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Game Networks Provide Steady Operating Model

Posted On: 2/1/2007

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U.S.A. -- Eight U.S. game suppliers -- Arachnid Inc., Incredible Technologies, Merit Entertainment, JVL Corp., Sega Amusements USA, Bulldog Entertainment and Raw Thrills -- report that they now feature networking technology at the hearts of their current systems, or expect to do so by the middle of 2007.

While a vocal minority of operators continues to resist the trend, manufacturers say the move to networked video will soon become universal whether operators like it or not, because players increasingly expect online connectivity, and revenues for networked systems in the U.S., Japan and Europe strongly justify the investment by manufacturers and operators alike.

Along with networked games comes a variety of associated features, such as online tournaments, downloading of new games and revenue sharing or recurring fees for broadband service. Other advances that are enabled by this technology include software updates and tournament administration.

Manufacturers of networked games say these elements will soon be the simple facts of life for most in the industry and will be as widely accepted as downloading music is now. Several manufacturers expect this evolution to occur by the end of the decade.

Operator resistance to these trends is understandable, said Bob Mills, vice-president of sales for Merit Entertainment. Quickly conceding that operators should have the right to make up their own minds about networking technology, he points out that Merit's games continue to preserve the option for traditional unconnected operation.

But Mills also said that operators who hold out against networked games will eventually see the market pass them by.

"Yes, a segment of the operating community is resisting the inevitable," Mills said. "Some operators can probably continue to resist forever with certain types of machines in certain locations.

"But eventually," Mills continued, "most operators will have to get aboard with networking or be replaced by another operator who does. This is a digital world; that's the norm. If you don't get onboard, you'll only be able to continue that approach for a certain time. After that you'll be on the outside, looking in."

Don Pesceone, vice-president of sales and marketing for Incredible Technologies, agrees that operators deserve to choose whether to be online or offline, which is why IT chose to offer an offline version of Golden Tee LIVE last November. The game was initially released online only.

Pesceone also agrees with Mills about the inevitability of online video gaming. "All this is coming and we strongly believe it's best to be onboard," he said.

Not unlike Mills, he asserts that the rapid spread of all things hi-tech in the world beyond coin-op is driving the amusements industry to keep up.

However, he views this evolution as a definite positive, and believes the majority of operators will come to share this viewpoint about video games as they have already done with networked jukeboxes.

"Over the next three years," said Pesceone, "low-cost broadband will become universally available in locations, and very familiar to operators. It will become well understood by the entire industry. During those same three years, manufacturers will release an exciting new generation of games and concepts that take advantage of those communications capabilities. By 2010, it will be a very different world and a very good world for coin-op. We will see fewer but stronger operators, and fewer but stronger manufacturers."

"Online games are the long-term future for our business, said Sega president Rick Rochetti. "There are many savvy operators out there who are very keen on promoting networked tournaments and developing more strategies around these technologically advanced products."

One of those savvy operators -- mentioned by most of the manufacturers interviewed for this story -- is Chris McSwain, corporate vice-president for A.H. Entertainers (Rolling Meadows, IL).

"I understand being upset that the days of the 50-50 split between two parties are over," said McSwain, adding that locations and players increasingly demand online products and experiences.

"We're living in an online world, and players want everything and they want it now. Broadband makes that possible," the amusement operator said. "For us, it's totally market-driven. I have to provide my locations the machines that are in demand or I lose those locations. Once the machines are in the locations, that expense is there. I have to find a way to make them work to my advantage."

A.H. Entertainers operates networked dart machines made by Arachnid and video games from several manufacturers. It is also testing a new online product.

"Some machines justify networked tournaments; some don't," McSwain said. "But there are some where it makes sense."

He explained that some locations succeed with tournaments, and others simply don't. "You live and learn," he said. "I believe any machine in a bar that is promoted will make more money than those that are not promoted."

Two operators enthusiastic about the spread of online games and tournaments are Jason Kendrick and Greg Cobb of Gametime Amusements (Brownsburg, IN). Approximately 60 games -- half of the business's total inventory -- are online.

Gametime runs proprietary tournaments on networked countertops and golf games; bowling game tournaments are planned next. "I think bowling has a lot of networked tournament potential," Kendrick said.

"We are aggressive with promotions," he continued. "We'll try anything once. We definitely see a spike in play when we're running contests and giving away prizes."

Kendrick anticipates that the company's current tournament, which offers a 32-in. LCD flat-screen television as the grand prize -- will boost play on the participating games by 25%. Some Gametime tournaments have achieved even larger increases in play volume, he said.

Of those operators who flatly refuse to consider entering the online video arena, Kendrick said: "I'm glad they choose to operate their business that way, because it gives me a competitive advantage when I offer something they don't. I'm a newcomer to the industry [he became a partner in Gametime two years ago], so I can't criticize how longtime operators choose to do business. But I think there is a way to do things better today than there was in the past."

America's coin-operated amusements industry is now in its 17th year of networked equipment since Arachnid launched this era with modems linked to electronic dart machines in 1991.

Networked video arrived on the coin-op scene in 1996, when Incredible Technologies introduced ITNet for Golden Tee Golf. Today, Merit Entertainment, JVL Corp. and Global VR all administer successful online game platforms.

Sega Amusements USA and Bulldog Entertainment are currently rolling out platforms for the online game market; Raw Thrills will enter the networked sector later this year.

The number of connected coin-op machines today cannot be estimated with any great accuracy, since leading companies such as IT and JVL Corp. decline to provide statistics on their installed base and the numbers of operators who participate.

A year ago, the figure was approaching 80,000 connected video and dart games in the U.S. market. Currently, Arachnid alone communicates to a base of networked dart games that is approaching 40,000 units.

Incredible Technologies reports that it has "tens of thousands"  golf and hunting games connected to its network. Pressed for specifics, Pesceone said that the current installed base surpasses the peak figure of prior years (25,000 IT games were reportedly online a year ago).

Merit's TournaMaxx network supported 7,500 online MegaTouch games a year ago. At current growth rates, by the end of 2007 Merit expects operators have more than 9,000 MegaTouch machines online.

Based on confirmed figures from earlier years, VT estimates JVL Corp. now has more than 1,000 games online and Global VR has 3,000-plus games online.

While acknowledging that some operators remain confused by broadband and networking, Pesceone said the operators' learning curve is rising steadily.