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Power House Rolls Out Nationwide Rental Program, Plans To Sell Jukeboxes To Operators Through Distribution

Posted On: 4/24/2009

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Jukebox, Vending, Vending Machine, Automated Retailing, Coin-Op, Interactive Entertainment, Amusements, Arcade, Taverns, Bars, Music, Digital Music, Power House Vending, Ecast, Stephen Bennett, Rick Wolfen

ORANGE, CA -- Power House Vending said that it is set to officially launch a digital jukebox rental program on a nationwide basis this spring. "We are ready to install jukeboxes on a rental basis across the U.S," said the company's chief executive, Stephen Bennett, a 20-year operating veteran who originally hails from Australia. His business partner for the past 10 years is Rick Wolfen.

Power House's jukebox rental program has been publicized for several months on the operator's website. Power House also took a booth at February's Nightclub & Bar Show in Las Vegas, and it advertises its rental programs in location-oriented trade magazines.

Under the program, Power House rents out two different models of privately branded, wall-mounted, downloading jukeboxes with 19" monitors that run on the Ecast network. The location pays a rental fee of $119 a month, which amounts to approximately $4,600 over the 39-month term. The monthly fee is in effect a minimum that comes out of the location's cashbox share. Power House divides the revenue with the location on a 70-30 split, with the larger share going to the venue. Power House retains ownership of the jukebox at the end of the rental program.

Although San Francisco-based Ecast provides its music library and platform for Power House jukeboxes, the content company is not a partner in the operator's business or its rental program, Bennett and Wolfen told VT.

After supplying a certain amount of demand for jukebox rentals to locations, Power House intends to sell its jukeboxes for no more than $2,995 apiece to operators through distribution. Power House is looking to establish a distributing and manufacturing arrangement. Sales are expected to begin this fall. Thirty-nine of the company's jukeboxes, in fact, have already been sold through distribution to operators, and are currently on location, earning money for those operators.

The two operators strongly rejected criticism by operators and their trades associations that suggests the Power House rental program in any way "undermines the operator." In the view of Bennett and Wolfen, it simply makes effective use of digital technology and allows the company to operate music machines at any distance.

"This is 2009," Bennett told VT. "On my desktop computer with the click of a mouse I can track machine income and play data in real-time, on machines that are located over a 1,000 miles away. Our company is based in southern California, but we have operations in the Midwest and other places around the country. With our arcades, we can go online anytime and see collections. It makes sense to use the same tools for jukeboxes. I would like to do the same kind of rental program with malls and kiddie rides, but mall owners won't do collections."

Power House has trained a national company to act as a subcontractor to handle installations of its rental boxes. The locations that rent the machines are given the keys to the jukeboxes. Routine chores and maintenance, like collecting the cashbox and fixing bill jams, are performed by location personnel; telephone tech support from Power House headquarters is available, when required.

When this approach cannot solve a problem, Power House simply ships a replacement box overnight for installation by its subcontractor the next day. "We don't swap out speakers or power supplies," said the company. "The point is to minimize downtime and maximize earnings, so it's faster to simply replace the entire jukebox when there's a problem that requires technical expertise."

Along the same lines, say Bennett and Wolfen, by making available a cost-effective and reliable digital jukebox for operators to purchase through traditional distribution, Power House is providing a solution to an important problem facing today's vending companies: How to profitably supply digital music to "B" and "C" locations.

"A $4,500 digital jukebox is not profitable for many operators to deploy in second- and third-tier locations," said Wolfen. "When we heard operators complain they couldn't earn a high enough return in secondary locations, we decided to design a box at a price of $2,995 that could penetrate more venues."

The company originally planned to offer its units for sale to locations two years ago through a venture called Jukes Direct, but Wolfen said that idea was scrapped after it encountered a storm of protest from operators.

"Our idea to sell this product direct to locations did not fly at all, so we dropped it," Wolfen said. "But there's no need to throw the baby out with the bathwater. Our goal was never to undermine the operator's role. We simply said we never hear the location discussed and the location's revenues are what drive the success of the entire industry. So a new approach is needed."

Wolfen confirmed one of the company's current rental products, the J-380, is the same jukebox it originally planned to sell two years ago, which was called the Medallion then.

"Some operators look at our current box and say, 'that's the Jukes Direct box,'" he said. "Yes, it is -- but you can't blame the hardware. We fully understand why operators were upset with our direct-sales plan two years ago, but this is a very different program. Our nationwide rental program upholds the traditional role of the operator as equipment owner. We created an economic solution for operators by building a quality downloading digital jukebox at the market's lowest price point."

Power House built 100 units of its Medallion jukebox two years ago; it is this stock that furnished the 39 boxes that have been sold to operators so far. The firm has also begun to supply its jukeboxes to locations on a rental basis.

Bennett and Wolfen emphasized that the rental program involves Power House providing many traditional operator "value-added" services. "We are a very active partner in each location," Wolfen said. "We study music play patterns at each location -- remotely -- and we make recommendations for changing the playlist. We're there for our customers constantly." They emphasized that technology is an integral part of everyone's life, and that the industry needs to keep up with its customers' expectations.

In reply to AMOA's charge that the Power House rental program "does not make economic sense" for the operator, Bennett said the company has been testing its program and product for two years, carefully surveying the market, studying revenue patterns and trying different price-points.

"We have accumulated a great deal of data and we understand the business," he said. "We are here to make a return on our investment, and operators who buy our jukeboxes can make ROI by operating remotely the same way we do. We install our jukeboxes into B and C locations, because we've structured our program so we can make a profit."

Power House's proposition to locations is straightforward, according to Bennett's explanation.

"Our proposal is, we install a brand new digital downloading jukebox in your location at no cost to you," he said. "You (the location) provide us with DSL and power. Once the box is installed you get a welcome package with business cards, phone numbers, a fridge magnet and a quick reference guide with color photos for how to repair a bill jam, etc."

Bennett continued: "You (the location) pay us $119 a month. You keep 70% of cashbox revenues and give us 30%. For that 70%, we expect you to do a little work. We hand you the keys; you open the door and take out the cash. We ask you to use the diagnostic screens and if there is a problem, we talk you though it over the phone. In the event we can't fix it quickly, we install a new replacement box at no additional cost."

Billing to locations is uncomplicated, too, Bennett said. "When we send you (the location) a monthly bill, it's itemized," he explained. "You will know to the penny what money the box made. You'll know the top 20 songs and top 20 albums. You get this report on the 10th of each month; five days later your account is swiped for the rental and 30% of the revenue."

Bennett and Wolfen said that they are strong believers in the operator, distributor and manufacturer dynamic. "At the same time, we think rather than viewing this industry as a three-legged stool, it should be seen as a four-legged table," they said. "The location is the fourth leg."

The Power House team also said that digital technology could be a complement, not a threat, to the operator if properly understood and deployed.

"Using today's digital technology, operators can now provide previously unmatched levels of service," Bennett and Wolfen observed. "This ensures that locations are happy and that everyone in the market chain is profitable. That is exactly what our jukeboxes and rental program are intended to accomplish."