COMMENTARY
In the Land of Coin-op
Once upon a time in the Land of Coin-op, general
harmony reigned. There was the manufacturer who
had relationships with distributors representing
specific territories. The operator's distributor pro-
v ided counseling , service , and new equipment
financing plus assistance in getting rid of old equip-
ment.
Oh yes, there were problems and lots of bicker-
ing. Manufacturing quality was a constant headache,
parts were often hard to get, and each of the three
continually felt that he could do the other' s job
better. Most made a relatively good living . A few
made fortunes, but they were made over a period of
many years.
However, at the recent ASI show, there were
many dramatic signposts of how far from the world of
harmony the industry has come. They portend the
balance of 1984 and what may be the scenario for the
balance of the decade.
Power has returned to the operator. He may not
feel he has it, but that' s where it's at. His voice is not
only being heard , but it is being listened to and
appropriate action is being taken by the manufacturer.
The present quandary of our " majors" is also an
example of the need for better market research and
common sense policies, as prerequisites for a
healthier industry. There has to be an aftermarket in
this industry in order for the operator to make a buck,
and the only way that can happen is if the manufac-
turer makes 5,000 games when the demand is 6,000, or
8,000 when the demand is 10,000.
seem to have this problem . Or, if so, much less of one.
The Japanese have led the way in the kit business,
followed by the smaller U.S. companies and then the
majors, the last with the most to protect. In Japan
today, 90 percent of t he business is conversions, and
the conversions are the first- rate games. It was easy
for the Japanese to translate their domestic expertise
to U.S. shores. Economics force the situation in Japan,
and the same economics , i.e., operator ROI , force the
hand of the U.S. manufacturers.
While 1984 may be a major kit market and transi-
tion year, it may not be until1985 or even 1986 that
some major new life is breathed into dedicated
games . Time is required to cure some of the major
industry problems. Common sense is required to cure
the rest. Time is needed to weed out the weak
operators, leavi ng their market share to surviving
operators. Time is needed to repair the balance sheets
and buying power. Time is needed to create the next
phenomenon that hypes players. Common sense is
required to repair relationships .
What all this means is by 1987 there may very well
be a different lineup of surviving manufacturers. It
just may be that as the market winds its way from
being hardware oriented to software dominated, the
competitive advantage shifts from the major manu-
facturers to the smaller ones . There are several
reasons for this scenario. The majors may be too large,
committee-encumbered , therefore , slow to react to
marketplace changes. They have more invested in
what they are doing, and are slower to give it up. Their
large (dinosaur?) factories require longer runs to be
profitable so there's a tendency to produce more
than the market will absorb.
The smaller companies , by virtue of limited
capital, treat the money as if it were their own (it is)
and tend to underproduce against demand. The
majors' distributor relationships are in disarray while
the smaller manufacturer still works closely with his
distributors.
All the disadvantages of the majors can be
addressed and met if the commitment is there . But do
large corporations have the commitment to stay in
the coin-op industry? We know parent corporations
and public shareholders have little patience for
slumps in the market. We are in a replacement and
not a "fill" phase of the cycle , and it's unlikely any
manufacturer is going to make a killing over the next
couple of years. That may be the determining factor as
to who is around as we finish out the decade .
Closeouts hurt everyone and lead to one party
trying to stick it to the other. Our smaller brethren
(able to react quicker and without committees) don't
Malcolm E. A. Kaufman
Beverly Hills, California
The speed with which the industry is back-
pedaling from laser disc games is matched only by the
speed with which it flung itself headlong into the laser
phenomenon. The problem of selling a $4,000 game
to an operator with a $1,000 budget has finally sunk in .
As noted above, relationships once existed in the
land. Well , they have fallen to such a low ebb that one
manufacturer is threatening suits for specific perfor-
mance against those distributors who ordered games
several months ago and now no longer want them. In
days of old, something would have been worked out.
Manufacturers didn't have (also couldn't afford) in-
house trigger-happy lawyers. Forcing product on
distributors in today's environment is like France
supporting four francs to the dollar. But, the company
does have bonafide P.O .s and is taking a stand that "if
you ' re going to give me an order, it had better be an
order. .. if your written word isn't any good, what is?"
72
PLAY METER. July 1, 1984