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EDITORIAL: Three Problems, One Solution

Posted On: 11/15/2006

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One of the few members of this industry who works, earns and thinks both as a manufacturer and as an operator every single day is Rick Caviglia. The owner of California Amusement Group (San Leandro) and president of View Interactive is forced to think through every issue from both perspectives. So when he talks about the industry's biggest challenges today, we should listen.

In a certain sense, Cavilgia considers operators the source of the industry's major problems. "The first problem is lack of trust," says Rick. "Route owners are still not comfortable having a third party partner [i.e., a music platform provider and digital song supplier], based on generations of a super-cautious, low-profile operator business culture.

"The second problem," he says, "is apathy or inertia. Older operators are coasting, not upgrading unless they are threatened with losing the account. Otherwise many operators, including me, nurse along old games and old jukeboxes.

"The industry's third problem," he observed, "is that mom-and-pop operators lack sales and marketing know-how. For example, if an operator is trying to sell a location owner on a digital jukebox, but the operator doesn't know how to properly present the fact that some of the cashbox goes to the platform provider, he creates his own barrier to success."

But Caviglia says manufacturers, not operators, are responsible for solving these problems. After all, it's manufacturers who perceive an urgent need for more sales. And, only manufacturers can act decisively to resolve these issues industrywide. Caviglia did not outline specific solutions in our conversation; the following are my ideas, not his. They all come down to one thing: a more aggressive, more comprehensive, deeper, stronger marketing effort.

The better manufacturers (and content providers) are taking steps to build trust: sharing risk as well as profits; generously financing equipment purchases; complying with AMOA's Internet Privacy and Security Policy; not operating themselves; and forbidding staff to privately own routes. So far, so good.

Manufacturers and platform providers could build even more trust by sharing what they pay to music labels or components suppliers, and what they spend on R&D (in fact, TouchTunes does some of that in this issue). Revealing more specifics about long-term plans by manufacturers and platform providers would also build operator trust.

What about operator sales resistance? The way to overcome it -- and to help operators make a sophisticated pitch to locations -- also comes down to a single solution. Manufacturers should perform direct marketing (not direct sales) to locations. The issue here is whether manufacturers want the assume this responsibility on the operator's behalf, and risk angering those operators who desire to control all information going to locations.

How can manufacturers and operators square this circle? By remembering the words of AMOA past-president Jim Stansfield of Stansfield Vending (La Cross, WI). "Operators don't like it when the phone is constantly ringing with locations demanding new equipment," Stansfield once said. "But when the phones stop ringing, we don't exactly like that, either."

This year's AMOA-sponsored jukebox market survey revealed 28% of locations now have satellite radio; 13% have MP3 player competition. These numbers will grow rapidly. AMOA's own jukebox licensing committee chairman says operators must react faster to inroads from non-coin-op digital media.

A crucial point: I don't ever recall hearing any operator complain about having government for a partner when he was lobbying to legalize operator-run video poker. The biggest complaints came when government refused to cut operators in on the deal.

Operators who truly understand the digital media threat should welcome aggressive, nationwide marketing programs from music and games manufacturers -- whether the machine involved is a jukebox, pool table or video game. Better to be "forced" to upgrade earlier than you would like, and better to be "forced" to accept a content supplier-partner, than to lose the account forever to some communications conglomerate three or five years down the line.