Wednesday, October 05, 2022

PR agency power paves roads to IR licenses

In recent years, IR operators have been building their Japan operations from scratch, their eyes firmly on the prize of winning a gaming license and the considerable profits that are almost universally expected to derive from the Japanese market. One of the key tools that most, or perhaps all of these operators have reached for is that of local PR agencies.

Journalists communicating with gaming executives will often find themselves directed to one of these firms: Las Vegas Sands has worked with the Japan branch of Powell Tate; Caesars works with Ashton Consulting; Galaxy Entertainment works with Golin; Rush Street Gaming has employed Finsbury; and the list goes on.
The larger IR operators do not necessarily form exclusive connections with their local PR firms, but may hire different companies for different tasks. They are not in the habit of making public which firms they have contracted with, so the picture that can be offered here is necessarily incomplete.

Famously, Japan is dominated by two giants in the communications sphere, Dentsu and Hakuhodo. Their power is omnipresent in Japan, and their political connections go right to the top. To name just one of them, among Dentsu’s alumna is First Lady Akie Abe.
One consequence of this industry structure is that the more-than-a-dozen international IR operators setting up in Japan quickly come to realize that the largest PR firms have contractual relationships with many other operators that they are in direct competition with.

The major PR firms try to put the operators at ease by explaining that different teams will handle each account, and that strict walls are put up between the various teams. They insist that the confidentiality of the operators’ strategies can be fully maintained.
With the stakes so high, more than one of the international operators views such an arrangement with caution. Tim Drehkoff, CFO of Rush Street Gaming, explains that his company was initially surprised to hear such things, and ultimately decided to seek a smaller PR firm whose loyalties are undivided. “It was important to us to find a PR agency that wasn’t conflicted with someone that we may be competing with,” he observes. Other operators feel very much the same way.

Once the contracts are signed, many operators are having a similar set of experiences.
There is general agreement that the PR companies in Japan are very strong when it comes to political connections and their knowledge of the decision-making landscape. They have established relationships with key politicians and bureaucrats at both the national and prefectural levels. They can make introductions and facilitate meetings.
Indeed, some operators have noted that PR agencies in Japan are focused on this aspect of their work more than in some other countries. They are very useful sources of intelligence and provide a good deal of important information that foreign business people coming into the Japanese market need to know.

The key weakness that many operators have discovered is that, not surprisingly, the Japanese PR firms know very little about the gaming and IR industry, as until recently they had never handled such accounts. It is obviously very difficult to construct a communications strategy about a product that you don’t really understand. Clearly, there will be a learning curve in this respect, with major operators working hard to quickly educate the teams that they have made contracts with.

Most of the competing IR operators are also building their own permanent teams in Japan. There seems to be a consensus that, at least for the time being, it is necessary to have both in-house staff and to hire outside PR firms for various tasks. Indeed, many also note that their PR teams back in their home countries are also playing a crucial role in formulating their overall communications strategy for the IR license hunt in Japan.

The role to be played by the PR agencies will also evolve as the process continues. At a certain point within the next few years, the importance of lobbying government officials will recede and that of engaging with the general public will start ramping up.

Perhaps by the end of 2020 or so, the three consortia to receive IR licenses will have been chosen and the IR construction process will get underway. The task of shaping messages to the host communities—typically concerned with issues like gambling addiction, an increase in criminal activity, and the corruption of the values of young people—will become a primary concern.

In this area, too, some observers say that the PR firms will have a learning curve, as these are not matters that they really have much experience in dealing with. By that time, the successful IR operators will be filling out their own in-house Japanese staff and will become less reliant on what the contracted PR agencies offer.
Still, for the giants Dentsu and Hakuhodo, with their unparalleled reach in print and broadcast media, there will undoubtedly be an ongoing role to play even after the first IRs open their doors.

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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