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Are Amusement Operators Ignoring The Potential Of Innovative Payment Strategies?

Posted On: 1/11/2014

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TAGS: bulk vending, coin machine, coin-op machine, coin-op industry, vending machine, bulk vendor, coin-op business, small business, vending, vending operating, Vending Times editorial, Hank Schlesinger, branding a business, payment systems, Adolph Zukor, Automatic Vaudeville Co., amusement route, jukeboxes, family entertainment center, video game arcade, Golden Age of Video Games, penny arcade

Perhaps it is time to rethink the pricing strategies of street operations and family entertainment centers. Not much has changed since the first penny arcades opened at the turn of the 20th century. Back then, players chose their games à la carte in pretty much the same way they do today. Of course, the price to play a game has gone up considerably in the past hundred years, and the available media that can be used are greater, but the same basic principles apply today. A child transported from the turn-of-the-century Adolph Zukor's Automatic Vaudeville Co. on 14th Street in New York City into the most modern FEC would understand how to pay for the miraculous games he saw.

What has changed, and changed dramatically, is the consumer. The typical millennial has an expectation that software-based products are either free or readily available at a very low cost. Google, Facebook, Twitter and all Web browsers, among scores of other sophisticated software products, are essentially free to users. Likewise, music, movie and book downloads are accessible at low prices or sometimes free. Even wildly popular games like Candy Crush, a "freemium" game, arrives at no cost to the player for the first addictive levels of play. It's not that the players don't value or enjoy the software -- they simply have far different expectations than their predecessors when it comes to pricing.

Added to that is the fact the vast majority of young people today carry with them a minimum of one screen, while two screens are not uncommon. Even three screens -- smartphone, tablet and notebook computer -- do not raise an eyebrow. An unscientific survey of twenty-something bar patrons revealed that they carried with them on various portable devices no fewer than a half-dozen videogames. And that is not counting videos they play at home.

Luring them away from their portable screens to a pay-to-play screen is no easy task. Street and FEC operators have become dependent on the "out-of-home experience," which would include pool tables, merchandisers and air hockey. But what about videogames?

We may be seeing the first hints of what's to come. One pool table manufacturer, for instance, has employed relatively simple and highly reliable technology to offer variable pricing. This allows operators to offer bargain pool during specific times of the day or week to prompt increased play, and premium-priced pool at the busier times of the day or week.

A tentative move by AMI Entertainment is its Tap TV Trivia Channel, going live earlier this year. The system leverages smartphones to interface with the trivia game. Payment eschews the standard coin drop in favor of a subscription paid for by either the location or the operator, or a negotiated combination of both. Patrons play the game free of charge using their own smartphones as controllers. The system, which brings a taste of social media into a bar or tavern location, builds venue loyalty.

Some of the latest FEC smartcard systems allow for innovative pricing strategies. The question is how creative amusement operators will get when it comes to pricing. In turn, how will this drive technological innovation on the part of manufacturers?

Promotions that offer limited discounted play on a single game category, such as driving videos, are one option. Sponsored events in which a corporate entity, like a liquor distributor or local car dealership, negotiates "free play night" with operator and location is another possibility. So are joint promotions with playtime paid for by gift cards supplied by another corporate entity.

As payment becomes more flexible, so do the variations of promotion. As the old saying goes: "Whoever invented gambling was pretty smart, but the guy who invented chips was a genius." The same could be said for videogames and payment strategies.

Another aspect that has been largely, though not entirely, ignored by many operators is social media. There is Facebook, of course, but also Twitter, Vine, Foursquare, Instagram and others. Although widely used by larger companies to get their messages and promotions out, they have not been fully exploited by smaller, independent firms, including coin-op. That's a shame, because that's where the action is these days when it comes to coin-op's core demographic of young players.

There are those in the industry who seem to have given up. Perhaps they remember those halcyon days of the 1980s, often labeled as the "Golden Age of Video Games." Certainly there was less competition for players and fewer screen options for potential players. That brings us back to Adolph Zukor, who revolutionized penny arcades. Eventually making the transition from penny arcade nickelodeons to movies, Zukor founded Paramount Pictures through a series of mergers. Decades later, seeing not only the threat of television to his motion picture business, but also the profit potential, he famously said, "Rather than lose the public because television is here, wouldn't it be smart to adopt television as our instrument?"

dolph Zukor's Automatic Vaudeville Co.

photo | Left: Adolph Zukor's Automatic Vaudeville Co. on 14th Street in New York City opened in the early 20th century. Its payment model is not that different from those found in many FECs a century later. Right: By the 1930s, penny arcades were seen as dens of low-cost illicit thrills. Today's FECs go to great lengths to attract entire families, though the pay-for-play model remains firmly intact.