Sunday, November 19, 2017 | Today's Vending Industry News
2002 Industry Review Exceeds Expectations: Despite Consolidation, Product Creativity Flourishes

Posted On: 12/25/2002

  • Printer Friendly Version
  • Decrease Text SizeIncrease Text Size
  • PDF

U.S.A. - Following the dismal experiences of 2001, almost anything that happened to the amusements industry in 2002 would have to be viewed as an improvement. After all, 2001 was the year terrorists leveled the World Trade Center. It was the year Midway Games exited the coin-op market. 2001 was also the year AAMA's chairman called "the worst in memory" for most manufacturers and distributors.

Judged in that light, 2002 was indeed brighter, although far from a banner year. Both national coin-op expos and the international parks show drew lower attendance in 2002 than in 2001, yet the industry's mood at the fall shows was markedly upbeat.

What triggered these suddenly buoyant spirits? Nobody could quite explain it. Perhaps it was simply relief , a feeling that the survivors on all three levels of the industry had made it through the worst, and were probably fit enough to survive for the foreseeable future, as well.

To be sure, nothing in the industry's 2002 financial picture suggested overwhelming reasons for celebration across the board. By all indications, the industry's collective bottom line continues to grow a bit slower than the annual rate of inflation , which means, in real terms, that the American coin-op trade is continuing to shrink.

The industry's key trend last year, as it has been since at least 1996, continued to be consolidation. In 2002, once again, the big got bigger and gobbled up more market share , whether their names were Merit Industries, Betson Enterprises or Mr. Regional Operator Kingpin. At the same time, many weaker or problem-plagued companies closed their doors, sold their assets, or simply turned their products over to others , whether their names were Konami, Rainbow Crane, Hyperware, State Sales & Service, Southgate-Moss Distributing, or Mr. Small Operator.

Capitalism has been called a "process of creative destruction," and the winners in this economic demolition derby were certainly smiling in 2002. Most obviously, the leading route and arcade operators kept absorbing more competitors' businesses in 2002. According to AMOA past president Frank Seninsky, the nation's largest operators in the Midwest and on both coasts had "their best year in 30 years" in 2002. By year's end, membership hit all-time peaks in both the Amusement and Music Operators Association and in the International Association for the Leisure and Entertainment Industries.

Yet the most telling headline of 2002 may have been Konami's decision to shut down its U.S. coin-op office. Despite spending millions on R&D over the past five years, and also despite creating a series of innovative, player-pleasing video games such as their music novelties and motion-capture simulators, Konami simply couldn't move enough volume here to justify keeping its U.S. coin-op office open.

In pulling out, the manufacturer followed a growing line of Japanese powerhouses that have either severely cut back or all-out vanished from the States , including SNK, Taito, Capcom, Data East, Jaleco, and several others. Betson Enterprises was appointed to handle Konami's U.S. parts and service, but as 2002 drew to a close, it was still unclear who would represent Konami's games in the American market during 2003. Also unclear was which manufacturer might be the next to follow Konami's coin-op division down this well-tread path.

Konami's exit, coupled with Arcade Planet's sale to a gambling industry services firm called Sierra Design Group, gave new life to the question asked two years ago by Reggie Moultrie of Dave & Buster's: Will enough manufacturers stay in business, to allow operators to remain in business?

The answer appears to be "yes." 2002 was showered with a surprising amount of innovative new products in many categories. New video games included updates on old standbys such as Merit's countertops and Incredible Technologies golf games, along with new entries in the c-top and golf niches by I.T., Rowe/Ecast and Global VR, respectively. Namco's top-selling game of 2002 was also an "old faithful," the still-popular pairing of 20 year old titles "Ms. Pac-Man" and "Galaga." But brand new titles and concepts appeared from traditional companies like Sega with its "Derby Owners Club" finding success in non-traditional locations, as well as from non-traditional companies like Tsunami. Sammy USA's "AtomisWave" system appeared with an impressive library of around a dozen titles from day one, with more to come.

2002 saw a host of successful new redemption games spilling out of Benchmark, ICE, Coastal Amusements, Skee Ball, Bay Tek, Smart Industries, and Lazer-Tron (now a division of Cadillac Jack in the wake of Arcade Planet's sale to Sierra Design). The year also saw clear signs of innovation in the jukebox realm, whether the upgraded c-top/jukebox "combo" of Merit and TouchTunes, or the quiet approach of Rock-Ola's new "Digital SyberSonics" package. More musical innovation is coming in 2003 from Ecast (now flush with $14 million in fresh capital), Rowe (divesting itself of vending and bill changers, the company continues to strike fresh paths in entertainment), and NSM Music (its remote jukebox will launch as soon as licenses are inked with more labels). Last year also saw substantial innovations in digital imaging equipment from Apple Industries, among others; and even the venerable pinball game got an update from Stern with its in-house tournament system.

If new product is the industry's lifeblood, political controversy is its adrenaline , and 2002 provided plenty. The year's single biggest controversy revolved around the question of tavern owners attending coin-op trade shows, and this argument is guaranteed to spill over into 2003. AAMA leaders decided to keep bar owners out of the March, 2002 Amusement Showcase International, a move that sparked joy among operators , and fierce criticism by many disappointed exhibitors. Later that spring when word dribbled out of AAMA that the bar owner attendance policy would be reversed in 2003, industry reactions were also (predictably) reversed.

When asked, most operators admit that direct sales to locations are largely a fact of life in the industry today, and that bar owner attendance at ASI 2003 probably won't make that much difference. But operators' visceral emotional dislike of the idea provides a hint of just how much anxiety lies underneath the surface of even the most successful operation today.

Operators have seen billions in profits vanish in a matter of two or three years, as when the mid-1990s consumer video game renaissance decimated the earnings for arcade video. So, despite full cashboxes for pool tables, countertops, and other select categories of equipment, 2002's leading operators worried that competition from legalized gambling and/or competition from Fortune 500 entertainment conglomerates could theoretically put them out of business almost overnight. Under such pressure, operators react all out of proportion to the slightest hint that their turf may be under attack.

The other major political developments of 2002 were the ongoing crackdowns against gray area amusements across the South, and the revival of public criticism of violent video games.

Georgia, Alabama, North Carolina, Arkansas, Texas, and Mississippi all struggled with increasing efforts by authorities to clamp down on video pokers, eight-liners, and/or adult redemption devices. Laws remain murky in most of these states, but the big picture is clear: gray area gaming is headed down the South Carolina route, toward extinction.

The arguments about violent video games fell silent after Sept. 11, 2001, as if real-life violence had dwarfed the fictional violence of popular culture into insignificance. By fall of 2002, the new horror of the Washington, DC, sniper attacks seemed tailor-made to revive the controversy, and it did. AAMA reports that the volume of media criticism returned to its old levels by year's end, accompanied by more proposed bans and restrictions at the state government level. The only important new video regulation to become law in 2002 was California's requirement that locations that have several red or yellow label games must post ratings and provide information about the Coin-Operated Video Game Parental Advisory System.

A very minor political controversy bubbled over the fate of the Golden Dollar. When the U.S. Mint halted production of dollar coins in the spring, many newspapers across the country headlined this as final proof of the currency's failure. A few industry holdouts continued to insist that the coin remains viable and that production pauses are common for all types of coinage. Regardless of who's right, the fact remains that few Americans to date , outside of coin collectors and vending industry professionals , have ever seen or handled a Sacajawea coin.

To summarize, 2002 revealed an industry that's still struggling with painful changes within and still threatened by legislative and competitive pressures without. But 2002 also revealed an industry that is increasingly determined to meet these challenges with hard work, innovation, diversity in products and in customer appeals, all backed by aggressive marketing.

As Florida operator Rich Holley expressed it, upon taking office as AMOA president last fall: "We haven't turned the corner yet [but]'there is still money to be made in this industry." He also spoke for many when he added: "I'm optimistic'we could be due for a rebound."