UP FRONT
The pauper paying the piper
The signs of an industry shake-out are undeniable .
For manufacturers, production is slow and close-
out prices on backed up inventories are common. At
Bally, where 3,600 games a week were rolling off the
lines during the height of Pac-mania at this time last
year, the production rate has fallen to about 1,000
games a week.
Distributors are so overburdened by an equip-
ment glut, they commonly employ auctioneers to ease
overstuffed warehouses. Much of the equipment
bulging out of distributors' back doors is being
repossessed from operators who can't meet loan pay-
ments. Many of them are new operators who swelled
the ranks of our industry so dramatically in 1981 and
1982 and have dropped out as quickly as they jumped
in, contributing to our "bad risk" reputation with
bankers, but not only the newcomers have been
affected. Sol Tabb, one of Florida's most established
and largest operators, has been done in by the demise
and has h~q to declare bankruptcy, as has the firm to
which he sold his business, Total Acquisitions.
According to current opinion, the outlook for our
immediate future is not bright. Warner Communi-
cations, parent of Atari, predicts its revenues for the
first half of 1983 "to fall far short of the results achieved
in the first two quarters of 1982." Sanford C. Bernstein ,
a New York investment firm, recently compiled a
report that predicts a 25 percent decline in the number
of arcades operating by 1986.
Video games have become the stars of the enter-
tainment world. The adulation has been welcomed by
most of us, just as the quarters were welcomed by all of
us. But, unhappily, the memory of our successes still
dominates the minds of legislators nationwide who are
convening for their initial sessions of 1983, trying to
plug holes in budgets that have been so seriously deci-
mated by the recession and loss of federal support.
Although our boom and bloom have faded , they still
want the pauper to pay the piper .
It is ironic and discouraging, that, although we are
much better organized for battles with legislators than
ever before, there has never been such a widespread
amount of potentially damaging misunderstandings
about our status. Never before have industry purses
been so universally and so irrationally clawed at.
In North Carolina, Senator T. Cass Ballenger would
solve the financial woes of the state's public school
system via the $5 million he believes ca n be taxed out of
operators at $200 per game. The tax is excessive and
selective, but such common sense arguments could be
lost on Ballenger. Ballenger, who professes to be
opposed to business taxes in general, told a newspaper
reporter the average video game is bringing in $400 a
day! " These things are gold mines for the people who
own them," he summarized.
Tennessee has proposed licensing each operator at
$1,000 each and then taxing each game at $200. The tax
has received support from those who have little knowl-
edge of the industry o r the games . In Williamson
County, for example, commissioners there voted 23-0
6
to endorse the state legislation after hearing Judge Jane
Franks tell them the games could be connected with an
increase in juvenile crime . They voted 23-0 to endorse
the state tax proposal; they took no action on the
judge's call for help in alleviating juvenile crime in their
county.
In Indiana, Representatives William Crawford and
Mary Pettersen introduced legislation that would tax
video game revenues 20 percent in order to finance
social services programs. They estimated the gross
receipts tax would net the state about $20 million a
year.
In Kansas, Senate Majority Leader Robert Talking-
ton believes he can raise $2.5 million by taxing the
games at a rate of $100 each. " I understand some adults
spend their lunch hours playing the games. If they are
that popular, we should look at them as a source of
revenue ," he said .
Additionally, Amusement Machine Operators of
Kansas executive Jerry Slaughter said : . The state
proposes to license each operator at a cost of $500 per
year.
The bad news is that these are just a few of the
proposals under consideration that do not take into
account the industry's current financial predicament.
The predicament is most definitively pointed out by a
single statistic revealed in the most thorough study of
the industry ever conducted, the 1982 Play Meter State
of the Indu stry poll, that the average video game nets
an operator less than it costs him to buy and operate it.
The good news is that despite the onslaught of
anti-games legislation , the industry has been successful
in defeating unreasonableness where it has, in an
organized fashion , confronted it. Knowledge breeds
understanding , and operators have been successful
with well-prepared , valid efforts in statehouses with as
vastly different needs as California and Mississippi , as
well as with local efforts as difficult as Boston .
The work to defeat unreasonable legislation has
just begun . We have educated far too few about our
industry. Despite financial woes we now encounter , we
must look beyond the day's troubles and participate in
efforts to beat back the legislative wolves who would
destroy our opportunities for a better tomorrow.
Our effort is a just and demonstrable one. And , in
most cases, legislators are reasonable people. It is not
an insurmountable task to educate them to the truth of
our circumstances. Those who have tried have found
success attainable. Let those who have nottriedjoin in ,
and we will not only survive the threats which beset
us,but we will prevail as what our efforts in th past
have made of us, providers of the world's favorite
entertainment.
Mike Shaw
Associate Editor
PLAY METER. April 1. 198:3