Many people out there are asking, "what is going to happen to the amusement industry and pinball in particular in the near future. This is our perspective on the situation as both an operator of games and a retailer.
THE FACTS
Near the end of 1999, Williams Electronics announced it would no longer be producing pinball machines. This is a huge blow to the pinball industry in that many feel that Williams has been the leader in the pinball industry since electronic games began production in the late 70's. At the same time, Sega, the only other company active in producing pinball games sold their pinball division to Gary Stern, of Stern Electronics fame (Stern produced pinball and video games in the late 70's and early 80's). In contrast to Williams, Sega went out on top after producing its two most successful games, South Park and Harley Davidson, both traditional pinball games which were produced as Williams was starting its Pinball 2000 experiment.
WHAT HAPPENED?
In general terms, changing demographics, sophisticated home video systems and a lack of marketing by the amusement industry has led to this downfall. The bottom line, is the generation that brought riches to the industry during the video explosion in the early 80's has outgrown the arcades and pool halls and a new generation has not taken their place. Today's youth prefers the sophisticated home systems like Nintendo 64, Sony Playstation. After all, why pump quarters or dollars into coin games when you can play games with equal if not better graphics in the comfort of your own home. In the past, home systems could not compete with the arcade (remember how bad Atari 2600 versions of Pac-Man, Asteroids and Defender were compared to the arcade version) but that has all changed.
It is interesting and somewhat ironic to note that the gamers of the 80's who have abandoned the arcades are now responsible for the boom in home sales of arcade games and pinball machines. These people now have the income where they can afford to own the treasured Pac-Man or Black Knight pinball machine of their youth and are gathering up these games as the curators of their own coin-op museums.
THE DOWNFALL OF PINBALL
Time will tell if Williams move to the Pinball 2000 system will be remembered as the "new Coke" of the amusement industry. The idea was interesting enough: stream line the pinball machine, add high resolution video and a few other features and make the games convertible (and cheaper to purchase kits).
What went wrong? Some will say that the price of the new system was too high and therefore virtually impossible for all but the most lucrative locations to turn a profit. There was reluctance to purchase the kits for the second release (Star Wars Episode One), did it come out too soon? or did the pinball enthusiast shun the new format. Opinions were mixed but many felt it would not be the savoir that some predicted
The truth of the matter is that the writing was on the wall long before Pinball 2000. After the successes of the early 90's (Addams Family, Twilight Zone, Indiana Jones, etc.), pinball hit a wall. Costs were escalating (some games cost over $1,000,000 to design and test before the first production game even rolled off the line). It was becoming harder for operators to turn a profit on their investment and they began to purchase fewer games than ever before. Even the best designed games such as Tales of the Arabian Nights and Medieval Madness had relatively poor sales and others were outright bombs that did not come near selling enough units for Williams and Sega to break even. Williams and Sega both had "sell-offs" on many games where selected distributors were offering the lowest selling titles at a fraction of their MSRP. Pinball 2000 was not the downfall of pinball but it may have been the final straw on what appears to be a dying industry.
Another nail in the coffin was the fact that pinball production which is largely unprofitable, took up a large portion of the factory floor while other more profitable products (like Bally produced Slot machines) took up far less space and needed further room for expansion.
THE FUTURE OF PINBALL
Time will tell if Stern can make a go of it. The jury is still out as to whether Gary Stern purchased Sega Pinball for sentimental reasons (once pinball gets in your blood its hard to get out) or for sound business reasons. Stern pinball in the late 70's and 80's (using Bally designed systems) were not the most popular games so we will soon find out if Stern has learned some new tricks since that time.
While the Williams name may never be seen on pinball again, we have a feeling that the Bally name may resurface. Rumour has it that Williams is shopping around the Bally trademark and if you have $10,000,000 you could start your own Bally pinball business.
Pinball is unique in that games cannot be reproduced on your home television screen like todays top video games but if it is to survive, manufacturers must find ways to cut costs while keeping the quality
THE HOME MARKET
In contrast to the decline in operator revenues,, home sales of pinball and video games are booming for reasons already mentioned. Manufacturer sell-offs reduced the prices of new games and allowed the "game room enthusiast" to purchase them for their own recrooms. This in turn reduced the prices of the older games as well and encouraged individuals to collect multiple games.
Pinball prices are likely to rise now that production has ceased but it should only affect newer (read 1990's) games. Basically operators will hold onto whatever pinballs they have left (or ask higher prices) which will reduce supply to the dealers and retailers who sell to the home market. We are already seeing a modest price increase in newer pinballs which will eventually have to be passed onto the consumer.
Most affected will be post 1995 games which are still largely in commercial locations and will be difficult for operators to replace (why spend $5000 on a brand new pinball, if you can even get one, when your Tales of the Arabian Nights machine (which is now paid off) will make almost the same amount of money as a new game. The pre-1995 dot-matrix style game will see some increases but not as dramatic as many of these games have already been passed down to the home market. If a dealer is telling you that a 1991 Terminator 2 pinball game is going to double in price than they are probably stretching the truth a bit in an effort to increase profits. Lack of pinball production should have very little to no effect on prices of pinball games pre-1990 because for the most part these games have been retired from service. Not that you don't see the odd High Speed still out on location but for the most part they have been put out to pasture, well actually your basement.
OPERATING GAMES ON LOCATION
The small to medium sized game operators are a dying breed indeed and are being slowly squeezed by the more sophisticated corporate game centres who have the clout to team up with manufacturers to open mega amusement centres.
While the small operators control most of the traditional locations such as bars, mall arcades and pool halls, it is the new breed of mega amusement centers and huge theatres which are attracting todays youth and families. These "mega arcades" offer the latest games and virtual reality pieces on huge screens and can afford to purchase millions of dollars worth of equipment, something which is obviously out of reach of the traditional game operator.
How long can they last, indeed many operators have already packed it in after many years of running the family business. As numbers dwindle we are seeing manufacturers like Sega and Namco becoming involved in the mega centres in an effort to sell their big ticket games and virtual reality. Fewer traditional sized arcade games and pinball machines are being produced which will eventually mean that video and pinball games will become extinct in all but the most profitable and lucrative locations.
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