It's 2004 and time for an all new year and a batch of all new trade shows.
Here's what I think we can expect in March at the ASI. Although attendance will be down, both in booth count and attendee count as the industry continues to consolidate, I think the buyers will be out in force. Our industry, being a product of the domestic total economy, is clearly in a recovery mode. Fortunately, we're not immune to the good things happening in the U.S. economy.
Our situation is also a little murky as we're significantly impacted by what happens overseas, both in economic conditions and with Japanese industry consolidation, including companies like Sega and Sammy. Domestically we are tied to the health of the businesses in which we place our machines, and then secondarily, the quality of the product of machines we're installing.
For those operators who have continued to minimize their debt, taken care of business, maintained the profitability of their respective companies, and stashed away some cash, this feels like a great time to reinvest in the industry. To no one's surprise, companies taking a proactive approach to niche markets (online tournaments, various products utilizing downloading capabilities, and marketing their services such as tournaments rather than the old school "set-and-fetch-the-cash" approach) are prospering.
The days of being all things to all people are behind us, not only in this industry, but business in general. In addition to the online opportunities, another great niche is the new crop of merchandising games that have been introduced over the last few years. These games have opened up many new opportunities for those who don't mind learning new tricks and talents.
I'm thinking that today, online products supported by comprehensive marketing programs, and expanding the merchandising segment of this businesses, are our biggest industry opportunities . They have filled a void left by thousands of beat up, old, empty video cabinets. I'm sure that there are many markets in the U.S. where these new product lines are virtually untapped. In these markets, opportunity abounds.
Now for the bad news. Video appears to be DOA in today's market for the masses. I see very little good happening in the traditional video game category. When the most exciting video introduction in 2003 was a remake of some classic Midway products, that wasn't good.
That's good and bad news for the operator. It's clear that in addition to dealing with the Internet competition, and the superior experience that our customer's enjoy with the new home video game systems, that all but a handful of manufacturer's have said "Bye-Bye" to the video game manufacturing game. Can you blame them? No one crunches numbers more than Sugarloaf, and the return on investment from traditional video games in traditional locations is poor.
I don't really miss the excitement of new video games being requested by my customers every month when the new magazines came out. Companies such as Sammy, Incredible Technologies, Global VR, and now Chicago Gaming with the Nicktoons Racer product, have kept us in the business over the last two years, and are the few bright spots peeking out of a galactic black hole.
Now we're reading that no less than 10 new sit-down driving video games will be introduced at the ASI show in March. May I ask what the manufacturers are thinking? The few videos that are being built today are not being sold in any quantity. We're on the verge of a video game glut in late 2004 in this industry like we've never seen. It will be a great time to be a buyer if that's the product you're looking for.
Yet I believe it's going to be a very exciting year in the industry. It may have been a long time coming, but this is the first time it appears that we're fully in a "post-shake-out" mode.
The industry continues to consolidate. This is in no danger of changing. Traditional routes are sold when current owners are concerned about the future viability of their business model, when owners feel as though their hard work is not generating the financial rewards that a sale would, or as part of a succession plan or lack thereof.
When consolidation is frantic and accelerated, as it has been for the last ten years in our industry, consolidation is a trend. At its normal pace, it's an evolutionary process that is expected and healthy.
I don't visit with as many operators today as I used to. But the ones I talk to continue to tell me how difficult it is to be a small operator in today's market. The key is they're still around figuring it out. The "fast-buck" guys are gone. The trend of cracking down on the industry's black eye product, fast games of chance, continues. Those that know the industry and have the experience are still around. I notice that the trade shows of today start looking a lot to me like the trade shows 15 years ago.
Many of the same people remain the backbone of our industry, though faces
are a little road-weary from years of ups and downs. The hard earned wisdom
and character that comes with experience is evident on the aged faces, mine
included. Experience counts and prospers over the long run. If it was easy,
everyone would be doing it. Our industry has seen both sides of that equation.
Now it's tough, but worth it in the right venue with the right business
plan.