Arcade games in Japan, particularly those from SEGA and Konami are dependent on a game service model that relies on profit sharing with the operator of the game, or ongoing subscription fees. The reasons for this service model are complex and unintuitive for most people, so this attempts to explain this model and why it exists in Japan.

In what many refer to as the heyday of arcade games, the 1980s and 1990s, arcade games in Japan and across the world were sold as cabinets of electronics that form a single unit product that were sold for large sums of money. In the earliest games, like Space Invaders, Donkey Kong, etc., this meant that each unit was effectively a complete piece, and the game code was stored either as hardwired instructions on a PCB or as code on a PCB's ROM. Operators were offered maintenance contracts and service parts from the original game distributors, but these services were a necessity to keep products working and to carry out warranty repairs, not necessarily profit centers.

This model of games had limitations. As a business model, it basically meant that once a game manufacturer sold its arcade machines, that was the end of its revenue. Nobody else would buy any more machines from the manufacturer once they all had them, and the existing machines became dead weights from a support perspective. As a matter of practicality, operators and manufacturers realized that the popularity of games would die off over time. In Japan, this lead to the JAMMA standard and eventually JVS, wherein arcade operators could swap out arcade PCBs and retain the cabinet, thus allowing games to be interchanged and sold separately from the cabinets. But this still had downsides, namely that the games themselves were still fixed and mastered separately. If a bug existed in a game board or on a game ROM, the only option was to find some update delivery mechanism, or to provide repair services.

At some point, this problem was basically solved through the use of CD and DVD ROMs, and later hard disks, as media for storing game programs. This happened around the same time that another concept was starting to grab people's attention: save data.

Early arcade games were effectively games that relied on users remembering their progress. The concept of the “one credit clear” later came-to-be, where arcade games would be “cleared” in one credit, which was a very impressive feat, owing to the fact that arcade games would offer “continues” if a user supplied more credits. Some games eventually added password mechanisms, where users would remember a password and then enter it to load their game's state back into the machine. But with the rise of more complex games came the need to save game data. This was eventually done in various different ways in Japan, from magnetic paper with a read/write head, to floppy disk drives, to PS1/PS2 memory cards, Dreamcast VMUs, USB sticks, and other media. This still had limitations though, and eventually, the natural solution was the development and rollout of nationwide arcade networks.

In modern times, Konami, Taito, Bandai Namco, and SEGA operate their own semi-interwoven arcade network services. These network services provide, broadly, depending on the game:

• Network update functionality. Users of these networks can receive game hot fixes and patches, as well as content updates, seamlessly over the internet.
• Profile save data. Users can login to network services using an Amusement IC⁶⁾ compatible mobile phone, network compatible mobile phone, or network compatible game card (including Amusement IC). Networked save data means that the amusement company owns the customer, and therefore, the customer can use their data anywhere the cabinets are.
• Social functionality, like leaderboards, friend/rival relationships between players, online network play between players and with other players, and chat messaging.
• Internet portal functionality. Many games include online portals with services that enable viewing data from the game or interacting with the game outside of the arcade.
• Payments. Through ThincaCloud and PASELI, it is possible to pay for game services at many arcades in Japan using electronic money. This means that instead of having game cards with credits that work only at a single arcade, e-money can be used at any arcade.
• Accounting. Because the machines are online, operators have a complete picture of arcade performance to whatever degree is necessary for their success. Data about machine performance is provided to operators and amusement companies, Individual per-play data is sent too. This also enables the use of a lot of licensed content that would normally be cost prohibitive to obtain indefinitely: a simple short-run promotional contract is all that's necessary for a 6 month long game event with another company's licensed IP. In rhythm games, this is often music and artwork. In racing games, this is car design and logo IP.
• DRM. In basic terms, to protect licensed content and the integrity of online services, these companies use online networked DRM to ensure their games are only operated in the terms of the contract they were purchased or are operated under.

Thus, we return again to the business model. Japanese arcade games rely on profit sharing with the amusement companies, or service charges, because they need to:

• Pay for maintenance.
• Pay for licenses to IP they do not own.
• Ensure regular updates to continually encourage players to play the games.
• Make sure operators and the amusement companies are aligned on incentives and making money.

This is almost the live service model for video games, except that unlike the live service model, coin-operated games are still fundamentally charging per play in some way or another. The game has to be fun, or at least lucrative enough for players to return to it, or it will die. In F2P games, users are often exploited psychologically into gambling or spending money on micro-transactions. In arcade games, users pay for a fixed amount of entertainment. At 100-200 yen per play, Japanese games are often on economic parity with going to the movies, and are a far better value than paying for F2P gacha games.

Many people find issue with the DRM aspect of these games. Why should games require network service to boot and operate? The answer is simple: the vast majority of these games are not original works, and rely on external IP. It is not cost efficient to procure perpetual licenses for many of these products. With some minor exceptions, music, art, and other products are DRM controlled because they cost money to license, and it's easier to structure it so that royalties are paid per-play, rather than in a lump sum for amusement companies.

Note that some companies, like Konami, run services for games that are effectively dead. These games have offline support, but operators can pay for service. It is typically the case that once a game is no longer popular, it will lose network service and be given updates or patches to function offline, or the cabinet itself will be converted to a different game.

• At least one operator has documented SEGA's service model: pay-as-you-go. We know that Performai games like maimai でらっくす operate by way of paying per play. Operators are not charged any significant recurring costs for the machine after purchase excepting things like parts.
• Some games operate on a service model where updates are paid for instead of plays.
• At least one operator has documented that Koanmi has a penalty for removal of some cabinets once they're installed if within the first year. This shows that the contracts can vary between games, and effectively bind arcade operators to games so they don't just drop them immediately.