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Issue Date: Vol. 46, No. 3, March 2006, Posted On: 3/25/2006

The Biggest News, So Far, Of 2006

Marcus Webb
When March 30 rolls around – the end of the first quarter of 2006 – the worldwide industry will have completed six trade shows, from ATEI to NAMA Spring Expo. Perhaps 10,000 industry-related (or quasi-related) news items will have crossed my desk during that same period. In this nonstop flood of events and information, what – if anything – is truly important?

The answer depends on who’s asking. For operators, the most important news of the year so far might be that Wal-Mart is about to test 100 Coinstar kiosks. If Wal-Mart installs these devices nationwide, the question arises: how long before the retail giant decides to make Coinstar’s subsidiary, Sugarloaf, its exclusive amusements vendor? A scary thought for independent Wal-Mart operators, but not necessarily an unrealistic concern, given ongoing consolidation in this industry.

For distributors, the most important development of the year so far might be the fact that two outstanding operators recently – and separately – made an identical prediction. Del Guerrini of Frank Guerrini Vending Machines (Lewistown, PA) and Phil McBride of T&G Music (Titusville, FL) both told VT that they expect the current operator base to shrink by 50% over the next decade. Considering that the operator base has already shrunk from approximately 6,000 in 1992 to something like 3,000 today, that is a dramatic and portentous prediction. ("Portentious" meaning "full of import" or "full of meaning and significance.")

Guerrini and McBride make this prediction based on looking around at the operators in their region. They figure half of these competitors are "out of business but don’t know it yet." That is, these struggling operators have old equipment that isn’t turning much profit, just churning dollars. They can’t afford to update or upgrade. The only question is, when will they hang it up? After watching the same events unfold time and again with other routes for the past 10 years or so, Guerrini and McBride know all the warning signs.

This story is being repeated nationwide. If I were a distributor, I’d be asking myself: how many distributors can 1,500 amusement operators support? (Frankly, the same question applies to trade publications.) It’s not hard to see that ongoing consolidation of the nation’s routes is good news for the surviving operators. They are stronger and in more of a position to pick and choose locations, and to dictate terms to locations. If you’re the only game in town, or in five counties, it’s pretty easy to say "Take it or leave it, Mr. Location Owner."

The biggest news so far for manufacturers might be the $69 version of the Apple iPod Shuffle. Remember how fast the prices on handheld, chip-driven calculators plummeted from their first appearance 30 years ago? Remember how fast the $500 DVD players of 2001 morphed into the $35 DVD players of 2006? Well, the same thing is happening here. By 2008, expect iPod players and their competitors to cost about $30. And, expect them to be all over the place. Everybody and his dog will have one (or two, or three). The same goes for cell phones that play video games. They may not cost $30, but they will be omnipresent.

How do manufacturers of video games and jukeboxes compete with that? It’s pretty clear that Sega Sammy, Namco Bandai, Incredible Technologies, Ecast and Rowe/AMI are thinking in terms of creating broadband digital networks that "do everything" – games, music, tournaments, and whatever else they can think of to pull in customers and persuade them to push dollars (or credit cards) into the payment slots. Meanwhile, smart redemption manufacturers and operators put those wonder-gizmos into the prize racks of their cranes and merchandisers.

This, ladies and gentlemen, is the big picture. These are some of the essentials that we should be focusing on, amidst the flood of information and events that compete for our attention every day. As for what it all means…that is something we must each decide for ourselves.

Topic: Editorial: Music and Games

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