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Issue Date: Vol. 45, No. 4, April 2005, Posted On: 4/11/2005


Raising Play Prices Remains Tough Battle For Ops


Marcus Webb

U.S.A. - Operators from coast to coast acknowledge that price-per-play on much of their equipment has not risen, in some cases in as much as 20 years, but they say boosting prices to the end user remains difficult for a variety of reasons. Operators cited such factors as the inability to pass on incremental increases in many cases; location fears of customer dissatisfaction; the perceived need by many locations to offer lower-priced entertainment to compensate for rising food and beverage costs; and the lack of a dollar coin.

Bright spots on the play-pricing front include downloading music, pool and dart leagues, and other new machines and additional services that offer greater perceived value. Yet even the most aggressive operators say hiking play prices can be "tough" or even a "nightmare" in some instances. Regarding credit card acceptance, operators across the board tend to take a generally favorable stance , favoring and expecting the credit card's share of earnings to expand, yet not expecting or desiring the industry to go 100% plastic.

To explore this issue, VT spoke with Tom Zepperi of Taz Amusement (Mechanicsville, NY); Rod Kruse of Nebraska Technical Services (Omaha, NE); Mike Moore of Automatic Sales Co. (Fort Worth, TX); and Lee Prantl of Pride Vending (Salem, OR). All four are veteran operators who service taverns; Zepperi and Kruse also work with arcades, FECs and resorts.

'HIGHER PLAY PRICING IS CRUCIAL'

Entering the industry in 1968 at age 15 with Superior Vending, Tom Zepperi formed Taz Amusement in 1975; today the company runs 850 pieces in New York, Vermont and Connecticut. Last December, Zepperi launched a brand new route called Rainmaker Games in Sarasota, FL. Specializing in games, Zepperi serves taverns as well as large venues such as ski resorts, bowling alleys and two seasonal arcades in Lake George, NY.

Zepperi is nothing if not outspoken about the opportunities and challenges of the amusements industry. He describes himself as an aggressive buyer of new equipment and a strong believer in new technology (he has eagerly embraced downloading jukeboxes and ATMs). "If I had the answer for how to get more money from going to higher play pricing, I'd be the first guy to do it," he declared. "But with so many machines in so many locations, I don't know how we can get off a quarter or 50. What else can you do for half a buck in this country today? Nothing. We are the cheapest form of entertainment in America. To get more money in the cashbox, higher play pricing is crucial. At the same time, it's very tough to actually do."

Digital jukeboxes are the great exception to this dilemma, Zepperi said. "My music is at an all-time high; it's just doing gangbusters," he enthused. "I have Ecast-powered Rowe and Rock-Ola jukeboxes doing $400 to $500 a week in bars. The response I get is unbelievable. Who ever thought players would spend $1 to download a song or to 'Make Mine First'? But they do. We have just a very few CD machines left; most or all of the CD units are in the warehouse now."

Taz Amusement has installed 40 new Rock-Ola "Wallettes" in diners. Says Zepperi: "They are sharp-looking CD machines and they are big winners for me because of my commission structure. I take 100% until the installation is paid for. Play pricing is 50 a song, two for $1. Everybody said I was crazy but it's steady money, customers are playing it. They look good, and they work. Many of these diners are open for business 24 hours a day and these machines will be there for 25 years."

Pool is the second category where Taz charges higher prices. "All my pool tables are running at $1, some at $1.50," he said. Novelties like "Mo Cap Boxing" and all sitdown drivers are set on $1 per play. "I usually went with whatever the manufacturer suggested, including if it was 75 per play," Zepperi said. "Lately, I've been moving to a dollar for these games. Other than that, everything is 50 to play and 50 to continue."

While many operators would feel getting a dollar or buck-fifty play on pool, and dollar play on video simulators is an accomplishment, Zepperi sees this price level as lagging far behind the rest of the consumer economy. "We now pay $2.25 for a gallon of gas," he pointed out. "The cheapest burger at McDonald's is $1. But we can't get $1 for a game of pool? Meanwhile, our gas costs have more than doubled and our insurance costs have gone up 40% in two years. The 50-50 split belongs back in the 1960s. Something is wrong with this picture. Our inability to get a bigger buck in our cashbox is one of the industry's biggest challenges."

Viewing $1 play on pool and high-end simulators as the minimal acceptable play price, Zepperi is sharply critical of operators who fail to charge even this much. "There are still some guys in our region who operate pool tables at 50," he complained. "A terrific driving game or an $18,000 simulator makes few hundred per month. It sounds good, but it's not enough. And in five years, you can't give it away."

Assessing the big picture, Zepperi asserted: "Hiking your play pricing is tough because there is no way to pass on an incremental increase in overhead to consumers. You can sum up the pricing issue for our whole industry in one sentence: Until we get a dollar coin, it will continue to be tough to raise play prices."

If there is a possible solution other than dollar coins, Zepperi sees it in bill acceptors and credit card acceptance. "I try to run bill acceptors as much as I can," he said. "If a machine gets a coin jam, it can always take a bill and vice versa. Proven winners like 'Lighthouse' and others already have the validators built-in. Across the route I'd say in high-volume accounts, maybe 30% of our cashbox is bills."

Yet Zepperi acknowledges challenges with bill acceptors also exist. "The changer is there and people are used to spending coins, so it's hard to break them away from that habit," he admitted. "And some validators don't always work." As for credit card acceptance, Zepperi said certain machines don't have them, based on the manufacturer's belief that credit simply does not account for a significant share of earnings. "That's true; even with downloading music, it's just 3%-5% credit card payment. But, sometimes, I get $30 in two weeks from credit cards so people are being taught to use them. I think credit card acceptance will be a very big thing in the fairly near future for amusement and music operators."

'THIS IS WHAT IT HAS TO BE'

Rod Kruse founded Nebraska Technical Services (Omaha, NE), in 1981. Today NTS  runs approximately 3,500 machines in 550 locations in an 80-mile radius from Omaha, including what Kruse describes as a "fairly large route in Iowa." Kruse said the NTS routes are 90% bar locations; darts and pool are his biggest earners and "where we put most of our efforts." NTS is believed to operate the nation's third-largest regional dart league.

Competition with other forms of entertainment, especially legalized casino gambling, has acted as a significant roadblock to Kruse's ability to raise play prices, he said. "We finally got to dollar-play on pool, but it was an absolute nightmare getting there," he said with a rueful chuckle. "There are so many location-owned pool tables, and with the casinos right across the river, most bars are doing whatever they can to bring in business. Many bars put location-owned pool on 50 or a quarter , or even on free play. It took almost a year for us to achieve $1 play and we lost a few tables over this deal. But we finally said: 'this is what it has to be if we're going to offer leagues and do it the way we both want.' A few locations said okay. The rest, we kept grinding it out. But it was a nightmare."

Increasing music play pricing was easier, Kruse reports, because with TouchTunes jukeboxes and the Tune Central component, NTS could point to the additional expense as justification. "Most locations resisted at first," he recalled. "But when they saw the earnings from Tune Central, it got easier. Now locations call asking for Tune Central and they know the higher play price goes with it. It is always harder to get the first few higher-priced machines out there; it's a process. I don't know how any operator just goes out and changes prices across the route and says, 'that's the way it is.' We always start with a handful of bars that are a little sharper and more aggressive, and let it grow."

After launching a price hike with the more progressive taverns, NTS then uses word of mouth among tavern owners as a tool, Kruse said. "We didn't have that word of mouth years ago, but now with our dart leagues, many bar managers play. That means they go from bar to bar every night. There are no secrets any more. You can't sneak a 'Golden Tee' into one location without having everyone know about it. They all want to know, 'Where's mine?' There is good and bad from that. If something is good, such as a play-price increase that is accepted by the customers and results in stronger earnings, word travels like wildfire and bars are more interested or willing to try it." Using this leverage, Kruse says NTS is "80% of the way toward getting two songs for $1 on jukeboxes."

Darts, however, are a very different story. Play prices remain at the same levels they've been at for 20 years: 25 for a game of 301 and 50 for cricket across the NTS route. "We are getting so much play on our dart machines, we thought: why do anything to mess that up?" Kruse explained. "Our locations realize that it's been a long time since we've raised our play prices, and that's one reason we've been able to increase prices on other types of equipment."

Kruse says bill acceptors are "very important" on the NTS route. "Our cashboxes are 90% bills," he said. "With darts, we have a lot of fives because it's league money. More than half of our darts take mostly fives. Jukeboxes take a combination of ones and fives. The countertops are mainly ones, and video golf games take in a lot of fives and tens, and sometimes you even find twenties. We almost don't put anything out the door anymore that lacks a bill acceptor. The new Merit machines, half of them come without quarter slots if you want to buy them that way."

Despite his enthusiasm for bill acceptors, Kruse said NTS likes the convenience of also taking coins as a backup feature. "We still like to have the quarter slot on jukeboxes and other types of machines," he said. "With a route our size, if the bill acceptor is jammed, players can still use the coin slot until the technician gets there. Pool tables are about the only type of equipment that we have without bill acceptors. We tried a model with bill acceptors, but neither we nor the manufacturer could keep them running." NTS has only 20 or 30 bill changers on its route, mostly installed in pool halls where the tables are set to take quarters. When pool tables with bill acceptors improve, Kruse expects to switch his tables to bill acceptance and predicts: "We probably won't even need bill changers at that point."

Money handling issues with bills are not significantly different from handling coin, said Kruse. "The advantage is bills are not as heavy," he said. Kruse sees no additional security issue from working with paper currency as opposed to coins.

Asked whether credit cards will be the payment method of choice in the future, Kruse offers a mostly positive view. "I don't think it's a big issue now, but in the future, it absolutely will be," he said. "Right now, the only machines we have that take credit cards are our eight 'Golden Tee Live' machines. We are noticing some plastic use on those eight games. I think if it ever got to the point where you could do it all by credit card, across your whole route, there could be advantages.

"But I'm not sure I'd like to see it all go to credit 100%," he continued. "Since collectors have to visit locations to get coins and bills, they catch problems before they become serious. I can see how with gambling machines in Iowa, credit card acceptance would be an advantage because you wouldn't have to worry about break-ins. We have had a bunch of break-ins on the adult redemptions machines in Iowa."

FOLLOWING THE MARKET'S LEAD ON PRICES

Mike Moore of Automatic Sales Co. (Fort Worth, TX), has been operating since 1964; his route consists chiefly of bars and taverns. Moore plans to enter the downloading jukebox market soon, but as of late March had yet to purchase his first digital juke.

Most machines on Moore's route take coins only, with just a few, such as Merit countertops, accepting bills. All the company's CD jukeboxes are set on two songs for $1, with a few providing three for $1. The CD machines originally came factory-set at three for a $1 in the late 1980s; Moore changed his music prices across the route two years later with no negative feedback and has kept them at that pricing level ever since.

Countertops are factory-set at 25 per game, but "Solitaire" is 50. "Golden Tee Golf" games are factory-set on 75 for three holes and take bills and coins. Pool is set at $1 to play in the more upscale sites, such as a restaurant with a bar, up from 75 a couple of years ago.

"Other operators in those parts of town were charging a dollar," Moore explained. "So when we set the locations with new tables, or recovered the existing units, there was no incentive not to go to a dollar. We're more of a follower than a leader on prices."

Moore charges 75 per game for pool in more blue-collar locations. He finds that the tables in the working-class locations actually earn better, but believes that is because the games are supported by leagues.

"I've been doing this a long time," Moore mused. "I believe in progress, but not in change for the sake of change. I installed a credit-card payment machine in a bar that I own, so that customers could pay their food and beverage tabs with plastic. My employees, the bartenders, fought it at first because it takes time to run the transactions. But it turns out that was one of the best moves I ever made. With no other change, and only a few small price increases in certain liquors, allowing for that we saw an increase of 15% to 20% in the first year.

"I don't know if the higher spend is due to greater convenience or if it's just that customers don't realize how much they are spending," he said. "I would certainly look at jukeboxes with credit-card acceptance. You have additional cost on the equipment and a transaction fee, but if it's priced right, it could pay for itself."

'BILL ACCEPTORS: THE WAY TO GO'

Lee Prantl of Pride Vending (Salem, OR), has been operating for 25 years. Today he serves 150 locations with 400 machines and says his route is 99% tavern based. "Business is good," he said. "A friend of mine says we're in the 'sweet spot' right now, where the action is with downloading music, countertops and pool."

Music is the main equipment category for which Prantl has increased play prices, and he credits downloading music with his ability to sell this hike. "When you go from CD to download, that's a quantum leap that really improves the sound and selection, and that justifies the price increase," he explained. "Even with jukeboxes, it's tough to introduce a new price but people accepted it. The downloading improvements made that move relatively easy."

Pride Vending operates 40 downloading jukeboxes, and all are factory-set at two songs for $1. "I try not to deviate from that," said Prantl. "The customers have accepted that downloading music is worth the money."

Two songs for $1 on downloading machines represents a significant play price increase over the route's CD jukeboxes, where Pride typically charges three songs for $1. Said Prantl: "We changed our music from 45s to CDs when the compact disc format came out 15 or 17 years ago. Again, we went with factory-set play pricing and that's where we've stayed ever since."

Asked if he has ever considered raising CD music prices, Prantl replied: "No, we never even entertained that idea. In fact, we'd probably lean more in the other direction. I don't have that many CD players left; and as they get older, we have dropped prices in some cases to four for $1. Our downloading music is the big thing we've got going and we don't buy new CD machines; we just move around the older ones."

When it comes to billiards, Prantl admitted that "We lag the market a lot on pool. I just moved to 75 in good locations with leagues. Half of our pool tables are at that higher play price, but half are still at 50 , the more rural locations without leagues."

Pride Vending approaches price hikes very cautiously, and only after consultation with locations. "Before raising our pool prices," Prantl explained, "I talked to our locations first. That's only fair because we're in this situation together. They were all in agreement. Someone said it was 12 years since we'd gone from 25 to 50 and the cost of recovering a table has doubled in that time."

An earlier attempt to raise play prices on pool ran into obstacles. Prantl yielded to location pressure at that time, but today admits he wishes he had been a bit more aggressive. "Three years ago I asked locations about raising play prices on pool, and there was some resistance," he recounted. "I think locations were afraid to make the move. I think sometimes the bar's feeling is, 'let's keep pool prices low to compensate for higher drink prices.' Now that we've gone ahead and finally done it, I wish we had done it sooner."

In fact, Pride's latest inquiries about hiking pool play prices led to supportive responses from bar owners. "This time the answer was, 'what took you so long?' I guess the timing was right," Prantl said.

Players didn't voice support for higher play prices, but they kept putting their money in Pride Vending's tables nevertheless. Said Prantl: "Complaints from players were minimal; everyone is going to squawk about a price change at first. But I use the best cues and the best cloth, and we do a good job with pool. Anybody who wants to pay less can go to the less well-maintained tables run by somebody else. After raising our pool prices, there was no drop-off in play. Revenues went up by one-third on those tables overnight. I did it quickly, though. We did it in September when leagues were starting. With the support of our locations, we simply said: 'we're going to do it and that's it.'"

Countertops on the Pride Vending route are set on one play for 25, which is the factory setting. "I've heard operators say manufacturers should set games on higher prices, but I don't know how you would justify that in this market," Prantl mused.

On the subject of bill acceptors, Prantl is clearly a supporter. "Almost all my equipment take bills except pool tables, and I just bought two Valley 'Great Eights' that take bills and I am anxious to see how they perform," he said. "Bill acceptance is terrific; it's the only way to go. When the option is available for a bill acceptor, I'll pay for it every time."

Credit card acceptance is a negligible factor for Prantl's route. "Our Ecast-powered jukeboxes take credit cards, but this accounts for just 1% of jukebox income today," he said. "Basically credit card acceptance is not a factor in my business. I'm indifferent on this issue and do not encourage or discourage credit card use. It's just another option for the customer."

Topic: Music and Games Features

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