The Outlook for the Amusement Vending Industry

February 2, 2011 No Comments

Several ripple effects of change cascading upon the amusement vending industry challenge the best of owner operators to adjust and yet hold on to what has sustained them over all their years in the business.

The reactions of their location customers to business declines, however, test reflexes. They’re facing dramatically tough times in Ohio, where the industry has hit rock bottom, while the West and Southeastern states are more on top of their game, affirmed David Alexander, part owner, Alco Music & Cigarette Service, in business since 1931 in Youngstown, Ohio. “It’s not easy to deal with people who want to spend thousands on games to make $10 a week. We have to say no, and they understand.”

Most every aspect of the industry is ruffled in some way. Yet one element that remains consistent is the expectation of honesty from route employees. In addition, said Alexander, “It helps if they can talk to maintain relationships with customers.” He’s had to bend some though, in the area of dress code, as younger employees wear pullovers and jeans, while older counterparts at the same age wore white shirts or nylon knits.

“The smoking ban affected the bars big time,” remarked Danny Dzialo, part owner with brother John, of All Star Amusements, Detroit, Mich. “Though it’ll take time to come back in the recession, everybody plays pool and music, and growth in Keno and improved lottery will help vendors, though it hasn’t hit Michigan yet.”

Meanwhile, the Dzialos have let go of some staff, stopped game purchases, and replaced those that don’t make money with what’s lucrative. “We’re trimming the fat, staying liquid, and not creating too much debt.”

In business 25 years, the Dzialos maintain good relationships with customers through a team approach, as well as with employees. “I expect loyalty, honesty and I do the same.”

Smoking bans and rigid enforcement of drunken driving laws have hit bars in Iowa hard, commented Steven Bray, owner of Amuse Me Games & Vending LLC, Cedar Rapids, Iowa. He’s sold off 90 percent of video games, and though the jukebox part of business is strong, he sees warning signs of NSM and others threatening to sell to bars directly. Pool and dart leagues also declined due, Bray assumes, to stricter laws, poor economy, and competition with home video. “Younger people aren’t lining up for leagues as older folks did at their age.”

Bray has allowed leagues to decline instead of advertising to youth that don’t read it. Overall, he’s downsizing, watching expenses and concentrating on top accounts. Selling product to the home market, a favorable niche for Bray, is bouncing back from a low felt since 2009.

Partner Rod Hunt may not expect to spot new equipment at the 2011 Amusement Expo, yet he entertains signs of a pinball comeback, which would please Bray. “They don’t rake off fees, and have a strong resale value for the home market.”

Bray has de-emphasized the kiddie arcade accounts because of low return on investment, unlike the plush and candy cranes in bowling centers and at Pizza Huts he operates. He sees an end to diversifying in bars. “Our future belongs in owning a select number of bars. Old-school bar owners understand the value vendor’s experience brings. Younger owners think they don’t need to listen. They don’t understand cost of investment, that we lose money buying equipment to defray cost of unprofitable equipment they think they need. Our bar does three times the business other bars make that provide karaoke and live entertainment on the best jukebox nights, Friday and Saturday.”

Though politically incorrect to say, the DWI law instated in Texas is the biggest obstacle to overcome for bar businesses, as Brad Whitley, owner of All American Amusement Vending, sees it from Lubbock, Texas, where business in bars is down 20 percent over the last two years, unlike the non-alcohol related part of the industry.

Much of his property is paid for where he operates machines, so he’s in better shape than others to weather the storm until weaker competition is out of the picture, he noted. “Location customers have changed too, expecting more customer service. They’re more demanding.”

Also on his side is what he expects and gets out of route employees, which are honesty, punctuality and technical expertise. “I can teach the technology part if I get the first two.”
Established locations in the Houston, Texas area, unable to sustain themselves in the failed economy, have consequently contributed to a decline in business for Houston-based All Coin Equipment. “With fixed costs and low revenue, the rewards for risk factors aren’t there,” confirmed owner, Vito Gaudiano.

“Laws contrary to the bar environment shut them down, the Facebook effect causes a decrease in bar customers, and video game business declines, home market increases, and high equipment costs, leave less discretionary money. Return on investment is critical. A wrong move and you can go under. The solution is to diversify the mix of equipment such as jukeboxes and pool tables, equipment that has longevity, and bulk vending, where the product, not the hardware, changes.”

Gaudiano is open to ideas he picks up at the annual Amusement Expo, which he finds very informative, where he can stay in touch with what works and doesn’t, interact with other operators from across the country and with manufacturers, getting a feel for current operations.

In business for over 30 years, Gaudiano notices a change in customer loyalty. Because of the economy, they’ll change over to a perceived better offer, buy equipment directly rather than share revenue, and operators jump in on someone else’s location. On his end, Gaudiano said, “I try to provide the best equipment and service I can, as always. If I lose a location, it’s not my fault.”

To fortify his best services policy, he depends on his route employees to be honest, dependable, and resourceful, to promote the business, interact with locations to build relationships, and have the technical abilities to diagnose problems for quick and improved solutions.

Overall declines are evident in Fort Dodge, Iowa, where Dave Knupp, owner of Amuse O Matic Inc., asserts that jukebox, pool, and darts show potential, while video games have declined over the last 10 years. Though in decline, he said, at least league play is still going and videos from Merit and Aurora with hundreds of game selections still attract players.
The upside Knupp sees in his 30 years in business is that working with customers is easier and less cutthroat. “People are trying to stay in there. When videos first came out in the 1980s, everyone had to have them. Things are calmer now. No one wants to be in videos – or in this business.”

Knupp is content to have his route employees show up everyday and to represent the company well.

“Digital music, and the core staples, pool and darts are still good to us,” said Scott Bright, owner of All American Amusement & Vending, Flint, Mich. “Locations haven’t changed a lot, relying heavily on promo to reap benefits. People on the bar routes, go to have a good time shooting pool or for dart leagues, not just to get inebriated.”

Bright owns a number of full-line vending companies and isn’t seeing the declines on the vending side as on the amusement side. His company was recently contracted to supply product vending to General Motors. He saw an immediate drop in touch screen games, along with a lesser decrease in self-merchandising games, when the state instituted Keno. “The allure of non-cash prizes is not as glorious as a three-minute cycle in a Megatouch game, very parallel to Keno play.”

His resort, campground, and college locations are unaffected, rather the bar business has taken the greatest hit. “Up to 17 bars closed their doors in three major areas since the smoking ban took affect May 1, 2010, and bar revenue is down 40 percent.”

In 34 years, Bright has never laid anyone off, just moved them from the amusement to the product side. His objective is for his route employees to enjoy the work environment, and return that with honesty. He puts education at a premium, helping with books for continuing education. In hiring several high school and college students, he said, “Older guys with the wisdom, stay fresh with the enthusiasm and new blood of the younger set.”

This year, he’ll bring a few employees along to the 2011 Amusement Expo. “I may not find the next magic equipment but just kibitzing with peer and reps and trading tips, there’s always more knowledge to be gained.” -

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