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Issue Date: Vol. 44, No. 12, December 2004, Posted On: 12/14/2004


The Outlook For 2005


Marcus Webb

If you want to know what's going to happen next year, ask a guy who got that question right last year. David Cohen, the friendly but realistic CEO of Firestone Financial in Newton, MA, is privy to financials from many operators, and to the strategic thinking of many manufacturers and distributors.

Last January, he predicted a gradual increase in operator investment, driven by growing location demand for new-generation countertops and downloading jukeboxes, plus increasing route acquisitions. Bingo!

So what does Mr. Cohen see happening now and in the future? "Amusement operators are still in many cases, although clearly not all, reluctant to buy," he told VT. "The main reason is that the operator population is aging. Today's average operator is probably closer to 55 years old than 35; little new blood is entering the business. A 35-year-old has a different attitude toward buying and trying new things than a 55-year-old. The younger businessperson is thinking: 'How can I build up my business?' The older businessperson often is thinking: 'if I can get a few more years like this one, and simply hang on to what I've got, I'll be fine.'"

As polling organizations like to say, "Demography is destiny."

Asked about the financial health of today's operators and distributors, Cohen reports: "Delinquencies in leasing and lending payments are down. Operators are healthy today. The return on investment is steady thanks to long-term, reliable earnings from so many important staples like countertops, pool, and music. Distributor sales are up three, four, five, six percent'but not in double digits."

Future developments? "An important new trend," says Cohen, "is toward more 'dual use' street facilities: more pizzerias with game rooms, more bowling centers with arcades, more skating rinks with coin-op amusements, etc. Operators are embracing these family-friendly facilities because they're not subject to DUI laws and smoking bans."

My own trend projections for 2005 and beyond include more successful operators finding ways to work with, rather than compete against, the exploding casino market (check out this month's feature story on Las Vegas-based operator Leon Cauchois of Palisades Amusements for a fine example). Operators nationwide will have plenty of opportunity to learn how to adjust to this new environment.

Next year and beyond, I think we'll see broadband becoming much more important to the amusements industry, and that this will occur much faster than many trade members now believe. I agree with VT columnist Kevin Williams, who writes in this issue that broadband is "the elephant in the living room'a hulking monster that everyone tries to ignore or pretend is not there." Williams adds that broadband's "ability to alter (if not totally transform) our industry is undisputed, though how best to grasp this live wire is another question."

I think we'll see more direct sales from manufacturers to locations, and further disintegration of the traditional three-tiered industry chain. I expect we'll see more credit card transactions for games and music; more operators embracing home sales of used equipment as a major sideline; and more legal skirmishes as this industry flirts with the line that separates gambling and amusement.

In all, 2005 should be pretty much like 2004: a good if not great year for the industry as a whole. A year where many evolutionary trends are gradually transforming the landscape. A year of important opportunities for those who work hard and work smart.

Demography may be destiny, but statistics are just averages - not scientific laws that impose iron limits on individual potential. We have many operators, distributors and manufacturers out there who dare to think and act boldly. It is they, not some law of averages, that will ultimately define our future.

Topic: Editorial: Music and Games

Articles:
  • Uncertainty In Bulk Vending's Brave New World
  • Luck Is No Longer A Variable For Bulk Operators
  • Churn, Baby, Churn. Declining Dynamism In Larger Economy
  • Lessons Learned From The Life Of The Mad Mogul Felix Dennis
  • Can Operators Cash In On Heavy Summer Traffic?

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