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Issue Date: Vol. 41, No. 3 / March 25, 2001 - April 24, 2001, Posted On: 3/25/2001


Indy Amusements Endures Challenging Times Smythe Works City Hall, New Music Technology


Marcus Webb

INDIANAPOLIS - When Indianapolis mayor-elect Bart Peterson chose to make video game violence his top priority last year, Bill Smythe of Indy Amusements unwittingly became the industry point man in what many believe is the most important battle facing coin-op today.

At the time, Smythe was vice-president of the Indiana Amusements and Music Operators Association (IAMOA) and its highest-ranking board member in Indianapolis, making him the logical choice to uphold the industry's position.

Although it was impossible to predict back then, Smythe would eventually find himself in the middle of a full-scale controversy.

With the rash of school shootings in 1999 still fresh in public memory, legislators across the country viewed Peterson's ordinance as a way to prove that they were at least doing something to deal with the issue, and copycat-efforts quickly sprang up from coast to coast.

Faced with the prospect of fighting costly battles in dozens of communities, coin-op's national trade associations, the Amusement & Music Operators Association and the American Amusement Machine Association, as well as the IAMOA, decided to draw a line in the sand in Indianapolis, believing that a victory there would give the industry the hammer needed to block legislation elsewhere.

What had been a local problem suddenly became an issue attracting national media attention, and Smythe quickly found himself spending a lot of time defending the industry in interviews with reporters from the city's television and print media. He became the face of the industry on the six o'clock news , coin-op's unofficial spokesperson in a city that was practically unanimous in its support of Peterson's proposal.

Thankfully, for the industry's sake, Smythe's position held more weight in the community due to the strong reputation Indy Amusements had established over the years. The family-owned business was launched in 1977 by Smythe's stepfather, Lowell Essex, and is currently owned by his mother JoAnne Essex, an accounting whiz who helped keep the company financially sound after Lowell passed away in 1985. JoAnne is planning to turn the company over to the capable hands of her two sons, Bill and Mike, who have alternated running the company since 1989.

Both brothers have played active roles in the coin-op industry over the years. Bill, who has been calling the shots since 1995 following a 12-year stint with Dictaphone, is currently president of the IAMOA. Mike, who began working for Indy Amusements straight out of high school in 1977 and ran the company from 1989 to 1995, is a past president of the AMOA-sponsored National Dart Association. He also served as IAMOA president during the early 1990s.

Bill and Mike also own and operate five restaurant/bars in Indianapolis. Not surprisingly, Bill said that Indy Amusements has a lock on those accounts, adding that he doesn't have to worry about the bar manager "complaining about the music" at those locations.

Indy Amusements, which serves the central Indiana market, operates jukeboxes, pinballs, video games, foosball, air hockey, electronic darts and pool tables. It is also the region's largest reseller of used amusement machines for the home entertainment market.

The company employs seven people: two movers/service technicians, a full-time collector, an operations manager, a league support person, and two administrators.

According to Smythe, the company's primary business is servicing bar and tavern locations, which make up 70 percent of its accounts. Another 25 percent is dedicated to other types of street locations, such as hotels and Laundromats, with the remaining five percent consisting of game rooms and arcades.

TEAM PLAYER

The irony may have been lost on the local media, but Indy Amusement has only a handful of site-based accounts that typically house "violent" video games, and the ordinance would have little or no affect on the company's bottom line. Why then, one would wonder, would Smythe take on such a time-consuming role?

"My wife asks me that question every day," he jokes. "I'd love to say I was taking one for the team, but to be honest I think that the biggest problem was a personal problem that I still have today: I don't believe that the legislation is constitutional and I don't believe that the government has any business raising our children. It was more of a principle issue than a financial issue."

Despite having little financial interest in the outcome, Smythe immediately became involved. A previous relationship with a newly elected council member quickly paid off, and he was able to obtain a preliminary copy of the mayor's proposal even before some of the city council members had a chance to review it.

What Smythe saw was alarming, as the original draft used the industry's Parental Advisory System as the criteria for determining what games would be compliant. Peterson's original ordinance restricted children under 13 from playing games that had a Yellow or Red disclosure message and people under 18 from playing games with Red disclosure messages. An ordinance expected to affect a handful of games had suddenly incorporated the vast majority of the industry's games.

"I looked at my inventory, and said, 'well I don't have many Red games, but I have a bunch of Yellow games,'" he said. "I knew that wasn't acceptable and I didn't like the fact that they were using our own rating system against us."

After intense lobbying efforts, Peterson and the council backed down and dramatically narrowed the scope of the legislation, eliminating all references to the PAS, focusing only on Red label games and changing the access age from over 13 to over 18. The end result was a much smaller number of games were affected , a major victory considering the copycat efforts that followed. Even if the industry eventually loses its appeal, which is currently pending before the 7th Circuit in Chicago, the effects will be far less problematic industry wide than the original proposal.

Beside the fact that he operates a small number of Red-label games, Smythe is also an unlikely defender of violent video games. He recognized the potential problems the games pose early on.

"I'm certainly not a Puritan, but as a parent I had some objections to some of the games in the marketplace even before this whole issue came about," he said. "For the most part, I've refused to buy them; some of it was business and some was personal."

On a financial level, Smythe noted that the games themselves have a small window of earnings, a lesson that was reinforced when he lost money operating his own arcade in 1996.

"Once that time period expires, you can't do anything else with them," he said. "If a large percentage of my business is bars, then why would I buy a fighting game with little or no future value?"

On a personal level, Smythe admits that he has problems operating games such as "Mortal Kombat 3," which Peterson used as evidence to convince the council that the ordinance was necessary, in one instance replaying a "fatal" move in which one character chops off another character's head.

"I remember when we bought that game and my guys turned it on like they do with every game and said 'Here Bill, this is what you just bought,' and I looked at that and said either take this back or make that go away," he said, noting that he eventually decided to lower the violence by removing the fatal moves.

After placing the now toned down game in a local trade school, Smythe was not surprised to get a call just two weeks later. "The guy said his customers were complaining because there were no fatal moves in the game, and he wanted me to turn them back on," he said. "The answer was no, and I told him I would take the game out before I would turn the violence back on."

Although the owner was upset, Smythe said he decided to keep the game, and the account.

Dealing with the media, as Smythe readily admits, can be frustrating. He found himself spending a lot of time trying to educate journalists about the industry, hoping to show that operating companies are generally family-owned businesses that care as much about their community as any other business. Despite his coherent argument, the point did not always come across.

"Their main goal is to sell papers, and I don't think they really care whether or not we're good or bad people," he said. "By and large they have favored the mayor's position and have played heavily on the connection between the violence."

Earlier this month, for example, Smythe attended a debate on video game violence at a local high school between Peterson and the director of the Indiana Civil Liberties Union. By coincidence, it was the same day that a young gunman in San Diego went on a rampage, killing two of his fellow students.

"The local television media showed 30 seconds of the mayor defending his position and five seconds of the guy from the ACLU discussing his position, and they wrapped it all around the violence in San Diego, even though Peterson didn't make any reference to the shooting," he said. "They only told one side of the story."

With the Indianapolis legislation on hold since December, Smythe emphasized that the stakes continue to rise. In early March, the state legislature voted 91-5 in the House to pass a copycat version of the legislation. The legislation is now pending a committee assignment in the Senate.

According to Smythe, the House agreed to put it off for two years under the assumption that the federal court would rule by then. The decision will now affect the entire state, not just Indianapolis. Since the city can't enforce the ordinance until the court rules, Smythe says he's content to wait it out.

"The city can't enforce it until then, but the fact of the matter is that a lot is riding on the outcome in other communities across the country," he said. "Yes, we would like a timely answer, but we only want a timely answer if it favors us."

While the situation in Indianapolis hangs in the balance, Smythe has been busy running Indy Amusements on a day-to-day basis, as well as taking on added duties as the newly elected president of the IAMOA.

In terms of the business as a whole, he remains optimistic about industry staples such as pool and countertops, especially Internet-enabled versions with tournament capabilities.

Other steady earners include table games such as air hockey and foosball, both of which Smythe commends for maintaining modest but loyal player bases.

On the other side of the spectrum is darts, which has remained stagnant due to ongoing lawsuits between manufacturers.

"I think darts has an opportunity to continue to grow or at least maintain itself, but only if we can get some resolution between the dart manufacturers," he said. "Since we are unable to confidently acquire new dartboards, it makes expanding the league or looking for new accounts to grow our league system very unpredictable. It's hard for me or anyone who works for me to go out to an account and actively pursue darts when we don't know whether we can get dartboards."

Smythe points to the recent decision by Merit to exit the dart business as a telltale sign of the difficulty facing the dart industry.

Another segment in dire straits is pinball, which Smythe says has shown flat earnings over the past five years.

"I don't anticipate making a heavy investment in pinball anytime soon," he said. "I don't think there's any problem with the equipment, I just don't believe that we have a generation of people coming up that will embrace pinball."

Although Indy Amusements does not run a large number of jukeboxes, the company was one of the first operators in the country to experiment with digital downloading jukeboxes after forming a relationship with TouchTunes in 1998.

TOUCHTUNES PARTNER

Today, the company maintains digital jukes in its seven best accounts, where pricing is set at $2 per play. Together they make up one of the highest per revenue TouchTunes installations in the country. Still, the majority of the company's locations operate CD jukeboxes at three plays for a dollar.

"I don't believe that every account warrants a TouchTunes, just like I don't believe every account warrants a 'Golden Tee' or a 'MegaTouch Platinum,'" he said. "Both CD and digital downloading jukeboxes play an important role, and I don't see that changing much."

Digital jukeboxes, he added are limited today by relatively high weekly minimums and the need for locations and operators alike to sign long-term commitments.

In one instance, Smythe made a multi-year agreement with the owner of a new bar who insisted on having a TouchTunes jukebox.

"I went to the account and said, 'Look, I'm committed to this for five years, so I can't just bring it in and change my mind, so you have to be committed,'" he said. "As part of the agreement, I told him I wanted a commitment that was certainly multi-year, and that he would be paying, as all my customers do, a weekly minimum, for the opportunity of having this jukebox."

The location owner, Smythe recalled, happily agreed to all of the conditions. One year later, however, the situation changed when the owner switched to a live band format and had no need for a jukebox.

"There was no failing on TouchTunes' part," he asserted. "The guy just changed his business format and the minute he did that he killed his jukebox. It was more the nature of the tavern business and how it can change so quickly."

Although he believes that the jukebox business will continue to thrive, Smythe warns that operators should be concerned about competition at some point from satellite content providers that can transmit music directly into locations.

"The majority of my locations have satellite television; how hard would it be to package a satellite/music service?" he asked. "I think it's something to keep an eye on."

SELF-INDUCED PAIN

It may seem elementary, but Smythe takes pride in making sure every decision affecting Indy Amusements is rooted in sound business philosophy.

"I think there's some inconsistency in business logic between the operator and the accounts," he explained. "We've always charged minimums for our driving games, as well as for CD jukeboxes when we made the conversion from 45s. We've always tried to look at the business from a cash flow and an equitable return standpoint."

Unfortunately, Smythe points out, not every operator takes that approach.

"If a guy calls and says, 'Joe Blow down the street has a driving game, I want one,' too many operators feel the pressure and go buy one, whether it makes money or not," he said. "Those kinds of decisions are exactly why we're seeing such a high degree of consolidation in the industry right now. This is self-induced pain; we're bringing this on ourselves."

Smythe is one of a growing number of operators concerned about the legal and financial ramifications of online, tournament games. Sharing a location's financial and marketing data with manufacturers that may one day become competitors, he said, presents uncertainties

"It's not the existing vendors I'm concerned about; it's new players entering the marketplace, maybe, that don't have the same understanding of how the industry works," he said. "The existing companies realize that the information is confidential, but I can't guarantee any new company will have that same sensitivity."


Topic: Music and Games Features

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