So is the spring buying season still in bloom or have the dog days of summer already set in? Maybe you participated in the buying if you have seasonal locations that are down the shore or at amusement parks. There are some good games, but a few operators I spoke to lately still say there's "nothing to buy." With a few of the new video games taking advantage of online tournaments, which are not legal everywhere, it's easy to see why some operators feel left out of the party, even if they want to buy.
I recently visited a large operating company, and I was stunned. There was easily over a million dollars worth of wood lying around not earning anything at all. Many of the games needed repairs. Many needed a dumpster. It would take years of steady work to recondition and sell all of those machines. And sell them to whom? Let's face it; there are probably other operators with many of the same games sitting around too. Home sales have become a great place for operators to get rid of unwanted games, but home customers are looking for games that are fun to play, look great and work well. That is not the typical game sitting in a warehouse.
Before operators can move forward and buy new games they need to get rid of what they have filling up their warehouses. An ad in RePlay's Blue Pages is a perfect place to start!
Some games on location may as well be categorized as warehouse games because they earn nothing and just take up space. Take a look at what you have out there. Is it making money and would it be better to just sell it off, convert it, donate it or trash it? Would two good games on location be more productive than five games taking up space? How do you tell that to your location? How do you make the transition from operating in a losing situation to operating in a profitable location?
Honesty usually works. If you've had games in a location for many years and the location has gradually decreased in earnings, is the location in an inevitable downward spiral or is it the games? The games make less because they are not great, and you have those games there because the location makes less money than it did years ago. Therefore, you don't give them anything decent.
Think about this. If the location was that bad, how are they still in business? Put another way, maybe you stopped doing your job as a partner in bringing that location the best games you had to give them and the best chance to make money. Now you just give them whatever you can without spending any more money on anything new for the location. How can they ever make money with that scenario? It's a classic vicious cycle.
Somehow everyone is able to make an excuse for not making money or why business is slow. It is always someone else's fault. Weather, competition, smoking bans, DUI enforcement, nothing to buy; the list goes on and on. At the end of every season, the guys down the shore tell me they are down 10-15% every year from the year before. I'm not a mathematician, but they are now probably negative 220%, but they come back every year.
Do we ever get or give the right story in this business? When things are good, everyone is quietly counting their money. When things are not so good, everyone has a crying towel or is heading for the fire exits in a panic. Things may not be so good, but they are not that bad. I hear operators crying and not with towels but with a loaf of bread under each arm.
Hey guys, loosen up a bit. Interest rates are low so that money can't be making you much in a CD. The stock market is a crapshoot and real estate while real is not much fun. This business is in your blood. For some reason you love it. If you are still here reading this, then it has been good to you. You are a partner with your location and should provide them with the best you can to make money. Don't sell yourself short. If you are truly doing your best, then I salute you. If you have been skating by without reinvesting in your business then you will probably be making less and less money as time goes by.
Here's what I would do (it's what I did as an operator): reevaluate every game and location. I calculated what the market value was for each game. Not with a location attached to it, but just the wood value. I divided that by 45 weeks to get my weekly ROI. I then listed that on a sheet of paper with the total cash value of the games divided by 45 weeks and sat down with the owner of the location.
My next move involved a risk, but it was a limited risk. Whatever the total wood value was divided by 45 was what I needed to net from the location weekly, so $10,000 in wood value needed to net me $222.00 per week. Let's put aside depreciation, service, etc. I would then offer the location owner a choice. I get the $222 a week or he can buy my games for the wood value and pay me over the same 45-week period. Every time, I got my minimum.
Unlike years ago when competition was fierce for street locations, today many locations look upon the amusement games as a bit of extra income and an accommodation to their customers to keep them happy. That component gives the operator an edge and makes it easier to negotiate a better deal than the traditional 50/50 split. When you consider downloading jukeboxes and pool tables, you really get a better advantage since those are long-term, steady earning pieces compared to video games.
If you cannot get a proper return on your investment, you must either sell the games outright or get out of the location. A new driving game today, at a cost of $6,000 divided by 52 weeks, needs to bring in $115.00 net per week. After a year on location, that game is worth about $4,000 as a sale and $2,800 as a trade for a new game. Should you operate it six months and flip it for close to new money or keep it for five years and sell it to a home customer for $2,500.00? You do the math. A Daytona is still king of the hill in many locations after all these years.
A point I'm making here is that you need a plan. You must figure out what you have in value on the street, what it is returning to you and where you are going in the future. Many of you may be surprised to see where you are. Many of you may decide to reinvest more in your own businesses because it will pay you back as long as you are running it and it is not running you. Take control of the ship, get a better deal at your locations and make better buying decisions for equipment. Stop blaming others if business is a bit slow and get out and go to work. Wake up the dogs in these days of summer and go out and make something good happen!
Jack Guarnieri started fixing electro-mechanical pinball machines in 1975 and has been involved in every phase of the coin-op game business since then. He operated a substantial game route in Brooklyn, N.Y., developed amusement centers and was called in as a consultant to manage Mondial Distributing and State Sales in New Jersey. In 1999, he founded PinballSales.com to sell coin-op to the home market. In 2002, he founded ShuffleAlley.com and released the Parker Bohn III Pro Bowler game, reviving the shuffle alley. His positive attitude, honest insights and opinions have made him a popular figure in the trade. While managing and growing his businesses, he still consults inside and outside the industry, and his marketing, promotional and business management expertise are widely sought. He's very active in his church, community and charitable causes as well. You can learn more at his websites (www.PinballSales.com and www.ShuffleAlley.com) or by phoning him at 866/323-JACK. Email is Jack@Pinballsales.com.
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