Editor’s Note: Scott Sherrod, CEO of Intercard, wrote an essay, “Stay in the Game: Overcoming COVID-19 in the American Amusement Industry” that he sent out to the trade publications, which we’ve published below in its entirety.
The coronavirus pandemic is presenting the American amusement industry with unprecedented challenges, from mandatory closings of FECs to potential supply chain interruptions and shortages of parts and merchandise. While no-one can predict the future, I believe that amusement operators and suppliers are an entrepreneurial and innovative group that can adapt.
This industry is small; we have to make sure we help each other through this unprecedented time. It will be a team effort and I believe that those who have decency and compassion during this crisis will receive returns; strong companies who can practice conscious capitalism will survive.
Because the customer has a need we have a job to do. Because of the customer we exist and we never take that for granted at Intercard. As a CEO I will do what it takes to work with our global family of customers to help them survive. I believe other CEO’s in the industry will do the same. We will be stronger together and nothing without each other.
The short term outlook is not rosy. Most if not all US arcades and FECs, like other entertainment venues, are now closed, and the impact has been immediate. “It’s basically turned off cash flow for pretty much everyone, because everyone is closed, right?” says Howard McAuliffe of FEC consultancy Pinnacle Entertainment Group. “Zero cashflow is a major problem, so one big operator has laid off 90% of his staff. Some of the suppliers now are laying off 30 to 60% of their staff. The industry is in full survival mode.”
The St. Louis region, where our world headquarters is located, has issued a mandatory stay at home rule. That won’t stop us from being there for our customers, and we will continue to provide them with technical support and training 24/7 no matter where they are in the world. As a software company we are very flexible; our technical specialists can work remotely. We are still performing installs and customer training and filling game card and product orders so when our customers’ doors open again, they will be ready for business. Fortunately Intercard makes everything here in America, so we expect no supply chain disruptions.
Operators must also be nimble. Todd DeMott, a veteran arcade operator from New Jersey and a sales representative for Intercard, just opened a new location for retro games in a prime Shore location. Less than a month later he’s been forced to close down. To compensate for lack of cash flow, he’s feverishly promoting sales of season passes good for unlimited gaming from Memorial Day to Labor Day.
“I immediately set up my online account so [customers]can make purchases straight from the website and I’m just marketing it like crazy,” says DeMott. “Facebook, social media, making sure everybody knows, running an ad on Google.” He says local customers, who flock to the Shore for fun in the summer, are confident that the crisis will have passed by Memorial Day. They are not shying away from investing in their summer playtime and the $70 passes are selling well.
I recommend keeping up as normal a routine as possible and staying focused on reopening to help shoulder the pain of this shutdown. We aren’t losing sight of our customers’ needs and FEC owners can’t either. Our software makes it easy to stay in touch with your customers and remind them that when this crisis ends you will welcome them back.
One of the few benefits of the shutdown is that FEC operators can use the unexpected downtime to catch up on unfinished projects and prepare for the crucial summer season. “In this industry you never really get a chance to catch your breath. It’s always a 365 day race,” says DeMott. “So we’re all just catching up on projects that we haven’t been able to accomplish in a while. Everybody just wants to be ready for that 10 week push and you can’t lose a day.”
What will the industry look like when the crisis is passed? McAuliffe believes that a number of FECs, especially newer ones that haven’t experienced an industry downturn, could go out of business. This could include larger operators who are overleveraged and operating on slim margins as well mom and pop operations. “A lot of people in the bowling world haven’t been through a recession. I know a lot of these [BEC] concepts have come about since the last downturn since 2008,” says McAuliffe. “Especially ones that expanded quickly. If they did that with borrowing it’s going to be rough.”
He expects that those that survive will be back stronger than ever and better positioned for success because there will be less competition. “I think you’re going to have some strong companies that are going to be in a good position,” says McAuliffe. “And I think we have some saturation maybe to the point of a bubble; at least in certain markets that’ll be gone.”
The amusement industry relies heavily on trade shows but for the next year I foresee only the bigger “must attend” shows taking place. Until cash flow is in full swing again, I expect that not as many exhibitors and guests will attend as in the recent past. Vendors with supply chains out of China may not be around much longer and it might take years to get the industry back to where we were before the virus hit.
The big question is will customers come back to play right away? McAuliffe believes there will be enough pent-up demand for social activities that they will return quickly. “When people are able to get out, they’re going to want to get out and congregate and go to FECs.”
DeMott also thinks so because people who have been self-isolated at home will be anxious to get out. “I think we’re going to see an instant flux in revenue just from people wanting to get out,” he says. “They’re just going crazy being stuck in a house, being cooped up. People quickly forget, right? Summer’s going to be here. It’s going to be beautiful out.”
Our customers’ facilities will be an important part of bringing people back together again when this crisis is over. Our customers create experiences and memories for people all over the world. When this scary ride is over people will come back to the entertainment centers and we all have to make sure we do our part to help keep those doors open for the people when the time comes.
We have to work together to stay in the game.