It's a statement made with the most sincere intentions by prospective customers. "There are tens of thousands children wandering around our small town, neighborhood, city, with nothing to do at all. If we put this arcade in, it will do terrific." So the pitch goes
The way our business works, that means there is someone willing to sign a lease for a property in a small town that may set them back maybe $1,000 per month and spend another $1,000 on paint and used furniture. All you have to do as the operator is buy 30 games at an average cost of $5,000, a total investment of $150,000 or so, to set up the new arcade. No real problem, though - you do get to keep half of the revenue stream. The problem operators have is that a few made some real money on those small-town arcades a few years ago. Twenty years ago, to be exact. And nothing since. But in tough times, you just never know. You don't want to miss out.
My father and I went though this numerous times and came up with a golden rule. It's really quite simple. It applies to prospective new customers calling you to set a new location. When during any part of the conversation someone mentions the phrase, "There's nothing for the kids to do" (it doesn't matter what follows after this), we get off the phone as soon as possible. Blame it on the phone company, or bad cell connection, or something. Just go. Run away, don't walk. This one was just touched by the kiss-of-death phrase. It's over. If you must, open the nearest window and throw $20K right out the window. You'll end up ahead. Just don't do this deal no matter what, is what we would say.
Rule number two: Be sure that the proprietor is financially invested to a greater degree than you are with your games. It doesn't matter how hard they are going to work or how many hours. It's about the money at this stage. If it's too easy for them to walk away when things get tough, that's a big red flag. Banks figured this out years ago. It's called a personal guarantee. That gives pause to every business adventurist.
We did a few of these arcades in Kansas in the '80s. They were all losers, best I can remember. The thought process is that you're talking to someone who should know his or her hometown. In one case I was talking to the former mayor of the town, for goodness sake. I'm thinking I'm getting inside information and better act quick before he calls someone else. "All my games are brand-new out of the box," I boasted in hopes of closing the deal right there on the phone. "I'll service your machines even if they break on Christmas day." Back then, I even asked, "Where would kids go in town to play games now?" I learn there's a Stop and Shoppe Convenience store at the corner and that's where the kids go when they can't go to the big city. The roar of opportunity is deafening.
At the risk of sounding anti-entrepreneurship I've decided that if, in fact, there is nothing for these kids to do, there must be a reason. Surely if there was this much opportunity in this area someone would have already figured it out and opened a skating rink or bowling center or something. No, really, these kids drive 80 miles to the big city to go to an arcade. They really want to stay in Smallville, I'm told. They hate driving to the big city. OK, issue number one. No, they don't. If you're from a small town you want to get out of that town at every opportunity, don't you? That's what I'm thinking. Especially if you're talking about a teenager, which we are.
At the time, I didn't see quite this clearly. So, being aggressive and wanting to "steal" one from my competitor, we set the arcade. Boy, we were excited. The first week's revenues were great. I guess our customer was right about the kids not having anything to do. Is that possible? Then, the first sign that all was not bliss. The owner calls me and says the game they really want to play isn't here. Oops, I only set 14 out of the top 15 games in the recent RePlay poll and they want the only one I didn't set. He's afraid if we don't get the specific game that is being requested we'll lose our customers. That's easy for him to say. Well, it's go buy another game or jeopardize the whole deal. We dodged a bullet there.
Then, there is another request. A customer requested a game no one in our company had ever heard of. I called my distributor and he thought it sounded familiar but had no further information. I called the owner of my new "leading edge" arcade and told him that I pretty much knew everything about this industry there is to know and I've never heard of the game. His customer must be mistaken. He should double-check with him. The owner calls back and said his teenage customer read about it on the Internet. Seems it's on a Japanese video game manufacturer's website, and by the way, it's been available in the home version for six months now.
The second month's revenue was only 60% of the first month's. I'm starting to get a little worried. Turns out it was only because school started and kids couldn't go out every night. Revenues were still pretty good. I guess we can still do well on a weekend program.
Month three and revenues go down another 15%. I call the owner and learn that they don't know what's going on, but that the kids are headed back to big city arcade. They say it's where all their friends go and that's who they want to hang out with. No problem. I've got a solution. Eight tokens for a buck. That should draw the customers back. I was wrong. The problem with this solution is that price isn't an issue with this age of customer. It's all about cool, and hanging out with those that are cool. These are the same kids who drop $30 for a concert ticket and $20 for a CD by a band named KORN without hesitation.
In today's market, we are the ultimate expensive impulse item. Customers are not going to search out our products. Something else must be the draw. Our products have the brief ability to grab someone's attention. Then our business begins. Actually, it begins before that. Where we place our games in businesses is the first step. Understanding the customer base and placing the right product mix is equally important. So when you get that miniscule, brief, impulsive glance, your goal is that the customers are moved to make a purchase, and then another, and so on. Then hopefully they're so moved by your presentation and products that they tell someone about it. Have you ever gone to see a movie a second time just because you liked it and wanted someone else to enjoy it too? I think this is our business model in a nutshell. It all comes down to a glance here, a glance there. How many failures would our industry avoid if we just grasped this one concept?
Being a destination point is yesteryear's business model. It was nice, but that's very old news. The model used to be: find a space, pretty much just any space, and fill it up with games. That's what you see in gaming states with slot arcades. They're on every corner. It's probably overkill, but we were guilty of the same thing when we were the destination the gaming industry can claim to today.
If you're calling operators for games, don't use the "There's Nothing
for The Kids to Do" story anymore. It may have worked, but it surely
won't now.