By Scott Cronick
Debit-card systems for arcades seem to be the way to go in large Family Fun Centers around the nation, but independent arcade vendors said the costly systems just don’t make sense for most of the locations they service.
Although coin-operated machines dominate most arcades and small business with games, vendors said tokens make a great deal of sense and are far more affordable than debit systems.
Gary Minter, owner of Tip Top Amusement Company in Carson City, Nev., said more venues with multiple video and redemption games have already made the switch or are considering making the switch to tokens for promotional purposes.
“Locations can use the tokens as promotional items so that when a family comes in and sits down to have dinner and there are a few kids at the table, the server can pass out some free tokens,” Minter said. “So the kids go over and play some games and the parents enjoy some quality adult time. And then when the free tokens run out, the parents usually give them more so they can have even more peace. It ends up being a nice family night out and everyone is happy.”
Minter said hotels and ski resorts that he services also use free tokens to market their arcades.
“Pizza parlors and sports bars, where we do most of our business, as well as ski resorts and hotels, just like tokens,” he said. “If a family checks in at a hotel or ski resort, they say, ‘Here’s some free tokens and the arcade is down the hall and to the left.’ It introduces them to the arcade that the family might not even know exists. And you know they will keep returning for their whole visit. It’s savvy marketing.”
Dennis Greco, owner of Top Shelf Amusements in Rosemont, Ill., is a “firm believer in tokens.”
“We use tokens in some places and coins in the others, but I really think kids love to feel the tokens in their hands,” he said. “Plus, you can just do more with tokens and people aren’t thinking, ‘Did I get everything I was supposed to?’ like they do with debit cards.“
Greg Duke, owner of Video Amusement & Music Company in Ontario, Ore., also does not use debit-card systems, preferring tokens.
“The big FECs tend to go with card systems, but the majority tend to go with tokens so you can do promotions with them that you can’t do with money,” he said. “Tokens also tend to keep vandalism and theft down. No one wants to steal a bunch of tokens. So there’s a security issue there that’s great with tokens. Tokens aren’t free, but they are not the same as cash, and you can include them in packages that you can’t do with straight cash.”
Debit-card systems, operators said, just don’t make sense for smaller arcades and business.
“We just don’t use them,” Minter said. “They have their place and work well but we found tokens to be the way to go. In our area, they just haven’t gotten into the cards and I haven’t talked to anyone who has except family entertainment centers. “
Midstate Amusement Co. in DuBois, Pa., also doesn’t handle debit-card systems.
“Places like Dave and Buster’s still use them, but we are mostly still using coins,” said owner Fred Wood. “We went through a period where we were only using tokens at our skating rinks and bowling alleys and pizza places, and it went back the other way to coins. It doesn’t make sense to me, but if it’s what the customer wants, we do it. I think tokens are great – why not give customers six for a $1 as a great marketing tool?”
Greco said he wouldn’t have a debit-card system even if he owned an FEC.
“I am not a big fan of debit-card systems,” he said. “They are just so expensive. But if I were an owner using coins, I would do more tokens, especially in bowling alleys and pizza places that have a lot of birthday parties. But even that can be costly by the time you buy the tokens and the mechanisms for the machines. It’s a small fortune.”
Jeff Prescott, owner of Valley Vending Service in Plattsburgh, N.Y., also doesn’t service any businesses with debit-card systems.
“We also don’t even do tokens, really,” Prescott said. “We hemmed and hawed about it but we are mostly in places like food courts, and there is a lot of impulse play and you lose that with tokens. Tokens are great if you have a place where it makes promotional sense because you offer birthday parties, but for others it’s just an expense not worth investing in. It takes about $20,000 to do a card system correctly. You need to have a lot of games being played to make that much money back. Each game needs a card reader installed. It’s a major investment. Even switching to tokens can be costly putting in new coin mechanisms for each machine. They might only be $10 to $20 a piece, but that adds up in a 40-piece arcade.”
The biggest trend among independent game operators is the massive increase in redemption games over video games.
“Redemption games are increasing; I don’t see anyone jumping off the ticket bandwagon,” Prescott said. “In a mall arcade, redemption games are 65 to 70 percent of our revenue. And people of all ages love them. You would be surprised how many adults are coming in and working their way up to prizes. My wife buys all of that stuff and it’s truly amazing what people will play for. They want everything from crock pots to all kinds of weird stuff.”
Top Shelf is also seeing an increase in redemption games.
“I think it’s only natural because our industry is our own worst enemy because they came out with the same video games in the arcades as they are making for home systems like Xbox. Plus the graphics are even better on the new home systems. They can play better video games at home. But they can’t play redemption games at home, so that’s why they remain popular.”
“Redemption games are like mini gambling machines, and people just love them from young to old,” Duke said. “There is a major shift to redemption and away from video games. I think it’s because video games are just so widely available to kids in home formats and they don’t have to go anywhere to play them. But you can’t win prizes at home. The funny thing is how similar all of the redemption games are. If they are big and bright, people want to play them. It’s appearance more than content most of the time. It’s hard to get away from the act of putting a ball through a hoop or a token through a slot. The excitement isn’t the content but winning the tickets. But redemption works. They are more expensive to operate – twice as much as a video game. But the games also have longer legs. A video game may last three or five years, but a redemption game can last you 20. ”
But that’s not the case for Midstate Amusements, which is actually doing less redemption games.
“We do a lot in bowling alleys, but I think the cost of ticket systems and redemption counters scare a lot of operators,” Wood said. “For some reason, a lot of my customers think they make more money if they don’t do redemption, and I tell them it should be the opposite. I am a big believer in redemption games. I sometimes wonder how people stay in business at all. I see them pulling out redemption games and putting in straight video games and air hockey and things like that.”
Independent arcade vendors mostly reported flat or declining revenue.
Tip Top, which has been a family-owned business for 43 years, offers amusement and vending operations to hundreds of locations spanning about 300 square miles in northern Nevada and northern California.
“Business is still slow and we are still looking for recovery,” Minter said. “Some counties are running at a 15-percent unemployment rate, so we’re slow and struggling. Mom and pop places are really hurting and we have seen smaller bars and pizza parlors go out of business. You just have to cut costs and find your niche and adapt and hope things turn not just for our industry, but all industries.”
Midstate, which was founded in 1962 by Randall Miller, who partnered with Wood in 1980, covers about six counties and a several hundred mile radius with hundreds of locations and more than 6,000 pieces of equipment on its route. Wood said business has been flat.
“I think the whole amusement business is that way everywhere,” he said. “A big reason is that we have a lot of bars and they are struggling with tighter drunk driving laws. People just don’t go to bars like they used to, so our business is down.”
Valley Vending, which is a third-generation family business that began in 1957, services hundreds of locations in a 100-mile radius and experienced a flat 2013.
“The vending and ATM parts of our business are up, but bar and music and games business is down,” Prescott said. “People just don’t have money. They have their bars in their garage or man cave or whatever and just don’t want to get caught drinking and driving. They hang at home and don’t play games and don’t have to pay $4 for a beer.”
Top Shelf, a company that has operated in a 75-mile radius for about 35 years and services 80 locations, had a down year.
“In Illinois right now, any where that anyone is pouring liquor they are putting slot machines in and that is really hurting the amusement industry because our games are coming out,” Greco said. “Plus, I think the manufacturers are really killing our industry. Not only are they making the same video games for home systems, but they are pricing their games from $10,000 to $14,000 and even higher. So unless you’re an FEC operator, you can’t afford those games. Guys operating bowling alleys and pizza parlors
…it just doesn’t make sense to invest that kind of money.”
Video Amusement & Music Company services about 100 locations in a 30-mile radius and saw a decent year thanks to adjusting their priorities and strategies.
“There have been a lot of shifts in revenue with the economy and everyone is repositioning themselves, and so are we,” Duke said. “Small companies like ours are able to change our strategy must quicker than bigger companies. So when we see things not being used, we have been able to change our strategy and reinvest quickly. And more redemption games has been a big part of that. The key to survival for places that have games is to focus in places that draw big numbers like movie theaters and mall arcades and bowling centers. They just don’t work in mom and pop stores anymore.” –