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Issue Date: Vol. 44, No. 7, July 2004, Posted On: 7/8/2004


Clash Of The Titans


Marcus Webb

Things in the amusements industry have come to a very odd pass indeed when America's largest traditional video game manufacturer and several of its top distributors announce that they don't need or want each other's products or support. Betson personnel are not alone in pointing out that no amusements manufacturer has ever succeeded, in the long run, with a direct sales policy. Incredible Technologies speaks for several manufacturers when it asserts that distributors as a class have done a mixed job - at best , of educating the operators about today's complex new equipment and how to make money with it.

IT CEO Elaine Hodgson rejects any suggestion that her company is shaking up the industry's established order. She is entirely correct when she says that the lines between manufacturing, distribution and operations have become increasingly blurred in recent years. Betson's own manufacturing arm is one obvious example of vertical integration. The operation of large routes by leading distributors is another. Further example comes from operators who dabble in distribution.

But the distributors that have dropped the IT line clearly see IT's policy as a shot across the bow. And they have returned fire by raising pointed questions about whether IT's next move might be to eliminate operators entirely and go direct to locations. IT says no such program is conceivable or acceptable to them, and vows the company will not sell direct to locations. Only those operators who are certified members of the Amusement and Music Operators will be permitted to buy equipment on a direct basis, IT executives said.

Therein lies the rub. Who defines locations, and what is to prevent locations that own their own equipment from joining AMOA? Executive vice-president Jack Kelleher says there is no litmus test, no screening mechanism, no definition built into the AMOA governing documents to separate "locations that operate" from "operators that also own locations." In Kelleher's own words:

"According to our bylaws, there is no membership category for location owners; therefore, they are not eligible to join our trade association. Do we have operator members who also own locations? Yes. Do we rely on the honor and truthfulness of our members when they apply for membership? Absolutely, much in the same way we rely on their word when an applicant tells us he or she has five employees. Do we have a system in place to audit the accuracy of all of the information submitted by an applicant? No, but if a challenge , by another member or from one of us here at headquarters , does arise, denial of membership can only be made with the approval of the Executive Committee."

For the record, AMOA played no role in creating IT's new policy. AMOA neither endorses nor criticizes it. Kelleher concluded: "In my nearly six-year tenure, the idea of locations applying or becoming members of AMOA has never been an issue, and we don't anticipate that IT's new policy will change that. After all, we've been around for 56 years, and our broad definition of what constitutes an operator has served us pretty well so far."

Time will tell on that issue, and on several others. Among them: will IT be able to handle sales, service and finance for operators across the U.S.? Will operators feel comfortable dealing directly with a manufacturer that could theoretically be purchased by another company someday'a company that may not have IT's scruples against direct location sales or against operating?

For now, it's clear that IT has launched a major experiment. If this experiment  results in weakening the three-tier market chain, as several distributors charge, that would be regrettable. If it encourages some distributors to become even more competitive and to provide better sales and service, that will be good for the industry. Of course, these possibilities are not mutually exclusive. Many factors have been shaking up this industry and dissolving its traditional structure. With or without IT's policy, that process seems sure to continue.

 


Topic: Editorial: Music and Games

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