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Issue Date: Vol. 43, No. 12, December 2003, Posted On: 12/11/2003


The Next Coin-Op Boom


Marcus Webb

Manufacturers in this industry have been puzzling for a couple of years now over a single, vexing question: "Why aren't more operators buying more of our machines?" After all, by their own admission today's operators have plenty of money. And, many of today's top games and jukeboxes can be proven to earn excellent ROI. So now that we've put this industry through a six-year consolidation wringer and emerged as a lean, mean entertainment machine, why aren't we seeing the upward half of the cycle? Where is the boom that, by all rights, we should now be enjoying? This question is especially vexing since some analysts claim entertainment as a whole is now the world's dominant economic force. The question becomes even more urgent, now that the U.S. economy is roaring back with an 8.2% growth rate last quarter.

"Operator sales resistance" is the manufacturing sector's favorite explanation for why our industry has failed to produce a strong comeback over the past few years. I don't entirely agree. Yes, operators could be buying more new products to upgrade existing locations and outfit new ones. At the same time, I think when leading operators say "We won't buy any new machine unless it brings more money into the location," they are coming close to putting their finger on the real problem. But while that explanation is perfectly accurate from an operator's viewpoint, for this insight to be useful to manufacturers it must be translated into an industry-wide perspective.

So here it is: this industry competes with every other available form of entertainment - as it always has , but now, that competition is bigger, glitzier, and better-funded than ever before. Michael J. Wolf, who advises mega-conglomerates from Universal to Bertelsmann, says that entertainment is already , right now, today , the biggest chunk of the U.S. economy and is the driving force of the global economy. Wolf literally wrote the book on this subject: The Entertainment Economy , How Mega-Entertainment Forces Are Transforming Our Lives. Wolf also says U.S. consumers now spend more money on fun than they spend on food. More than on clothing. More, even, than on health care. That's why the rest of the entertainment business (with the exception of the music labels) is making money like a house on fire.

Therefore, if music and games manufacturers wish to compete successfully in today's market, they must go beyond building good products. Indeed, they must go beyond building great products. They must embrace marketing in creative, aggressive new ways. They must compete for consumers' attention, and win.

For a fine example, look at Incredible Technologies. Not only are they are grabbing consumer attention with leagues, but they are grabbing global media attention with an aggressive marketing campaign. Local and national TV and newspapers around the world are sitting up and taking notice with a nonstop barrage of glowing stories. And if you don't think that adds to the glamour, glitz, and cache of "Golden Tee Golf," resulting in more players and more loyalty from existing players, think again.

The fate of amusement manufacturing rests in its own hands. I don't believe any automatic upswing or boom cycle will magically appear out of nowhere to rescue us, just because the calendar says it's time for one to happen. The fact is, operators can coast along on staple games and a 5% annual machine replacement level for decades, especially if they market their routes with proper league and tournament promotions.

Manufacturers, however, cannot coast along on that level of sales. If they want to grow, if they want to generate more operator investment, then I say they must follow the lead of Incredible Technologies and others. They must embrace modern marketing. Fortunately for this small industry, the main ingredient required for powerhouse marketing is plain old human imagination. And that's free.

Topic: Editorial: Music and Games

Articles:
  • Luck Is No Longer A Variable For Bulk Operators
  • Churn, Baby, Churn. Declining Dynamism In Larger Economy
  • Lessons Learned From The Life Of The Mad Mogul Felix Dennis
  • Can Operators Cash In On Heavy Summer Traffic?
  • Are Vendors Adapting Too Slowly To Changing Retail Landscape?

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