The distributor has been perceived as an essential part of the amusement industry for the majority of the mechanical and video amusement history. A component of the early route scene, amusement complexity and reliability ushered in the reign of a territorially specific, sales, shipping, and maintenance and support representative.
But following extensive discussion with those in manufacturing, operation and procurement the viability of distribution in the modern market has been thrown into some doubt.
The readers that have followed Stinger coverage from the vending and kiosk sector (#558) will be aware of the observation made that the operational structure of these sister industries offers an eye-opening picture of what could be the amusement industry's future as well. Fundamentally, in the vending and kiosk sectors, technology is improving efficiency and eliminating the middleman in a growing number of cases. Some say this possible future for amusements is promising; others simply say that given the march of technology, it is inevitable over the next decade or two.
Specifically, the vending scene sees a special machine monitoring (telemetry) infrastructure with fault checking and stock-keeping functions that can significantly reduce wasted down time. An empire of reliable operation has been supported by a highly managed product sale, with e-payment migrating from bill acceptance, fob-key payment and credit card transaction -- all resulting in the growing monetization of the market. Technology in turn facilitates more vertical integration, creating such a profitable market that the industry has concentrated into a direct operation model, as seen in Europe, with even key territories operated by major producers (Coke, Mars, etc).
Those that chart amusement argue that this hi-tech solution suits vending as this sector does not depend on a fast-changing hardware platform (unlike amusement video games). The simplicity of a modern vender unit has limited functionality variances and is a highly evolved remote service tool. No need to totally replace the unit after only nine-month intensive 24-7 operation as with amusement, and no wild swings in popularity from users. Just fill with stock and move on.
The need for distribution is defended by those that define modern support of video amusement as requiring greater than ever pre-sale and after-sales support. But what a distributor brings to modern amusement is being questioned as the new opportunities (with their profit opportunities) are considered – as listed below:
Just-in-Time Stocking
Seen in retail and manufacture, the use of controlled stock and servicing criteria to direct the avoidance of over-warehousing and apply a stock only when needed (quick turnaround) model. No more just a regular van visit to 'see if things are okay', but a focused stock and ship methodology that needs no distributional support.
Crane Plush is the best example of this need for a linear support infrastructure separate from the delays inbred by the distributor involvement. The modern crane, best illustrated by the ‘UFO Catcher', is more than just a plush dispensing system but is a means to present highly licensed merchandising. The latest branded property (seasonal) is packaged for crane application. Offering valuable licensing revenue (running the latest big movie release plush to coincide) is part of the package.
In the current market the quick turn-around of various properties is too fast for distributors to be best placed to maximize -- at best Christmas, Easter and Thanksgiving trends can be represented, while weekly movie licenses and emerging properties are neglected -- plush literally gathering dust in some venue machines.
A just-in-time system (as deployed in vending) would save redundant crane over-stocking and allow the deployment of a much more diverse stocking option, keeping the machine fresh. It is the avoidance of presenting tired placement that marks the drive to a new era in amusement.
By the way, some claim these problems could be solved by current operators, if those operators were simply more vigilant about updating merchandise. But the reluctance of so many operators to rise to this level of professionalism, is precisely what leaves the door open for vertical integration by manufacturers that decide to operate their own machines.
E-payment
The current mantra of Stinger owners KWP is 'monetization' - the need for a seamless if not invisible encouragement of greater spend, and increased value of the gaming experience. From coin-less payment to secondary spend on tournaments, smart cards and enhancements, amusement needs more money from a smaller player diversity.
But glacial adoption of such innovation is caused by a deep-seated intransigence and even hostility to change. Distributors, reflecting the mood of operators, are often unwilling to try new and difficult concepts. But in reality a hold-over of oldtime facility executives look at electronic payment as the killer of 'skimming' and other shady activities that might have once been an industry norm but are increasingly an anathema to an industry that needs to change.
Telemetry
If you are to have connectivity to run e-payment and secondary spend, then you have a capability to run a machine monitoring capability.
If tournaments, and player stats are front of house, then machine earning, fault reporting and utilization can be back of house services. A reliable data stream that can tell the operator when a machine is under-performing, and via the link prices can be set.
The deployment of Just-in-Time (described above) management is a factor benefited by the use of telemetry, with crane game plush and vending reported back to a operator running this process so they can request UPS-style replenishment, rather than being tied to a guy in a van!
Telemetry offers real-time statistical data in two parts. The first brings 'machine monitoring' ranging from coin-drop, player time, to actual pre-fault reporting allowing hot spares swap out -- before the actual component fails in the field.
The second is 'player monitoring' -- our industry actively ignores the people that pay our wages. The ABC's of player habits a neglected dream of those attempting to make the games to encourage future revenue.
E-distribution
The most contentious component of future thinking is that the reality of broadband connectivity across consumer and commercial application is that -- the hardware is permanent, while the game is interchangeable.
With a level of hardware performance leveling -- the need for the machine (cabinet) to be replaced has diminished. As seen from Inspired Broadcast Network with their 'Itbox' and GamesWarehouse with their 'Paragon', or Merit with its ‘MegaTouch' games, or any digital downloading jukebox, the hardware can remain for a few years while the games (or music selections) are swapped much more frequently.
This concept has been on the table since the early 1990s, at least in theory. Now it's a reality, in a growing number cases, but it is still a controversial idea in video amusement (let alone a cause of anger in console retailing) -- kit based replacement an already established factor in amusement, though if it could seriously be achieved with just software has yet to be proved. The future will see a serious 'upgrade' path in amusement from a purely software (if not downloaded) route.
The future being a UPS shipped machine, that when unboxed performs self-automated installation and is supported directly via a manufacturer's marketing support scheme. The operator effectively leasing space to the manufacturer and receiving his cut of the revenue, in an e-check at the end of the period.
Question: where does the distributor fit into this picture?
What Could this all Mean
In the field at recent facility visits by TSR, we've observed an embarrassing need for the removal of 'dead wood', in some cases amusement over eight years old running in popular venues -- hogging revenue. To many operators, this is a positive picture: the machine is long since paid for an is into pure profit. But the invisible cost is the "walk-away" business…the players who poke their heads inside a facility, see an array of ancient games, and leave in disgust -- without spending a cent.
The days when an arcade machine could literally sell itself, with no need for marketing, player support and initial evaluation, have long gone. But we see some distributors adverse to 'work-it' (spend time in personally shaping the marketing for their audience). This has led to situations where games such as ‘Derby Owners' and ‘World Champion Cup Football' -- claimed as unworkable in American and European markets -- have been self-operated by manufactures and been smash hits. This slap in the face of sales credibility sending reverberations round the executive table. Questioning the very value of the current structure of the market.
This finally brings this report to a nasty observation. Has the drive for distributor removal started clandestinely already? On the one hand, the recent experiment in direct sales by Incredible Technologies led to mixed results at best. All of the IT distributor network is back to selling IT games. But the experiment did erode the "sacrosanct" image of distribution. And the sales of annual video software updates directly from factory (IT) to operator continues. Meanwhile, IT's bold public experiment prompted a lot of discussion in the US industry that growing direct factory-to-operator sales were occurring, and had been for years -- but simply not being acknowledge publicly.
The latest pressure to eliminate distribution, or at least downgrade its importance, in the US market chain came earlier this year when a nationwide US operator consortium called Club Lucky pressed manufacturers for the option for its members to buy direct. Faced with this demand, no factory dared to say "Absolutely not, no, never." A few did say, "Maybe later, but not now."
Now comes the latest development in this evolving process. Manufacturers such as Namco, SEGA, Incredible Technologies and even distributors such as Chicago Gaming and Betson have been linked directly or indirectly to operational aspirations. The ability to sell - in effect - to themselves represents an overwhelming advantage in an intransigent market that is hostile to change.
As reported in previous coverage, the expansion of the new-GameWorks initiative sees exclusive machine placement direct from SEGA of Japan - eliminating any distributor involvement and in effect having SEGA operating their own machines, as Namco Cybertainment and others already do.
In a matter of months, grim decisions will have to be made that address the issues of new technology adoption -- and whether our current business model can embrace technological profitability -- or is a hindrance to our future revenue, and so needs to be replaced.
News Story with thanks to Kevin Williams, please visit
www.thestingerreport.com for others.
