I stayed at a few places like that when I was going to school in Tokyo. Some of them have rooms that are more cubicle-like, without even a full ceiling, while others are more like individual, complete rooms. Nearly all of them have confusing layouts (especially for non-Japanese speaking foreigners like me).
But they are definitely cheaper than the hotels.
also worth noting, video rooms are often the refuge of the homeless in japan and i wouldn't be surprised to find out that the majority of deaths weren't salary men, but shoppingcart men.
RE: "production of space" comment.
But that seems obvious.
The US has much more space than tiny, tiny Japan. Space scarcity would seem to be a major factor there.
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