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Lemons And Lemonade

Posted On: 9/23/2011

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consumer spending, discretionary consumer spending, coin-op video game, arcade video game, amusement business, jukebox operator, vending machine operator, vendor, amusement vendor, juke box business, coin machine business, Vending Times, Lemonade Freedom Day, Nouriel Roubini, Firestone Financial, Chuck E. Cheeses, Dave & Buster's, video game sales

The dollars that drive the U.S. amusement industry are the same dollars that drive the overall economy. Discretionary consumer spending accounts for 70% of America's economy -- and 100% of music and amusements. So when economists analyze discretionary spending, their findings are extremely pertinent to the out-of-home amusement trade.

These days, experts see a mixed picture. Here are key facts cited by optimists:

1) Consumers regularly spend less on leisure but splurge now and then, spending "bigger." Result: Total annual leisure spending is up 3%-5%, says American Express Business Insights.

2) Year-over-year sales in taverns and restaurants are up 5.6%. Some months see slight dips, but the trend is positive.

3) As VT recently reported, a report from the U.S. Bureau of Labor Statistics showed that 34 states and the District of Columbia generated job growth in the leisure and hospitality sector between 2006 and 2010.

4) Dave & Buster's most recent fiscal report showed comparable store sales up 6.1% for the quarter ended May 1. | SEE STORY

5) Firestone Financial Corp., the nation's largest lender to buyers of vending and amusement equipment, announced the signing of a $125 million multiyear revolving credit facility in June. | SEE STORY

Pessimists also have notable data:

1) Consumer confidence plummeted in August to the lowest level since 2008, said Reuters/University of Michigan.

2) The chief financial officer of Heinz commented: "This result was even lower than in the depths of the Great Recession of the first quarter of 2009; and in fact, is at the lowest level since 1980. As a result, U.S. consumers are reacting by cutting back on discretionary spending."

3) In July, consumer videogame sales plunged 20% to 2006 levels. In South Dakota, video lottery revenues are down 17% to 35% year-over-year. The VLT slump is largely due to the statewide smoking ban, according to machine operators.

4) CEC showed comparable store sales sharply down for the quarter ended July 3.

Of course, quarterly reports are snapshots of the immediate past. What is the smart money saying about the near-term future?

New York University professor Nouriel Roubini, a brilliant economist who predicted the 2008 crash two years beforehand, said on Aug. 31 that a double-dip recession is likely (he rated it a 60% probability). Roubini also said current conditions are worse than 2008 because Uncle Sam isn't spending (on "stimulus") and banks aren't lending.

The amusement industry is taking all this in stride. Operators, distributors and manufacturers are past masters at turning lemons into lemonade.

However, even the lemonade business is not what it used to be. Maybe you haven't noticed, but there has been a disturbing trend across the country for the past year or more of police and environmental regulators shutting down -- believe it or not -- kids' lemonade stands.

To cite a few examples: Police in Coralville, IA, shut down four-year-old Abigail Krutsinger's 25¢-a-glass lemonade stand for "health reasons."

Officials in Multnomah County, OR, closed seven-year-old Julie Murphy's 50¢-a-cup stand, threatening a $500 fine because the child had not purchased a $120 temporary restaurant license.

"From Maryland to Wisconsin, kids are being harassed for not having business licenses, vendor permits, food permits and who knows what other goofy government forms or assorted bureaucrat-gone-mad paperwork," reported the Washington Times.

What's a young business tycoon (or a veteran operator) to do?

We recently saw an essay that explained how a "lemon-trepreneur" should research the market: find a good location and the right niche; offer customers choice and great service at the right price; advertise; track sales; and experiment a bit. The only good idea they left out was "form a trade association," but some civic-minded adults have done that for them. It's called Lemonade Freedom Day and has its own website and Facebook page.

What goes for lemonade stands also goes for amusement and music industry professionals. Operators, distributors and manufacturers already know the importance of strong locations and proper pricing. They know, too, the power of choice (giving players the latest games and music) and the necessity of keeping a close eye on the cashbox.

Where amusement industry trade members could use some strengthening is in the advertising (including marketing) and trade association departments. Is your company aggressive about advertising and marketing? Do you have a marketing program or even an ad budget? (If you don't have one, see "Calculating Your Ad Budget" at

Are you a member of your state and national association? Do you volunteer to help the leadership or are you just grudgingly paying your dues and complaining?

Nowadays, it's not enough to turn lemons into lemonade. As America seemingly heads into a second recession, industry pros must work harder and think smarter in order to stay ahead of the game.