In June 2007, I wrote a column that surveyed amusement industry support technologies and made several predictions about the path on which those tools would take us. Four years later, everything is downloadable, and multifunction prepaid card systems in amusements have penetrated approximately 10% of FEC locations and about 90% of all new family entertainment centers. Prices have not come down as fast as expected, but they have decreased and the card readers have improved tremendously.
Meanwhile, we predicted that the cost of brass and copper would rise to the point where prepaid card technology became more affordable than tokens. This prediction came true. Today a token (9¢) costs a bit more than a stored-value card (8¢). Monthly fees for card systems have remained stable over the past five years, but the system licenses have decreased or been entirely eliminated by some providers.
The facilities and operators that have adopted payment card systems are not taking full advantage of their capabilities. Some of these systems have literally hundreds of useful options -- but most locations just learn to use one or two. Some locations use "time play" (play as many times as you want in 30 minutes or an hour), but they restrict this mode to non-ticket, non-prize games like video and air hockey games. But these are the lowest-earning games in most FECs; if the location bothered to learn how to use time play for redemption and prize venders, it could increase earnings significantly.
Our industry still has a long way to go in its learning curve for available FEC tools and technology.
FLOATS FUND CARD SYSTEM INVESTMENTS
Card systems are paid for with the "float" in fewer than two years. The float is the money and points that remain on cards that is never used by the customer. Float has been averaging 5% to 8% of gross revenues, depending on local vs. transient customer base mix and repeat customer marketing ability.
But some recent court rulings on gift cards have put some state governments on a confiscatory path, taxing the money that is stored on gift cards. If this happens with smart cards and amusement debit cards, it could slow down the adoption of card systems in existing FECs. However, it probably would not halt new FECs from using this technology since it's more efficient to install when building the facility than to replace an older system in an existing FEC.
Wireless systems have proved themselves beyond question as reliable in the past four years. They are still more expensive than four years ago. When building a brand-new FEC, it costs approximately $7,500 more to install a wireless system, but future savings can be significant for existing facilities when they plan a system upgrade, especially since floors, carpets, walls and ceilings can remain untouched.
However, wireless systems use kiosks that must be hardwired, so relocating them requires running data lines back to the server.
We reported in 2007 that RFID technology was too expensive for compatible readers to be placed on the games (they are placed on the token dispensers), and this is still true. Many indoor waterparks use RFID wristbands, which now cost about 80¢ each compared with $1 four years ago. These can also be used to unlock hotel room doors.
News recently broke that Facebook is stealing customer data that are stored on these wristbands as guests use their wristbands at picture-taking kiosks to email photos and post at Facebook accounts. This has been reported in detail in a recent Redemption and FEC Report. Yes, "Big Brother" is using new technologies.
In my four-year-old article we talked about making transactions with smartphones at vending machines, and observed that the U.S. was about five years behind the rest of the developed world. But now Google Wallet, the search engine's ambitious play to push mobile payments into the mainstream, could be a game-changer. This NFC payment method went live in September in major U.S. cities, and vending machines with wireless controllers can support it. The number of vending machines accepting credit cards for small transactions continues to rise, but the amusement sector has been slow to adopt cashless payments.
Even more, there is no buzz in the amusement industry about moving away from cash. Just about as many industry members still operate on quarters and bill acceptors as four years ago. I don't see this trend changing significantly in the U.S., even though it can be shown that token locations (that have discount token programs in effect) generate more revenues than those that operate on cash. It should be noted that more cash locations are now mixing tokens and quarters to take some advantage of token promotions.
A bit of speculation: now that the U.S. government is desperately looking for cost savings, the dollar coin may come into its own. Keep an eye on the Congressional "supercommittee," which may approve the new COINS Act to replace the dollar bill with dollar coins. Operators should educate themselves on the subject enough that they can react quickly if there is a rapid change in American currency.
We forecast in 2007 that POS and payment card companies would form alliances; in fact they have merged in some instances, but today each provider has focused on being the only one or total solution for both POS and debit systems. One inexpensive standalone software program (sold individually or as a fully integrated add-on to a debit card system) is Party Center Software. It has simplified the tracking and usage of online party bookings.
THE GREAT TICKET DEBATE
The debate over "tickets vs. ticketless" for redemption machines and centers in debit card locations was going hot and heavy four years ago. It still continues, but more locations are using ticketless solutions for their prize redemption functions. Makers of token-action, or quick-coin, games are providing token hoppers for each player station (at an additional cost of about $500 each) so players can swipe their payment cards at games and receive tokens from games directly. Every token-action player station would require a card reader in ticketless operations.
My data show that going ticketless is not the best option. Of the 38 revenue-share locations run by Amusement Entertainment Management, only two employ ticketless redemption. One has given their customers the option of tickets or no tickets, and both are showing lower overall game revenues and lower revenue per game averages on their token-action games. We track results weekly and believe these facts are related.
In reviewing the revenues of other ticketless locations, I also see that their game revenues and per-game averages are lower than the FEC locations that follow the best practices that I have written about and presented over these past 30 years.
One thing that has not changed in five years: the industry is still suffering from lots of myths and bad advice. One false claim says that token-action games are "yesterday." In truth, games in this arcade amusement class remain the top-performers when the best practices are followed.
Four years ago, we predicted that prices would drop for automated redemption prize centers, leading to greater market penetration. Prices are still high ($12,000 and up in some cases) and as a result market penetration has been slow. If game and prize suppliers found ways to support discounts on such technology, they could move more products and reach critical mass. Today, I would say only 500 to 1,000 of these units are in the field, representing less than 5% penetration of their potential market. Critical mass, the point at which sales take off, does not occur until there is 20% market penetration.
One surprising and booming development not predicted in my 2007 column is the smartphone apps. Amusement manufacturers are making some money from selling phone-based versions of their old videogames. And some progress has been made in developing apps that support equipment in the field.
Unfortunately, most of these apps require the addresses of games and jukeboxes, information that's not easily divulged by operators. TouchTunes recently claimed that its mobile app is generating about $1.4 million a month in new revenue, networkwide. MyTouchTunes Mobile lets patrons access most jukebox features from an iPhone and other smart devices, and most importantly, it enables them to track down bars where TouchTunes jukeboxes are playing. In addition, it allows users to browse playlists, purchase jukebox credits and connect with MyTouchTunes membership base.
Social networking is a huge technology that has exploded in the past few years. Every business -- including those in the amusement industry -- has tried to exploit Facebook and the Internet, and you can find Facebook pages and sites for everything from leagues to arcade locators. We've heard about coin-op videogames in Japan that have a small social networking component, but little of this has been seen in the U.S.
AMI Entertainment Network, has recently launched Megatouch Live, a program that allows players of touchscreen videogames to track their scores and performance levels and compare with top player rankings from any game and share this information through Facebook Connect with their family and friends (see Page 42). In addition the players have an account where they can purchase and then redeem virtual currency tokens to use to obtain game powers. This technology has been labeled "social gaming" and could very well be the start of a new trend in our industry.
For long-term success in this industry, I believe it is critical that we all enjoy the challenge of tracking new technologies and better understanding those that gain 10% penetration and enough traction to move towards 20% penetration. Getting in early on some of these new technologies can pay off. We will continue to do our best to predict the 10-year cycles of each new technology to help operators make informed decisions on whether to jump in or continue watching from the sidelines.
FRANK SENINSKY is president of Alpha-Omega Amusements (East Brunswick, NJ), parent company of Amusement Entertainment Management, a consulting agency; Alpha-BET Entertainment, a nationwide revenue sharing equipment provider; and Alpha-Omega Sales, a distributor of new and reconditioned games. During his 40 years in coin-op, Seninsky has presented nearly 300 seminars and penned more than 1,300 articles. He served as president of the Amusement and Music Operators Association and the International Association for the Leisure & Entertainment Industry. He is editor of The Redemption Report and an instructor at Foundations Entertainment University. Seninsky can be reached at (732) 254-3773 or by emailing email@example.com.