SALT LAKE CITY - Something about the American West's big skies and endless horizons seems to foster an optimistic, can-do spirit. That is certainly the case with Elden Kingston, president of Mountain Coin Machine Distributors, based here.
Kingston, who has 42 years of experience in this industry, says that good machines are available today; operators are "hungry" for strong, new equipment; sales are up; and, despite a lengthy period of consolidation, the surviving distributors and operators are stronger, better businesses.
"You just have to work a little harder to make the same amount of money today, that's all," Kingston told VT.
As a leading distribution chain with branches in seven states, Mountain Coin covers almost every part of the western half of the country, except California. This gives president Kingston a broad view of the reality of operations in a large geographic segment of the market. It also makes him a leading member of the Distributors Committee of the American Amusement Machine Association, where, as co-chairman, he is well acquainted with the concerns and thoughts of his fellow distributors nationwide.
Taking a big-picture, Western-style view of the industry, Kingston maintains an upbeat outlook. If working harder is the formula for success in distribution today, Kingston has no problem with that. To him, it means focusing on customer service rather than just being an order-taker. But Kingston says that is a distributor's responsibility in the first place.
"I think we have to help operators make money," he explained. "Rather than just take an order, you have to exercise a little salesmanship and explain to them why they should buy certain equipment. Encourage them to try the new downloading jukeboxes, or a new themed pinball. Make them understand they'll make more money from operating it. This means we have to use better sales technique and provide more help to the operator. And that is exactly what we try to do. When operators are successful, and today many of them are doing quite well, we too are successful."
How successful? "Our business has been quite steady," Kingston said. "Our 2003 sales were up over 2002, so there was an increase. Profits remained steady since costs also increased. But business has been good."
Mountain Coin provides sales and service to every type of operator: large and small, glitzy FECs and those serving urban restaurant chains, as well as one-man shops and traditional street routes. Kingston is intimately familiar with the small, rural operations that provide a few jukeboxes, pool tables and countertops to taverns in dusty little towns spread far across the desert landscape.
"Operator sales resistance" is not a phrase that comes readily to Kingston's lips. "I think operators in the last few years have been a lot more selective in the machines they have bought," he began. "But today they are hungry for new equipment. They need new machines. If we have good equipment that will earn for them, they are eager to buy. Over the last few years, operators have done well. They have made more money recently than in the five or 10 years prior because they were able to leverage an installed base of machines. But now it's reaching a point where they won't be able to maintain that income unless they upgrade their equipment, so they are looking for new products. If you're a distributor and you've got the product, the customer base is out there."
change is in the air
Kingston is more likely to talk about operator resistance to change. This reluctance to embrace new concepts and new types of equipment is something the MCM team encounters mostly among smaller, less sophisticated operators, he reported. "Certain members of our industry are afraid of change," he said. "They keep doing the same thing until some of them go out of business. It can be like pulling teeth to get some operators to consider trying a new technology or new type of machine. But now even the hold-outs are beginning to realize more and more that they have to be open to new ideas."
Downloading music has "made big change in the jukebox business," Kingston noted. "Many operators have realized this is the future. It was hard for them to take a chance on it at first because it was new and the technology was new. Operators lacked confidence that hard drive storage would replace CDs. Now they are starting to put them out and the attitude has really gotten a lot more positive. The income from downloading music is unbelievable; operators are making more money than they ever have in the history of the jukebox. That has definitely helped sales." Mountain Coin handles Rock-Ola and TouchTunes downloading machines.
Pinball now is becoming a solid category for MCM. "Gary Stern has done an excellent job of keeping pinball part of the industry," said Kingston. "For a while, everybody was afraid that pinball was a lost cause and worried it would go away completely. Now the confidence is back for pinball, too. Pinball has rebounded because of Gary and his team and what they've done. Lately they have put out excellent themed pinballs that are making money for operators."
Video simulators such as Global VR's "BeachHead," "Need for Speed" and "EA Sports PGA Tour," as well as Sammy USA's larger pieces, among others, have encouraged Kingston as well. Larger FECs, arcades and Peter Piper Pizza game rooms have "done quite well with them," he said. Meanwhile, the countertop video game and golf business has been "excellent" in street locations. "These machines have been some of our biggest sellers and accounted for a lot of our volume," he said. "We've done quite well with them. New online tournament games have given a big boost to operators' income."
Cranes have been steady for MCM; redemption has performed well in some areas to "fill the hole left by the upright video." Darts have "fallen off somewhat" due to lack of aggressive league support by operators, Kingston added. But "in places where operators get out there and promote, they make a lot of money on darts." Pool is steady but could be even stronger with more promotion, he said.
Looking at the range of available machines today overall, Kingston summarized: "There is never 'enough' high-demand product, of course. But today we have equipment to sell; we just have to get out and sell it."
When Kingston says "get out there," he means it literally. The MCM sales staff travels to see operators on routes from time to time, but Kingston would like to do more of this. "Travel has become expensive, especially paying for gas if you go by car," he said. "Lodging isn't cheap anymore either. But I think it's necessary to get out on the road now and then to see the operators."
Mountain Coin also takes the initiative and creates events such as occasional spotlight shows that draw operators into its seven offices. "Manufacturers have been very good with supporting us on these things," Kingston said. "If we schedule an event and call for help, most have helped us a great deal."
But only one MCM office, Denver, held a post-Amusement Show International open house this year. While that event was well attended and generated decent sales, Kingston explained that, "Over the last few years, we've cut back on open houses" due to so many national shows being held in Las Vegas, which is convenient for Western operators to attend. If the ASI remains in Chicago, where it is scheduled to be held in spring 2005, then MCM may consider offering more spring open houses in the future.
As for open houses in the second half of the year, the AMOA International Expo often comes too late for MCM to host a post-show open house to support distribution's fall buying season. "Some distributors are talking about having open houses before the AMOA show this year because it's so late in the season," Kingston said. "The American Amusement Machine Association's July preview in Chicago will help with that." AAMA will hold a distributor gala combining informal manufacturer equipment exhibits with a cocktail hour on July 23 at the Wyndham Hotel in Chicago. This event is part of the organization's annual meeting.
open house turn-around
Kingston observed that the nationwide trend toward distributor open houses seems to be fading, a victim of tough times and diminishing returns. "I think many distributors have cut back on open houses or even eliminated them," he said. Dealers cite high costs and the depressed state of the industry for this decision, he explained: "They haven't really done that much business, and until recently there hasn't been much good product." Ever the optimist, however, Kingston quickly added: "But I think that has turned around. In the last year, there has been some strong product. The 2004 ASI Show was quite encouraging."
Some distributors express the opinion that parts, service and financing are now their key profit centers, not sales. Kingston sees this as an artificial distinction. "I think parts, service and financing are really important for any distributor," he noted. "But we wouldn't be in the business if it wasn't for equipment sales. Machine sales have always been the major part of any distributor's business. Without those sales, we couldn't stay in business. If distributors don't sell machines, they can't sell parts and service. If they don't sell machines, they have nothing to finance. So it all goes together."
survival of the fittest
Consolidation on both the operator and distributor levels has been undeniable in the past decade, but here again Kingston takes the view that the glass is half full: "I think it's true the operator base has shrunk over the past few years. But in some cases, this isn't all bad. A lot of those operators who have exited the business were really not that good for the industry. They gave excessively high commissions and that hurt their competitors. They were not careful with expenses. They didn't run good routes. Some were an eyesore, or even a liability to the industry.
"But most operators who are still around today know how to run a good business. They run strong, professional operations. As a result, I think the industry will get stronger."
As an executive who has built his distribution business through acquisition (see sidebar), Mountain Coin's president takes a positive view of consolidation among distributors as well. "I think in the long run, consolidation on the distribution level also makes for a stronger industry," he said. "Those distributors who can't provide financing or service, don't do well for their customers. I think the stronger chains do a good job."
As with operators, Kingston says, the decrease in distributors means that survivors enjoy greater market share and a stronger financial position, enabling them to provide lower costs and better service.
But Kingston rejects any claim that a few large distributors exercise undue influence on the market, much less that he and his colleagues have "control" over the free enterprise system for amusements. "The bigger distributors do have a bigger market share; that's a natural thing," he said. "It's probably true that half a dozen distributors serve more than 50% of the market. But I think it's an overstatement to say those few distributors 'control' something like 85% of all sales in the country. It's still plenty competitive these days."
Distributor consolidation has occurred prominently and recently with acquisitions in Chicago (where Signature Sales purchased the assets of Atlas) and Texas (where Betson purchased Spirit Distributing). But Kingston believes the distribution tier has now achieved a level of stability. "I don't see many others leaving the business at this point," he said. "I think most of today's distributors will probably remain."
Mountain Coin's last acquisitions were the Portland, OR, and Seattle, WA, branches of Music-Vend, which joined the MCM chain in late 2000. Is Kingston in the market for further acquisitions? "In a word, no," he chuckled. "Let me put it this way. We haven't got any concrete plans right now to expand, and we haven't been looking to expand. Of course, if the right opportunity came up, we'd consider it. At the present time, though, we're plenty busy taking care of our existing business and focusing on how we can improve our customer relationships and provide even better customer service."
As mentioned, Kingston serves as co-chair of the AAMA Distributors Committee, which was formed a year ago to provide a forum for distributor concerns, a medium for exchanging ideas on better service and effectiveness, and a platform for distributors to express their views to the rest of the industry. Other committee stalwarts include co-chairman Jon W. Brady of Brady Distributing (Charlotte, NC), with Rick Kirby of Betson Enterprises (Boston, MA); Ira Bettelman of C.A. Robinson & Co. (Los Angeles, CA); Ron Bolger of Atlas Distributing (Elk Grove Village, IL); Dave Drouillard of Signature Sales & Service (Schaumburg, IL); and Mark Singer of Central Distributing (Omaha, NE).
The relatively new committee was formed less than three years ago at the request of leading distributors. According to AAMA president Mike Rudowicz, it was a bit slow getting off the ground at first. However, the committee met at last fall's AMOA Expo and again during March's 2004 ASI event. Rudowicz cited Kingston's expertise and dedication as a key factor in helping "prompt attendance and make the Distributor Committee meetings successful." And, he added: "The members speak to most of the distributors in the country, and they speak for distribution generally. I think their work will benefit the entire industry, most definitely including the operators."
in support of customers
The AAMA Distributor Committee covers a wide range of issues, Kingston said. "One thing we've talked about is how we support our customers and what we can do as a group to better help the industry," he commented. "We also discuss how we can give input to manufacturers so they can produce better products, and how they and we as distributors can provide better support. We address test programs that can help manufacturers determine which machines should be released, or how those machines could be tweaked before release."
An important issue tackled by the Distributor Committee at ASI 2004 was manufacturer warrantees. "We feel a good warranty program on the machines we sell is a must," Kingston declared. "The operator pays high prices for new machines today. They have to have confidence that the manufacturer and distributor will stand behind them, and know that if they have a problem or need a part, we can take care of it. We believe that customer confidence in both the manufacturer and distributor will ultimately result in increased repeat sales and will benefit both manufacturers and distributors."
Some manufacturers have "gotten away from" that philosophy, Kingston continued. "There has not in all cases been the emphasis on after-the-sale support that we think should be there. We on the committee are going to research exactly what each manufacturer's warranty program is, so we can convey that information to the operator. This information will give manufacturers a way to see where they stand in regards to current industry practices, as well. We feel if one manufacturer has an excellent warranty program on machines, then that would be a real incentive for the customer to buy. Some new cars have warrantees up to 100,000 miles. When his competitor has a 15,000 mile warranty, this issue becomes a big sales advantage."
The distribution pendulum may be swinging back toward more exclusive distributor territories these days, Kingston observed. "Because of the decrease in the number of distributors over the past few years, some manufacturers are considering a return to exclusive territories," he said. "I feel this probably could result in increased sales for manufacturers.
"But it's a two-way street," he continued. "If a manufacturer has the confidence in a distributor to give him an exclusive, then that distributor has to return that confidence and put its efforts into selling that product rather than the competitor's product. If distributors get behind the manufacturer and push their products, it will result in better performance and more sales for the manufacturer."
From his perspective of more than four decades in the amusements industry, Elden Kingston remains a positive, upbeat and eager participant in the daily challenges. "Our industry has its ups and downs, but you roll with that and do whatever it takes," he said. "I see evidence every day that good distributors and good operators will make very good money. So I think it is still a great business and I love it. I'm going to be active in this business for many more years," he promised.