My very first coin-op magazine essay was in the early 1980s. It was directed at the manufacturers of the up and coming home video games, titled, "Dance with the One Who Brung You." It focused on my concern that the home video game market explosion that occurred first in late 1982 with Nintendo would have a very negative effect on the coin-op industry. I was very concerned that manufacturers of the home video games were bypassing the coin-op division in total with their top titles.
My point was that the popularity of the coin-op video game business is what created the demand for home games! So don't forget us. You may need us again some day. However, we were being bypassed for the home market with regularity. The coin-op industry continued to exist through the initial introduction of home video games, although it did take quite a "gut shot" that sent many operators packing. What happened in late 1982, when collections dropped off by 50% in a matter of months, is still debatable. Clearly the 1982 recession, along with 20% interest rates, and the home video market explosion, all contributed.
Here it is, 17 years later. The coin-op industry is alive and...OK, it's alive. That's a success story in itself. This is a survivalist industry driven BY new technologies, not driven OUT by new technologies. Those who have changed with the times are still here. What's gone are the free-standing game rooms on every corner and the operators that really thought that 20 tokens for a dollar was a good promotion. What's still here is a $7 billion and growing home video game market. What's relatively new is the competition from the Internet.
Today I read in "USA Today" that the line between the home video game manufacturers and Internet sites is blurring. Microsoft recently announced plans to enter directly into the competition for the home console market, where they will compete with current leaders Sony, Nintendo and Sega (Microsoft is a also partner the new Dreamcast system). Our edge in 1982 was that our coin-op video games were superior in quality to the scratchy pictures and awkward controls found in the home video game systems. Today it's a different story. The "X-Box" home system, as it is to be called by Microsoft, will sport a 500 Megahertz Intel processor, 64 megabytes of RAM, a 56K modem (for game downloading capabilities), a hard drive, and a new high performance graphics chip. For all of this, the cost to the consumer will be a whopping $249 to $299. To point out the obvious, coin-op no longer has an edge.
Sega's recent Dreamcast system introduction claims the "biggest 24 hours in entertainment retail sales history," with sales of $97.9 million the first day. That's the equivalent of selling 2,000 coin-op video games in one day. That number sold during any time frame is a success story in coin-op. To all of this hi-tech competition, I say "So What!" I can still get mine because I'm after a different market.
Today's Internet is yesterday's home video game system. The savvy operators are hearing nothing new. There are a percentage of people that aren't leaving there homes...they are living in front of their computers. In fact, according to this week's "Newsweek," they are living "on" their computers, using them for communication, business, entertainment, shopping, news and even their - ahem! - social lives. It's no big loss to have these customers drop out of the coin-op market. That's the same computer wiz who put a quarter in a Space Invaders and played for an hour, or that person's son or daughter. You never made any money on them anyway.
Meanwhile, the successful operators are in a dogfight for the locations with the most consistent traffic. Have you been in a truckstop in the evening lately, a grocery store or mass merchandiser on a Saturday afternoon? How about a big sports bar on Monday night, or an amusement park over Labor Day weekend? Although league bowling is down significantly, the bowling centers are now expanding their open play with hi-tech, glitzy "cosmo" bowling. New "open play" customers are heading to bowling centers again. Yes, people are going out more than ever, and they are not bringing their hi-tech computers with them.
Welcome to the industry of selling totally impulse products. You remember that term? The ultimate impulse item is the "National Enquirer"-type tabloid at the grocery store. Do you notice that in every grocery store in America, the only place you find that rag in is the cash register checkout line? Do you also notice that more often than not, they are sold out? Go ahead and confess, you've read one while standing in line, haven't you? The reality is that if this tabloid is anywhere except where you must look at it, and you must walk right by it, it would never cross your mind to read it, let alone buy it. If you put it next to the eggs and milk, you couldn't give it away.
I put the coin-operated games in the same impulsive category as the tabloids when dealing with locations. Visibility is everything. Here's an acid test I use when talking to a prospective coin-op customer. "How many customers will walk through your doors without my games installed? How many customers do you expect to walk through your doors after I install my games?"
If those two numbers are not the same, then that customer misunderstands what I have to offer. I can't bring them in the door, nor can any operator. What I can do better than others, after the customer is in the door, is have an impact on the amount of their discretionary income I can extract from them with my superior games, my presentation, and my quality of service. That's where the competition is: who can extract the most money from existing customers?
Yesterday and today the threat to the national cash box was home video games. Now it's the Internet. A valuable observation to me is that through all of this, the motion picture business is booming. Today if a movie doesn't gross $100 million, it's considered a bust. In the prosperous times in which we're living, there is plenty of discretionary income in which all forms of entertainment must compete for. Our competition is not each other, you see...it's all the other forms of entertainment.
Here's a footnote to that first article ("Dance...") written
when I was 25 years old. I wasn't particularly complimentary about the home
video manufacturers, namely Nintendo. Shortly thereafter a guy named Al
Stone (then President of Nintendo of America and today is President of Sega
Enterprises) called me personally in Wichita, Kansas to discuss my concerns.
We had never spoken or met before. It was a classy move that classy guys
make. Without question I was scared to death.