May 2010
Frank Talk
Going Global
Frank Seninsky Returns from Russia with a Lead on Future Growth
I’m just home from my trip to Russia and the Ukraine, as well as short side junket to Montreal, Canada. My recent travels leave me convinced that the world really is full of opportunity if we are willing to go out and seek new business.
I traveled to Russia to attend the RAAPA (Russian Association of Amusement Parks & Attractions) show in Moscow (March 17-19), where I gave two presentations on redemption and then visited dozens of mall entertainment locations both in and around that massive city and in Kiev, Ukraine. My gracious hosts and interpreters were Yaroslasv Sobko and Andrey Zykin of Game Trade and also owners of Barron Games.
RAAPA is the second largest attended industry show in the Europe/Russia/Middle East region. The market is unbelievable in Russia. It’s a huge country with so much potential for growth, much like the U.S. 40 years ago. At present, investors are developing dozens of mall facilities near metro stops (there are over 100 metro stops in Moscow). Bowling is also growing in Russia and both Brunswick and QubicaAMF are represented.
However, I did see several bowling attractions that had Chinese manufactured products, and the feel was very different (less action) and many lanes were out-of-order. The same was true for the coin-operated amusement games. With the lower weekly revenues/month, service is not provided on a daily basis or, in some of the malls, even on a weekly basis. Perhaps that is why there seem to be many more machines than are necessary from my perspective.
The Moscow Metro system, which was recently in the news because of a terrorist bombing, is massive and reportedly carries more than 6 million people each day. Each one of the mall facilities that is already up and running or in development includes some form of family entertainment operation with games and family attractions. The good news for me is that many of these businesses know very little at present about redemption. Both of my speaking opportunities, including a keynote and subsequent seminar, drew sizable crowds. There is enough consulting business there to keep me busy for the rest of my life.
Many of the entertainment centers in Russia are filled with videogames priced at $1.50 per play, which is high for a country where many people make only $500 per month. Even so, videogames are very popular and currently command high prices. When they do offer redemption, the games are generally priced in a similar fashion, and the prizes are marked up to retail values. Yet they wonder why nobody plays their games. There are very few merchandise dispensing machines for now at least; this category of games is illegal in Russia. In my seminar, I stated that the basic price per play of a redemption game should be only five to six rubles (US $1.00 = 30 rubles) making it similar to about 21 cents/play average discounted value in the U.S.
Russia is deeply in need of good product, “work horse” redemption games and prizes, and a lot more expertise in redemption operation. Currently, the distributors in Russia are buying games from a small handful of Western suppliers — companies like Sega, Namco, Triotech, LAI, Coastal (Sea Wolf is one of the most popular redemption games) — as well as cheaper goods coming out of China. Unfortunately, import tariffs add significantly to the cost of both. I have been told that it takes about two and a half years for an operator to recoup his investment while in the U.S. it is less than 14 months. So the tariffs actually double the cost of the games.
A number of the distributors in Russia are also eyeing the profit potential in operating games they are currently selling to entertainment and retail locations. They are literally inventing street locations by placing two and three games in smaller venues, but it’s still mainly large entertainment and mall venues. People in Russia are starving for entertainment so there are deals for the taking.
My side trip (a 12-hour overnight train ride in a sleeper car) to Kiev introduced me to a beautiful part of the world. The Ukranians are very Westernized and easy to get along with. I visited a paintball club, and saw the WBC world heavyweight boxing champion, Vitali Klitschko, who plays paintball there. Paintball is a very popular attraction. In fact, all large attractions do well, and without the same safety liability fears that western operators face in their business.
U.S. companies looking to do business in Russia will need to forge local partnerships and alliances. You can’t go it alone, but the market still has something of a “wild west” feel. The country’s political climate is much better than it was at first in terms of creating investment potential, but it still has a long way to go to make it a viable market for many western companies.
Upon my return from Kiev, I headed up to Montreal to visit with Ernest Yale, president/CEO of Triotech Amusement, the manufacturers of XD Theater, Typhoon, Stomper DLX and my all-time highest-grossing sitdown videogame, Mad Wave Motion Theater. Ernest and his wife Genevieve spent a lot of time with me in Moscow, traveling the subway system and taking pictures in Red Square. I also met with a few game and FEC operators about helping them to expand and refine their redemption operations across Canada. Redemption is currently illegal in the province of Quebec, something that locals hope to change someday soon.
Canada is obviously a more developed market than Russia, but there is still plenty of room for growth and development. Operators in the U.S. have a lot of knowledge, and there is considerable opportunity in joint operations (if you can find a way to balance it with the 15% foreign tax impositions) and consulting. When I was there, the U.S. and Canadian dollar exchange rates were about the same.
I can see that some of my consulting work, at least in the near term, will be outside the U.S. and will provide me with an opportunity to learn much about the demographics of the world. My next stop is Dubai to visit the DEAL Expo and help present a day and a half of Foundations University along with Randy White, Kevin Williams, and Beth Standlee, and then maybe next year on to Taiwan, China and India to give presentations at their shows.
Enjoy the pictures. It was a lifetime experience for me to be able to stand in the middle of Red Square and take in the beauty and feel the history and power of this site. I want to personally thank RAAPA president V.A. Gnezdilov, VP Boris Rabinovich, Diana Lukina (exhibition manager), Zoya Darevskaya (exhibitor director) and Elena Kosacheva (exhibitor manager, marketing and sales pro and translator) for inviting me to be a presenter and Sega’s Satoshi Yamakata and Marin Riley, Namco’s Kjeld Erichsen, Universal Space’s Steven Tan, Triotech’s Ernest and Gen Yale and QubicaAMF’s Alexei Shiryaev for their time and knowledge that they provided me.
Frank Seninsky is president of Alpha-Omega Group of companies, which includes a consulting agency, Amusement Entertainment Management (AEM), and a nationwide revenue sharing equipment provider, Alpha-BET Entertainment; all are headquartered in East Brunswick, New Jersey. During his 41 years in coin-op, Seninsky has presented nearly 250 seminars and penned more than 1,000 articles. He has served as president of the Amusement and Music Operators Association from 1999-2000, is a past chairman of the International Association for the Leisure & Entertainment Industry and sits on the AMOA and IALEI board of directors. Seninsky can be reached at 732/254-3773 or by email at fseninsky@aol.com and www.AEMLLC.com.
(c) All contents of this page and the entire RePlay Magazine website at http://www.replaymag.com and http://replaymagazine.com. Copyright 2010 RePlay Magazine. All rights reserved.