The Outlook for New Games
February 10, 2013
How Operators Are Facing Today’s Challenges
The amusement and vending industry continues to go through changes and challenges. In the past few years, improving technology with home gaming systems, smoking bans in bars and taverns and population changes have forced operators to think outside their comfort zone to ensure their businesses’ survival.
As owner of Antler Amusement Company in San Antonio, Texas, and president of the Amusement and Music Operators of Texas, Kirby Cline has witnessed many changes in the coin-op and amusements industry over the last decade. Cline, who bought out his father and now runs the company on his own, considers himself a traditional street operator with games and amusements in bars, bowling centers, nightclubs, restaurants and FECs.
“I service locations within a 120-mile radius of San Antonio,” he said. “I have everything from pool tables, to ticket and self-redemption games to juke boxes. The key to my survival and growth has been diversification.”
As president of Texas’ Association, Cline witnesses firsthand the challenges that many operators face. Although the no smoking laws and advancements in home video games and smart phone game technology pose threats, he has worked around these challenges by finding other games that people would go out to play and enjoy.
“Internet juke boxes have been a lifesaver for us,” Cline noted. “People just stand in front of them for hours and play them because they carry everything from the oldies to the newest tunes, so customers are never bored. Also, the pool tables and air hockey games are still very good for us.”
Along with the challenges of the no-smoking regulations and home game system advances are the challenges of operation costs.
“I can’t say that my revenues are down, but the costs for me to get those revenues are up. Fuel, insurance, the costs of purchasing the games – all are on the upswing and to be honest, the costs are outpacing me, raising the price of the games. This business has never been short of challenges, so as in the past, I will find ways to make people want to go to their restaurant or nightclub or FEC to play the games and have fun.”
Hanover, Pa., is the home of Staff Music & Amusements. As vice president of the company and president of the Pennsylvania Amusement & Music Machine Association, Steve Fritz is also aware of the ever-changing obstacles that face operators in the coin-op industry.
“I think it’s easy to see that video games are going by the wayside. There is nothing new out there that makes us think that we can purchase them and get a decent return on our investment. Now, the market gets better games than we do. We used to get a six-month to nine-month window for new games. People would go to our locations to play the games and we would make a good profit for those months,” Fritz explained. “But now, there is no window. Still, the Golden Tee Golf and Silver Strike Bowling remain strong for us. ”
Another advantage that Fritz has in his location is that Pennsylvania has exempted some bars and taverns from the state’s no smoking laws.
“Everyone I talk to in states where the no smoking laws are completely in place has seen a 30 percent drop in revenue, but so far, our locations are still allowing smoking so we are stronger on that front. If it does go into effect, we will diversify again as we have done in recent years. Ninety-five percent of our business is still in taverns, but we have added other sites in our service area which includes more than 1,200 machines in a 50-mile radius.”
Another challenge that Fritz has noticed is the challenge for the mom and pop bar and taverns to compete with chains.
“This is something we have to watch as well. If mom and pop or small tavern and bar operators close, we lose those locations, so we always have to look at new avenues for us and our machines and games. This is nothing new in this industry. It is always changing, and we are always adapting.”
For the past 34 years, Ryan Brooks and his brother Logan have owned Alpha Vending in Oklahoma City. The family business has games and machines in 60 bars and taverns and four Laundromats. While their almost four decades of experience has taught them to diversify when needed, the company still finds strong sales in games such as Golden Tee Power Putt and self-redemption machines.
“We have gone out of our comfort zone of just bars and taverns and into Laundromats,” said Ryan Brooks. “In this business, you can’t hide from the challenges; you have to face them. So many things change that you have no control over from legislation, to population shifts to technology. You have to be able to handle it.”
While some operators in other states have left the bars and taverns venues, Brooks has stayed with them because he has not been hit by the no smoking laws yet plus larger establishments such as FECs and large bowling centers do not fare as well in the spread out Oklahoma City region.
“We don’t seem to have the population needed to support these expansive locations. As of now, I see very few ‘beer and shot’ bars opening up which are the best places for our games and machines,” he said. “But as the demographics change and the area changes, we will find ways to bring in customers and entertain them. That is what we do.”
With four locations throughout Ohio, Indiana, Missouri and Michigan, Shaffer Distributing is a new and used equipment distributor for coin-op operators. Shaffer provides service, support and parts and represents all major lines of music equipment and vending.
“I think the industry is now trending upward, and I am quite bullish for the most part,” said Bryon Howard, branch manager for Shaffer’s Livonia, Mich., location. “I see more redemption-type equipment being bought and used than the traditional pool table and darts games, and the reason for this is that the tavern landscape is changing. To maximize their business growth with all the changes, operators have to think outside the box and find ways to entice customers into their locations.”
Shaffer sees both ticket and self-redemption games remaining strong especially as operators leave the bars and taverns and venture into sites like FECs, bowling centers, night clubs, sports bars and movie theaters.
“These games always have an audience. The video games are very difficult now because the sophistication of the home systems and mobile games cannot be beat, but the redemption games are still fun and exciting, especially when they are in sites that are family oriented, clean and well maintained.”
While Shaffer admits taverns are a tough venue now, he does think digital juke boxes are one way around the challenges with these locations.
“Customers love music, and the digital machines have so many types of music that people stay entertained for a long time. The juke boxes have a lot of life and profit in them.”
As president of Inglis Coin Machine Service Company in Garden City, Idaho, Dick Inglis has changed his business focus from bars and taverns to bowling centers and FECs. He is also president of the Amusement & Music Owners of Idaho.
“In the last few years, I have seen that redemption games are the way to go right now,” he stated. “I have 300 games out there within a 50-mile radius of Boise, and, along with redemption, I still have pool tables, pinball and darts and the crowds are still coming, but that might be fading with the non-smoking laws and the stricter DUI laws that place police outside taverns and bars all the time. These laws do discourage patrons from going in.”
Having grown up in the industry, Inglis is disappointed to see that the newest laws and sophisticated game systems for the home have cut operator revenues by approximately 30 percent, but the challenges will not destroy the industry.
“Everyone has to be creative about their locations. Not every operator in every part of the country is sharing the same challenges. It’s up to us to figure out what is the best path and what will bring in customers. It’s true that these days, the obstacles seem endless, but it really is time to figure out how to compete. If we can do that, we can still have our companies and entertain the patrons.” –