MARKETPLACE
NEWSLETTE R
PAGE 4, NOVcMtjtH
,jU, '~'"
Getting Your
.......
Dollar•s Worth
The discussions you hear about getting your doll11r's worth ure based on unything
but logic , at least as far as this industry is concerned. Because in this industry
equip ' t is based on the fact that it nmortize itself within n reasona ble period of
time while earning the operator a decent return on his investment. In short, coin
operated machines aren't typewriters or automobiles .
1lh~t is a reasonable period of time for equip ' t amortization? Over 11 qu11rter cen-
tury 11go this writer introduced a 4 years amortization formula for music bused on
40/30/20/10. In short, 40% depreci11tion the first year , 3Cffo the second year, 20fa the
third year and 10}~ the fourth and final year . This was upheld in various actions and
met with the approval of many operators and their accountants.
What is a decent return on an operator's investment? Many agree , after the take
covers all expenses involved , that the operator earn a profit of 10p on his invest-
ment. flso to be taken into consideration is the profit differential after the trade
or sale of the old machine. In short , on a $500 machine for example , after all expen-
ses are covered , tho operator should come up with S50 profit before taxes . How suppose
he makes a profitable sale or a profitable trade- in with the same machine . This addi-
tional profit tends toward "getting his dollar's worth" out of his investment from a
pure profit standpoint.
This year of '73 has , because of inflation and dollar devaluntion, proved very
profitable for most operators. Prices of used equip't have not only remained station-
ary but h11ve , in most instances, increased up 11nd above expectations. So even tho
operators may have amortized equip ' t sooner than expected , they have been able to
sell or trade for a much higher price . Such trades have not only lowered the co~t of
the replacement equip't but have, thereby , brought about quicker amortization which
meant bigger profit on the new machine .
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"Getting your dollar ' s worth" is now based on many considerations . If you operate
pinball , for example , you're paying more for the new games. At the same time the
trade-in value has gone up. This averages off the price increase. You take in more,
especially at 1/25¢ play and , thereby , amortize the cost so much faster. Faster amor-
tization means a shorter period of actual operation . The shorter the time element for
the operation of the new game , the higher the resale or trade- in value. This , in turn ,
means the average progressive , alert operator is , most definitely , gettinff his money's
worth from the purchases he makes today .