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Big Lessons From Small 'Apps'

Posted On: 11/23/2009

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Jukebox, videogame, pinball machine, vending machine, coin machine operator, vendor, amusement industry, amusement trade, family entertainment centers, arcade industry, arcade games, amusement parks, theme parks, coin-op, coin-op games, coin-op news, Vending Times, Great Recession, Redbox, Apple, iPhone, Spielberg, McDonald's, Amusement and Music Operators Association, AMOA, American Amusement Machine Association, AAMA

The amusements industry has survived the "Great Recession." The shrinking of the Gross Domestic Product is over, according to an Oct. 29 announcement from the U.S. Commerce Department. The economy actually grew 3.5% during the third quarter of 2009. However, unemployment will probably top 10% by mid-2010, economists admitted. So, for the next year at least, location traffic will probably remain light and the national cashbox will probably remain "less than overflowing."

But the coin-op trade is populated by tough, determined, smart, lean-and-mean survivors. Even before the latest national recession began, today's operators had already fought through a 15-year industry contraction. So what lessons can operators learn from the consumer success stories in today's market? Plenty ... if they focus on the right examples and draw the right conclusions.

Today's consumer success stories include McDonald's, which is still generating strong sales with its popular $1 value-price menu. Redbox continues impressive growth with its $1 vend price for overnight DVD rentals. (Next up: Redbox machines will vend videogames for Nintendo, Sony and Microsoft home game consoles.)

The big story in consumer electronics, however, is not videogames (still a weak market) but smartphones. And if you're not paying attention to the smartphone boom, then you're ignoring the biggest trend in your customer's universe.

Here are some key facts. Apple's iPhone continues to be the consumer's favorite tool-and-toy permutation. During the third quarter of this year, more than three million Americans bought iPhones and became AT&T subscribers. According to one study, iPhone owners spend an average of $80 each on applications, and have purchased an estimated $400 million worth of "apps" for that one smartphone brand alone.

Some smartphone applications are priced as high as $900, the price of a sophisticated video surveillance tool. But many fun and useful apps are just 99¢. That includes sophisticated videogames that you can play on your phone. (In fact, iPhone game apps are seriously cutting into sales of Sony and Nintendo consumer videogame software.) Meanwhile, the success of the iTunes store -- with its 99¢ downloads -- continues to grow.

If you see a trend emerging here, with $1 products flourishing in tough times, you're right. But it's crucial to learn the correct lesson from all this.

For example, it would be easy for amusement operators to pat themselves on the back and say, "We have come through the Great Recession by getting back to the basics -- pool, music and countertops -- that Americans have always loved and always will love. And we have survived by keeping our vend prices in the $1 or less range that Americans love." There is much truth in this, but it's not the whole truth.

It would be just as easy for FEC owners and operators to say, "We have come through the Great Recession by highlighting redemption games and prizes, and by keeping our perceived value high while keeping play prices comparatively low." This, also, is correct -- but it is not the whole truth.

Finally, it would be easy for both street and fun center operators to say, "We have come through the Great Recession because we are providing classic entertainment. Americans like repeatable experiences. Let's face it: Pool, music and videogames have not fundamentally changed since the day these coin-op devices were invented. You pay a small price and enjoy a game of billiards, a video adventure or a song in a public venue. Classic entertainment will always have a vibrant market."

Again, all of this is true -- but far from the whole truth. Yes, Americans love familiar experiences. As movie mogul Steven Spielberg shrewdly noted, "The reason McDonald's Big Mac is so popular is because it is the ultimate repeatable experience."

But most of all, Americans prefer to have their beloved, familiar experiences wrapped in shiny new packages. Successful companies update those packages every year or so, and sometimes far more frequently.

So it's not just the familiar taste that makes McDonald's a recession-era hit. It's a brilliant combination of the cheap (value pricing), the familiar (most items on the menu) and the novel (a constant parade of new food packaging, new location themes and new chainwide marketing campaigns).

Similarly, the videogame apps on an iPhone might strike many operators as ho-hum, but consumers love playing them on their cool new pocket-toys. And let's not even get started on iPhone's portable jukebox functionality, supported by iTunes.

Likewise, Redbox may not seem like an innovative approach to vending, until you notice it's supported by a companion website. At, consumers can see kiosk locations, hours, and what DVDs are stocked in each machine. Consumers can also manage Redbox accounts remotely, and even reserve DVDs online for later pickup at specific machines.

Operators know that consumers love the familiar; manufacturers constantly point out that consumers crave novelty. Both are correct. The familiar, wrapped in the novel, and offered at a compelling price-point, is the unbeatable formula for consumer success in good times and bad. Operators who know this secret will continue to find a solid market in 2010 and beyond.