a 1,000-yen note ($10). My machine, which was programmed to pay back more frequently and in smaller jackpots, played scenes from a Korean TV show that was a hit in Japan a few years ago. Before long, I'd hit the jackpot, and balls poured out of the machine and into my tray. And then again. And again. To my surprise, I was enjoying myself.

Winning over skeptics like me has been a big focus of the industry for many years. Operators have opened new shops in fashionable districts such as Shibuya, the hip neighborhood on the western part of the Yamanote train line that circles central Tokyo. They're hiring college grads to staff operations—which now look more like high-end boutiques with smoke-free areas—and pachinko makers are spending millions on prime-time TV commercials. In 2005, the biggest operators formed a self-policing organization called the Pachinko-Trusty Board (PTB). Today, the biggest seven operators, whose total revenues account for more than 10% of the market, must undergo a stringent annual audit, and results are made public.

Not Wanted on the Exchange?

That has paid off: Outside experts estimate women make up 35% of their clientele vs. less than 20% a decade ago. "People who were dreaming of hitting the big jackpot and spending large amounts of money have gone away, but they have been replaced by new customers," says Norimichi Okuno, a consultant at Funai Soken, a Tokyo-based consulting firm.

Even so, obstacles remain. In December 2005, midsize pachinko parlor operator P-ARK, which runs P-ARK Ginza, applied for a listing on Jasdaq, Japan's second board. This wasn't the first time the company had tried for an IPO, having applied unsuccessfully several times in the 1990s. After P-ARK got past the first stage in 2005, a group of lawyers objected, appealing to the National Police Agency, the Financial Services Agency, and the Tokyo Stock Exchange. A listing application is usually granted in a few months, but P-ARK has not received an answer from the Jasdaq Securities Exchange (Jasdaq refuses to comment on individual cases). The two biggest parlor operators, Maruhan and Dynam, are now taking a wait-and-see approach. (The story is different for pachinko machine makers, which have been listed since the late 1980s.)

The industry may still have a way to go to shed its old image, but I'm now a fan. After a half-hour playing at P-ARK Ginza, I get up to leave, taking my winnings in a tray to the front counter. I want to swap them for sweets, but the staff members strongly suggest I cash out. They count the balls and hand me a box containing a tiny piece of gold to take to a stand-alone booth a few meters down the street. When I get there, I push the box toward the woman behind a Perspex screen. She passes me a 1,000-yen bill—I've broken even.

Tashiro is a correspondent for BusinessWeek based in Tokyo.