INSURING PERMANENCY of the
AUTOMATIC MUSIC BUSINESS
TI
O MANY PHONOGRAPHS .. . too
uch competition between opera-
ors .. . too much effort for too little
eturn . . . these are some of the
things haunting the minds of opera-
tors who can look back on the days of
music operating when it was a highly
profitable business, the minds of young-
er men in the business who have a de-
termination to build something stable
and lasting, the minds of all men in the
automatic music industry who think
constructively on the economic situation.
Recognizedly one of the strongest or-
ganizations of its kind, one of the pio-
neers and leaders in thought, the As-
sociation of Phonograph Operators of
Eastern Pennsylvania and New Jersey
has given thorough consideration to the
proble m of stability of the music busi-
ness. Their findings and recommenda-
tions are given herewith as a matter of
united opinion of members of the body,
and publication here does not necessar-
ily mean that the COIN MACHINE RE-
VIEW endorses these views.
The factors in the problem are :
1. The public;
2. The operator;
3. The record manufacture r; and
4. The phonograph manufacturer.
I. The Public (the ultimate consumer
who buys the music sold automatically);
The history of automatic music opera-
tion and the fact that many men have
operated automatic music equipment
continuously for years is proof of the
permanency of the business if it is con-
ducted properly. That is, the public will
patronize automatic music equipment a s
long as it gets its money 's worth.
2. The Operator (who supplies the equip-
ment for the public's entertainment) :
Unquestionably, at this time the num-
ber of operators of automatic phono-
graphs is the greatest in the history of
the automatic music business, as is the
number of pieces of equipment being
operated. On the average, however, the
number of pieces per operator is no
greater than it has always been, due to
the continual entrance of new operators
into the business. Therefore, the average
operator cannot make more than a fair
living, while the large operator may
show a small profit. The history of the
business does not show that it has
made operators rich. Since there are
enough operators in the business today
to more than handle the existing loca-
tions, expansion is possible only by
taking locations from other operators.
Thus the high-commission and low aver-
ages on machines, causing slow re-
placement of old equipment, slow pay-
•
out of obligations, and refinancing of
equipment by manufacturers in many
cases.
3. The Record Manufacture r and Distri-
butor (who supplies the music for the
public's entertainment):
The record companies lost most of
their record sales when home phono-
graphs were displaced by radios. The
fully-selective automatic phonograph,
in conjunction with home radio-phono-
graph combinations, operated to bring
music to the public most conveniently,
as a business revived record manufac-
turing so that the sale of records today
is probably the greatest in history. Au-
tomatic phonographs, the radio and the
movies popularize songs so rapidly that
recordings become old in the space of a
few weeks, with the record manufac-
turers producing new discs at the rate
of about fifty a week, and quickly ob-
soleting most previous recordings. It
is said that approximately eighty per-
cent of all the "popular" recordings,
that is, the quickly-popular, short-life
records, are sold to automatic phono-
graph operators .
A good automatic music operation
(one that really caters to its cus tomers,
the public) must make an expenditure
of about forty-five cents per phonograph
per week for new records. With a
quarter-of-a-million phonographs in u s e ,
there is available a potential annual
business volum e to record manufactur-
ers from phonograph operators of over
five million dollars.
4. The Automatic Phonograph Manufac-
turer (who supplies the operator's equip-
ment for reproducing music for the
public's entertainment):
There are approximately 250,000 au-
tomatic phonographs in use today. There
cannot be much question that with the
amount of money represented in the
cost of an automatic phonograph, the
depreciation period should be at least
five years. This would mean a twenty
per-cent replacement annually for the
manufacturer's market, or about 50,000
phonographs per year at an annual cost
of over $10,000,000.
Summarizing this analysis, it would
seem that the public would probably
continue to play automatic phonographs
indefinitely ii operators, through the co-
operation of record manufacturers and
manufacturers of automatic phono-
graphs, will give the public music that
is worth the money it pays; but, while
the average operator could make a fair
living and a small profit, the record com-
panies and phonograph manufacturers
stand to benefit the most since their
Method suggested and unanimously approved by
the ASSOCIATION OF PHONOGRAPH OPERA-
TORS OF EASTERN PENNSYLVANIA & NEW
number is very small for the volume of
business available to them.
Therefore, it would seem, the least the
manufacturers could do is to cooperate
with and protect the operators of auto-
matic phonographs to insure their own
markets.
What Is The Present Situation?
1. The cooperation of the public, even
in its present poor financial condition,
is very satisfactory.
2. The cooperation of operators with
other operators is rapidly improving,
due to the realization of the ultimate
outcome of the business, unless con-
ditions are corrected. Formation of many
voluntary fair-trade groups of operators
in the past year proves this fact.
3. The cooperation of record manu-
facturers with the operators of phono-
graphs thus far, indicates that the op-
erators need fear no trouble from that
direction, as continuation of volume
sales of records is highly desirable.
4. The cooperation of phonograph
manufacturers can be greatly increased.
Recent announcements by certain man-
ufacturers are evidence that better co-
operation will follow to improve the
following conditions :
(a) Saturation-Heavy total unit pur-
chases by operators during 1936 and
1937 has resulted in practically all
worthwhile locations being supplied
with phonographs today.
(b) Returns - Intake averages de-
creased, a s more locations were s up-
plied with phonographs.
(c) Obligations-Most operators are
still paying off notes on 1937 and 1938
purchases, and they are having a
hard time meeting their payments at
present. Elimination of unfair competi-
tion, establishment of no new opera-
tors and a general improvement of
economic conditions would eliminate
this situation.
Some phonograph manufacturers, rec-
ognizing the foregoing analysis, have
introduced a "trade-in" policy enabling
operators having antiquated and very
old phonographs, to trade in this ob-
solete equipment for new music ma-
chines; and they have been refinancing
accounts to help deserving operators
with their payments. Some manufac-
turers have also gone on record as not
selling to locations, and limiting their
sales to established music operators.
The real problem is that phonograph
manufacturers, by accident or design ,
have practically saturated their market
in the past four years, thereby causing
a "lag" in replacement by at least one
year for normal depreciation of phono-
35
COIN
MACHINE
REVIEW
•
JER SEY, and given exclusively to HARRY BORT-
NICK, Pennsylvania correspondent for the COIN
MACHINE REVIEW.
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