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The Great Digital Debate

Posted On: 5/16/2009

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Power House Vending, Amusement and Music Operators Association, Amusement and Music Owners of New York, Ecast, jukebox, digital music, vending, vending machine, vending business, vending routes, coin-operated, coin-op, operator

Power House Vending of Laguna Niguel, CA, recently announced a nationwide rental program featuring privately branded jukeboxes that run on the Ecast network. Operators Stephen Bennett and Rick Wolfen posted their plan online for all to see. They said their goal is not to undermine the operator; Power House is an operator -- an assertion we'll discuss in more detail below. The goal of the company's rental program is to make a profit for this one particular operation, using the tools of remote management and digital networks.

"We're combining tried and true historical service models with current technology to get the best of both worlds," said Wolfen. "The fact that we can fix minor problems like a bill jam over the phone is a huge plus, not a negative. Our customer simply wants the jukebox up and running. If they can call us and we can fix the problem in five minutes, they certainly don't care that they don't see our face."

The Amusement and Music Operators Association condemned the Power House program, claiming the deal's terms didn't make financial sense. AMOA raised questions about Ecast's role, apparently wondering if Ecast might be a silent partner in the Power House rentals. Separately, the Amusement and Music Owners of New York accused Ecast of selling direct to locations.

Ecast initially responded that its operator contracts don't forbid this type of rental business. But after increasingly loud protests from traditional operators (read: customers), Ecast announced it would not "support" Power House in its new venture. Nationwide rentals, said Ecast, violate an "operator best practices" policy that, at this writing, has yet to be formulated. Clearly, that policy -- when written -- will favor local, traditional operating.

Power House insisted its program is truly about rentals, not direct sales. Bennett and Wolfen said they retain ownership of all rented jukeboxes. They said the $119 monthly fee paid by locations is in effect a minimum; Power House also shares cashbox revenues with locations that rent their jukeboxes. "We are absolutely not partners with Ecast in any way," Bennett and Wolfen emphasized. (That much, at least, is now abundantly clear.)

VENDING TIMES stands with AMOA and AMOA-NY in supporting the operator, of course. But that is not the same as protecting the operator from an evolving marketplace. Could the Power House program threaten some operators? Sure, just as all effective competition does. But isn't trial and error part of free enterprise? If AMOA is right and the plan makes no financial sense, then Power House will fail. The furor (from all quarters) over Power House seems to betray an unspoken fear that in fact, their plan would succeed all too well ... and a curious lack of faith in the ability of traditional operators to adapt, compete and win.

There are three main issues here. One: Who is an operator? AMOA says it has no definition and no membership criteria. But if we want people to honor the operator, shouldn't we define our terms? Clearly, a street operator in the industry's traditional sense is "any owner of a business that makes most its money as a third-party supplier of amusement and music machines to locations, either sharing revenues and/or charging a fixed fee (variously described as a minimum, rental fee or lease)."

By that definition, Power House is an operator and its rental program is legitimate operating.

Second: Is the Power House rental deal as it's described, or is it something else -- like direct sales in disguise? We would remind all concerned that Power House broke no law or contract in its 2007 direct sales effort, unpopular though it was. As we understand it, the 2009 Power House rental program also breaks no laws and violates no contracts. In fact, if you consider the above-cited definition, then Power House's nationwide rental program is simply a way of leveraging digital technology to achieve traditional operating, regardless of whether they're renting a jukebox to a location across the street from their offices or a location on the moon.

Third: How will digital networks impact the operator-location relationship, and how will the amusement and music industry be structured in the 21st century? This question cannot be answered definitively today. But it's worth remembering that some of America's largest, most respected operators have predicted for decades that downloading technology would revolutionize the operator's role. VT believes that determined operators, like AMOA-NY's leadership, can survive, adapt, compete and flourish amid this change.

AMOA ended its latest statement on Power House this way: "Hopefully, 'this case is closed; mission accomplished.' Next?" We suspect the case is far from closed. Or, at any rate, now that digital networks are out of Pandora's box, there is sure to be a "next." And a next. And a next ...

All this deserves open, vigorous debate. So if anybody disagrees with us, we'd love to hear why they think we're wrong -- meaning, we'd like to hear a reasonable explanation based on logic and principle, not an attack on personalities. Not innuendo. Not name-calling and emotion.

Meanwhile, we remind all concerned that Power House's owners are industry members in good standing. As far as we know, they have always told the truth. We think they deserve the benefit of the doubt now. Again, if anybody disagrees, do us -- and the industry -- a favor and state some hard facts, publicly, on the record.

In the same vein, we also hope operators will continue to support Ecast and its first-rate EQ jukebox, clearly one of the best products on the market. Any attempt to punish Ecast here would be misguided at best and could hurt the entire industry at worst.