U.S.A. — It’s no secret that many operators have become disenchanted with most traditional upright and sitdown video games, and the sector’s leading manufacturers are aware of this sentiment. They have been working to redefine the category for today’s industry – and to reestablish video as a reliable source of long-term ROI. According to several leading machine operators and manufacturers, there is evidence that these efforts are succeeding.
“I think some video games are definitely good buys,” said Jason Kendrick, partner with Gregg Cobb in Gametime Amusements (Brownsburg, IN). In recent months, Gametime has added many new video games to its route of mainly taverns and restaurants.
The company’s staple video inventory consists of 45 golf and bowling video games from Incredible Technologies and 20 countertop terminals from Merit Entertainment, along with other titles such as Global VR’s golf game. “Our total route is now approaching at least 50% video,” said Kendrick.
Operators who favor video games say their main focus is ensuring long-term player appeal, and different strategies to accomplish this goal have emerged.
Some operations, like Gametime and its 10 partners in a new nationwide alliance called Premier Games Promotions, seek to create long-term ROI through networked tournaments. At presstime, Premier (premiergamespromotions.com) was halfway through its first Golden Tee LIVE tournament.
The event features 50 prizes and a grand prize of a trip for two to the Masters Golf Tournament in Augusta, GA. As a result of this promotion, gameplay and earnings have increased for alliance members’ GT LIVE games, said Kendrick, though no exact figures were yet available.
KEEP IT CASUAL
Other leading operations such as Namco Cybertainment Inc. (Bensenville, IL) are adopting a different strategy for financial success: focusing on casual players who enjoy quick, simple games. “We’re looking for equipment that appeals to a very broad mass market, so I don’t have to worry about a small group of hardcore players who may be gone in a few months,” said David Bishop, senior vice-president.
Namco, once the largest American arcade operation, is transitioning into a national street route with almost 25,000 machines in the U.S. and Caribbean. The company serves approximately 1,200 locations that include movie theaters, restaurants, water parks and other sites that stray from its original mall base. Only 150 manned arcades remain in the operation, said Bishop.
“Game playing in the U.S. is becoming a much more casual experience,” Bishop said. “At Namco Cybertainment, we are really not catering to hardcore players, so we need to buy video games that are incredibly intuitive and simple, not the high-end, hard-core, super-engrossing titles. We buy some of those, but very few.”
Bishop prefers games that emphasize fantasy over realistic physics, such as in a driving experience. The latter may be extremely lifelike, he said, but this type of game is often too challenging for average or casual players to enjoy.
“Advanced simulators such as Sega’s Initial D or Namco’s own driving simulator, Wangan Midnight, earn very well from a small sector of hardcore players,” said Bishop. “But that’s a more fickle market than casual gamers. For the most part, we’re looking more for drivers that offer what I call ‘stupid fun,’ as opposed to providing ultra-realistic simulation experiences.”
Bishop praised video game manufacturers whose executives tell designers, “You can’t make it too simple.” He pointed to Raw Thrills’ The Fast and the Furious as an outstanding example of this.
“Raw Thrills has done a great job; they really get it and probably do one of the best jobs of providing video games with appeal to the American market at prices that give solid ROI to operators,” Bishop said. “I could point to Namco’s own driver, Mario Kart, and say the same thing,” he added. “It’s not intimidating, very inviting, and offers appeal to a wide spectrum of players.”
While some operators insist that not enough good games are available at attractive prices, Kendrick and Bishop disagree. “Of course there are good games available,” said Kendrick. “I am looking forward to seeing Merit’s new Aurora. We’re pretty hot on IT’s Golden Tee LIVE and Silver Strike Bowlers Club, too. We’re also going to buy a new Big Buck Hunter Pro unit.”
PRICE REMAINS A KEY ISSUE
The price of new equipment remains a concern for operators, Kendrick said. “Some videos are pretty expensive; anything over $4,000 or $5,000 means you have to be very careful,” he said. “We bought some games at $6,000 and now the same title is selling for $4,200. At the same time, there is something to be said for being first to market with those products because you can build player loyalty.”
Manufacturers said they also are sensitive about cost. “Pricing is a big issue because higher game cost dictates a bigger price per play, which turns off some players,” said Ron Malinowsky, director of game sales and marketing for Sega Amusements USA.
Malinowsky said that anyone who spends time in arcades and street locations can easily observe a price-driven dynamic among players. “Moms and dads tell kids, ‘I usually give you $2, but today you’re only getting $1 so pick out the best game.’” He added that a limited budget causes many players to choose value-added games, like ticket redemption machines, rather than video games.
Certain locations do draw a significant audience that will pay $3 to enjoy a superbly realistic experience, such as Sega’s flight simulator Afterburner Deluxe, Malinowsky said.
Video game manufacturers must respond appropriately to these varied pressures and segmented audiences, said Malinowsky, by offering a wide range of games at affordable prices. “Every buying decision that an operator makes is based on revenues,” he explained.
With this in mind, he said, Sega’s current product line includes street pieces such as its Extreme Hunting: Tournament Edition, an upright gun game.
While some operators are becoming more pro-video, many remain skeptical of the category after too many years of products that cost much and earned little, said Bob Geschine, president of Betson Enterprises, the partner of Raw Thrills/PlayMechanix.
The solution to this problem, said Geschine, is for manufacturers to build quality games at attractive prices, with economical upgrades in mind. “Our job is to create products that will give operators positive cashflows,” he said.
Accordingly, Geschine said, one aspect of Betson and Raw Thrills’ strategy is to create platforms that support reasonably priced updates, enabling operators to maintain fresh and appealing products without huge investments. By the end of 2007, said Geschine, Betson and Raw Thrills will probably have an upgrade path that will enable operators to convert the entire installed base of The Fast and The Furious to the upcoming sequel, The Fast and The Furious: Drift.
Raw Thrills president Eugene Jarvis has stated repeatedly that his company’s mission, along with Betson’s, is to create games that not only make money for operators, but that also change negative attitudes about video. Geschine voices measured optimism regarding results so far.
“It took a long time to get operators negative about video, and it will take a long time to get them back,” he said. “But we’ve made great progress in turning those attitudes around. With many of the most progressive, forward-thinking operators, I think we’ve largely been successful.”
Another manufacturing strategy for ensuring the success and long-term value of video games in today’s market, said Geschine, is a carefully calibrated production schedule and allocation strategy. Raw Thrills’ first driver, The Fast and The Furious, has been on the market for three years and is now approaching 10,000 unit sales. Geschine said those sales are spread quite evenly across the game’s 36-month production window.
“In the past, many failures have resulted from manufacturers trying to cram a lot of units into the market at once, Geschine said. “We are willing to move gradually and build the market. This policy helps ensure great ROI for operators, especially those who bought a game early.”
UNDERSTANDING BOTH STRATEGIES
Operators may choose different strategies for video game deployment based on either advanced technology or casual play, but manufacturers said both approaches are valid and deserve support.
According to Caryn Michal, director of marketing for Global VR, the widespread availability of wireless high-speed networks “could easily change the business model for video games, just as it has done for jukeboxes.”
As networking technologies develop in the larger economy, she said, the cost of supplying related hardware to operators will come down dramatically. “At some point, every piece of equipment going into field will have a modem,” she said. “It will be instantly connected as soon as you turn it on, as opposed to the barrier of having to pull wire.”
Ultimately, said Michal, a universe of networked video games will provide the basis for additional revenue streams beyond gameplay, possibly including advertising and other services that are facilitated by online connectivity. “We are talking to larger FEC owners now about this,” she said.
Also supporting both networked games and casual play experiences is Incredible Technologies. IT sales and marketing vice-president Don Pesceone endorsed David Bishop’s assertion that some players are merely seeking simple, mindless fun – including in street locations, where the company’s tournament titles have been very successful.
“We think street locations are a hugely viable business for video of all kinds,” said Pesceone. “We are developing games that include advanced networking technology and also bread-and-butter pieces that are easy to understand.”
IT is now testing a trackball video game called Target Toss Pro: Bags for a March 19 release in kit and dedicated formats. Pesceone said it’s a simple video version of a popular bar game in the Midwest called “Corn Hole” that began catching on 18 months ago and now is becoming a nationwide fad, supported with tournaments and publicized with coverage on CNN. Corn Hole is a beanbag-toss game that uses two plywood sheets with target holes.
IT’s video version will not be online, but it is configured to support local tournaments controlled by the operator and location owner. The company envisions a series of Target Toss video games that may include horseshoes, lawn darts and other themes.
On the networked side of the market, IT officials strongly believe in the viability of online tournaments. “Many operators say video games in bars are dead, but our figures show otherwise,” said Pesceone. “Last week’s earnings on Golden Tee LIVE were pretty darned good. Splittable income after fees, which includes player account money, averaged $176.45 per machine. Silver Strike Bowlers’ Club averaged $119 in splittable income after fees. The only reason some operators find that tavern video is suffering is in cases where games are outdated, ill conceived or not promoted.”
Raw Thrills, like IT, also intends to support both operator strategies, with networked tournaments for some games and classic casual play for others. Raw Thrills/PlayMechanix will introduce a tournament system to support Big Buck Hunter Pro this year.
“Yes, there is a segment of players who want tournament play,” said RT president Eugene Jarvis. “So we’re working hard, as with Big Buck, to include online features because we think it adds value. You still need a game that’s fun to begin with; then a network will enhance the revenue.”
But Jarvis constantly reminds his staff that fun gameplay, not technological enhancements, remains the main factor in the success of any video product. “Players don’t go up to a Fast and Furious and say, ‘Oh, it’s not networked. I’m not going to play it,’” he said. “There is still a large segment of casual players who don’t care if a game is networked. They are not particularly competitive; they don’t want a player card. We want to serve both sectors.”
NEW MARKETING METHODS
Manufacturers are moving to embrace and create several strategies to build the market from the player and location base upward, rather than relying exclusively on operators to educate them about available games. Online tournaments are just one weapon in a growing arsenal of aggressive, cutting-edge marketing techniques, company officials said.
Betson, for example, is attempting to increase demand for video games from locations and players with a nationwide marketing campaign for Big Buck Hunter Pro that launched on January 31. Bob Geschine told VT, “I’ve had operators tell me they refuse to buy anything unless the player and location ask for it. This is why we’ve started looking at other marketing avenues.”
The company retained Los Angeles-based 47 Communications, an experienced PR company that has worked with the home video game market, to craft its PR blitz. The firm has strong contacts in the consumer video press.
“We’ve taken matters into our own hands,” said Geschine. “We have learned that the more recognition a game gets in the mainstream media, the more play you’ll get.”
Geschine said the campaign has garnered considerable publicity for Raw Thrills games, and that distributors that utilize the positive press to educate tavern associations and tavern owners about the product’s earnings and popularity can create what is called pull-through demand. “The operator does respond – even if reluctantly – to pressure from players and locations,” he said.
Echoing Betson’s verdict that direct marketing to players is vital to success, Global VR’s Michal said future marketing efforts by game manufacturers and operators alike will target young players, college age players, sports enthusiast, and other demographic sectors with tailor-made campaigns. Future publicity efforts will utilize more event-driven marketing and will continue to make information available to players online about physical locations where certain games can be played.
“Dave & Buster’s already does a brilliant job of this,” Michal said. “They do a lot of marketing specifically to let people know they have the latest video games, and specifically which titles.” D&B’s frequently airs TV and radio advertisements and produces print campaigns to bring people in, she said.
Manufacturers have discovered that online player communities are powerful tools for creating excitement among players and bringing them to the games. Global VR, for example, supports player forums within company-controlled websites.
“Our forums give people a chance to talk to those of like interests, including people they may not meet elsewhere,” said Michal. Players use the forums to arrange play dates and maintain ongoing dialog that keeps the player community enthused about current tournaments and new games, she said.
GVR also pays close attention to non-proprietary player websites and forums where games are discussed frequently. “Our society is raising new generations of players who expect this form of communication,” said Michal. “The Internet is where information is shared and distributed most effectively and widely. Our challenge is to create a stir and a buzz for players to go do something they may not otherwise do: explore out-of-home gaming.”
Incredible Technologies sees cooperation with operator alliances as another important marketing tool that can create measurable success, both in terms of unit sales and cashbox earnings.
“Club Lucky, Club Nation, Premier Games Promotions and a fourth group that is forming – these are the future of the industry,” said IT’s Pesceone. “Large operator groups banding together to cooperate on promotions by creating a larger prize pool for players are giving players a reason to come back to the locations.”
Pesceone said that when Club Lucky runs a tournament on an IT game, the manufacturer enjoys a noticeable spike in sales of that game to operators who are not club members.
IT is encouraged by the development of these operator alliances and is “doing whatever we can to support it,” said Pesceone. He pointed to customizable tournament support features in IT games, such as FACTs (Free Automatic Contest and Tournament Software), that allow operators to run proprietary tournaments.
Looking to the future, Pesceone said another marketing support tool for video games will be an increase in the acceptance of credit cards. “This whole upcoming generation of players doesn’t carry cash anymore; it’s all debit cards,” he said. “MEI has a combo unit with bill and debit/credit card acceptance that we think is a great option.” Pesceone predicted that as leading operators more readily integrate card acceptance into their machines, the entire operating community will eventually follow suit.
BIGGEST PROBLEM: OLD WOOD
Leading manufacturers believe that the greatest deterrent to vigor within the coin-operated video game market today isn’t home games, the Internet, legalized gambling, redemption or any of the “usual suspects.” Instead, they point to the continuing availability of old games in locations across the country.
One manufacturer said the current market is a “mature industry” that supports too many outdated games on location – including many with dilapidated cabinets and faded monitors that may be 20 years old and earning only $20 per week.
“Our challenge is that over 1 million old game cabinets are still around,” said Global VR’s Michal. “It depresses player interest and holds down sales when players say, ‘Yeah, I know that bar has a Pac-Man.’ It may cost the operator nothing to operate that piece, but we need to provide a strong ROI that justifies the operator’s taking the risk of investing in a new game.”
Michal clarified that she is not criticizing operators who are cautious about buying new games, but instead assigns responsibility to manufacturers to persuade operators to think – and act – more aggressively.
“Operators are not wrong in desiring to decrease risk,” she said. “At the same time, manufacturers are not wrong in desiring to fuel market expansion through innovation. Our challenge is to integrate these needs so that all of us are healthy.”
Raw Thrills president Eugene Jarvis agreed. “Our biggest competitor is older games that still work well and earn on location,” he said. “But there is only so long an old game can be operated; at some point it really does make sense to buy a new game that makes three times as much. We as manufacturers simply have to make better games at cheaper prices, so operators can afford to replace them – and we’ll do our damndest to replace those million old games on location.”