Video arcades - a dying breed?

The popularity of the home console, coupled with an increase in competition from other leisure activities, has had a negative effect on the video arcade market, with some going as far to say the sector is "dead." Helen Fletcher investigates whether this is strictly true and, if so, how the industry can be brought back to life

When Nolan Bushnell launched Pong, the first video arcade game, in 1972 through Atari, I am sure he couldn’t have predicted the success that followed for the sector and some would say that manufacturers today have a lot to be thankful for.

However, at the time video games were at their peak, it was a different world and the general public would go to the arcade to see and play new games that they could not have played at home.

During this time, what today would be considered very simple games that would be expected on a mobile (cell) phone, had children standing in line to play. Today, with all the technology available, it could be argued that the home console games and computer-based games can provide a more intense gaming environment than coin-operated games.

"Some years ago Microsoft was trying to get the industry to use the PC environment as a standardised platform for game development," said Chris Cotty of operator American Family Fun Centers, in the US. "At the time each game developed used its own proprietary circuit board. Microsoft made the argument that there were many thousands of developers with a vast pool of creative talent creating PC and console games and that if our industry used a standardised platform we could tap into this creative talent."

Today almost all games are based on a PC platform running Linux and for Cotty the industry learned the lesson but perhaps too late. "In their day, there were a few ‘oddball’ games that were top earners," said Cotty. "I sometimes ask my younger employees to guess what some of the top earners were and they always guess wrong.

"Two of my top earners were Double Dragon and John Always Quarterback. Both games offered something we are finally realising is extremely important - head to head competition."

For Neal Rosenberg of US operator Monduce, the decline in video popularity is down to "people getting tired of video and moving on to other concepts. And when the cash box takings dropped so did the research and development in developing new product.

"Couple this with a cultural change in what was known as the video arcade itself - old school operators, dark and dirty rooms where the drug scene ran rampant and you wind up with a disaster in the making," he said. "Sadly - it has all been downhill as far as popularity goes. Most players that visit any type of entertainment centre are really looking for not only a good time, but a return on their spending by being able to leave with something of value back in their hand.

"They do not seem to get any satisfaction from a video game itself unless they’re in a group and are competing against one another."

For James Anderson of manufacturer Konami it is difficult to narrow down the changes in the industry to the coin-op market alone, as life has changed a lot.

"In the past there was no consumer game market, no mobile phones, no Sunday trading and so on," he said. "And people acted as a family and went on days out for entertainment. As there was no home entertainment market as such, people went to arcades to play the latest state of the art technology games.

"Now the world has changed and there are more places to spend the disposable income both at home and out of the home."

The growth of the home console market has, without doubt, had an effect on the video arcade market. The development budgets for home console games far outstrip any coin-op manufacturer’s budget and the home entertainment market has evolved. Due to economics of scale there are now very powerful machines available for the home market, which has led to an evolution in players.

"Due to players being at home there is no time constraint to games," said Anderson. "For example, in amusement we are looking to provide the players with a low cost fun experience for a short period of time, whereas the home market looks to offer players a long game play time for the higher cost."

UK operator Inspired Gaming has had a long involvement with the video arcade market and managing director for the UK leisure sector, Adam Hodges, told InterGame: "Arcade games were much more popular in the late 90s because there wasn’t the competition from the home market that there is today. There was less competition also in terms of the environments, such as bowling alleys and leisure centres.

"The home market has changed the industry significantly in recent years. Increased competiion from the home market has reduced the number of players spending money in the arcades."

For Hodges, the video arcade sector seems to be in a downward spiral - less people visiting venues and consequently less spend, means less investment and less development.

"Consequently the same winning games keep on being reincarnated," he continued, "such as Sega Rally 3 and Dance Dance Revoluiton (previously known as Dancing Stage). This isn’t necessarily a negative thing and you can understand why manufacturers don’t risk developing a new game that might not prove popular. Players also seem to only play the popular machines these days, which is another reason to keep on reincarnating familiar and successful games or those with a similar theme."

However, Justin Burke of Sega argues against this point and told InterGame: "Innovation has always been Sega’s strong point and we are constantly putting things out there that are a big risk and not just relying on the ‘safe’ products.

"We introduced WCCF which was a huge success as well as the card collecting games. Some things work and some things don’t but we do take that risk in order to provide the industry with something new. By developing licensed products we are also taking expensive risks as, if the product doesn’t succeed, it is a costly mistake."

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Burke added that there are areas in the world where video is actually bucking the trend and outperfoming other types of machines. "Turkey is currently a very good market for us, as is the Middle East and eastern Europe. There is some sort of myth surrounding video that the early days were the ‘good old days’ but the good times are now."

Talking about the American market in particular, Burke said: "The whole country’s economy is suffering at the moment and some of the operators tend to leave the machines in locations for longer than they should and don’t update with new machines. The market is still there if operators want it - the industry as a whole just has to work harder to get it. Good operators will invest in machines."

For Anderson the impact of the home market is not black and white. A few years ago Konami merged certain divisions of the company together and amusement, consumer software, mobile entertainment and so on, all came under the digital entertainment divison, meaning each section is able to work together in terms of brand development, production and market and work across all platforms.

"In some respects the home console can actually help amusement in terms of brand recognition," said Anderson. "Konami launched Dancing Stage Euromix for the amusement sector and then launched it on the home console. At the time we did not see a decline in income as many thought we would; if anything I feel it helped to boost the product as players could see the game at home and then play in the arcade and vice versa."

One territory where video is currently alive and well is Asia and according to Oniki Katsuhiko of Japanese manufacturer Taito, from the year 2005 to 2006 the total revenue of video arcade and sales of the machines equalled JP¥ 700bn (approximately US$7.4bn). "This is mainly down to the fact that card games had a phenomenal boom in Japan," he said, "offering the players a new type of genre game, with their play style of using the cards from your own collection."

However, even the Japanese market has seen a decline in the number of arcades in the market, with Katsuhiko claiming there are now half the number of locations there were at one time. "There has also been structural change, with larger scale video arcades increasing and the locations changing where they are situated."

In terms of equipment in Japan, the game is designed for core players and therefore is difficult for the average, more casual player - this is the major difference between Asian and Western markets. In European countries they tend to be much more casual in their gaming habits and therefore require different types of games.

It could also be argued that the popularity of video arcade games in Asian territories could be related to the fact that ticket redemption machines are not allowed. However, this does not mean manufacturers for these markets can become complacent and as far as Katsuhiko is concerned "it is important to continue developing games that players can never play or experience on a console."

When asked how operators can help themselves succeed when it comes to video, Katsuhiko added: "The total investment ratio of the equipment on the gross revenue is currently increasing and we feel it is necessary to provide more affordable products as manufacturers.

"However, it is also clear that continuing to operate old machines is a bad move by some operators as it is hard to compete against the console games - particularly in terms of quality."

Redemption has certainly become a ‘buzz’ word within the industry and you can’t help but notice when wandering around trade show after trade show that it is a desirable sector to be involved in. So, could it be that video is actually losing out to redemption rather than the home market?
For Ernest Yale of Canadian-based manufacturer Triotech, redemption games offer a quick, casual game play that is easy to understand with an immediate reward.

"In my opinion video arcade machines should also focus more on casual game play that is quick to understand and fun to play," he said. "A unique opportunity is physical interaction with the player. A game like UFO Stomper lets the players use their feet to interact with the game and each other.

"The challenge with this innovation is to introduce software that is fun to play but also easy to understand. We learned a lot with the first machines we put on test and we recently added new games that are easier to play and understand."

And commenting on the competition from the home market, Yale said: "The licences available on the home consoles have better graphics, more game depth and better multiplayer capabilities than their arcade counterparts. It is futile to try to compete against these major licences; the industry should be focusing on original content, run on original hardware.

"A driving cabinet or a standard shooting game just doesn’t cut it any more. We must think outside of the box and present players with unique gaming opportunities that can’t be experienced at home."

One company that has noticed the trend moving away from video arcades in some parts of the world at least, was US-based Incredible Technologies, which manufactures the internationally successful video game Golden Tee, which is mainly operated in the pub and bar market.

"Social networking websites are accesible on mobile phones - Guitar Hero, Rock Band and Karaoke Nights - and all of these things and more compete for the bar-goers attention," the company’s Gary Colabuono said. "Social competition is the one thing that video arcade games can offer people. When a person stays at home to play video games it is usually a solitary experience (even if connected via the internet to other players in real time).

"When they go to the pub to play Golden Tee they are socialising with friends and enjoying a common experience and if victorious - they can brag about it immediately.

"Our games - Golden Tee Golf, Silver Strike Bowling and PowerPutt Minigolf are adult games that don’t allow players to blow things up or shoot anything," Colabuono continued. "They don’t dispense tickets as a reward for good play. What they provide is a means for men and women to be entertained while they enjoy each other’s company."

Kevin Weir of Electrocoin, UK distributor for Golden Tee Golf, adds to this, saying: "There have been peaks and troughs in the success of the arcade video market depending on the differing pace of technological advancement in the home market.

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"Where the market differs as far as the pub sector is concerned is that the games that have been successful in the UK and US pub business have never been made available in a format that works in the home market. As a result new products coming to the market such as Power Putt can still reach high earning levels."

Weir added that the games also contain that key element - competition - and are best played in groups, while socialising with a drink.
For Cotty, this element of competition is the only way a video arcade game stands any chance of performing well. "You can take a great driving game such as Namco’s Max Tune 3 and as a single player unit it will not earn well," he said. "But as a two-player driver, or even four, it will be a top earner in a location. Double shooters and dancing games act in the same way."

The home console market is set to continue growing, especially with the current economic situation which is resulting in people spending less and less on leisure activities, as is the popularity of redemption games, which the players perceive as value for money, so how can operators and manufacturers work together to ensure video is a successful product in the mix of games in a location?

For Cotty, this is an interesting point. "Tekken 5 had PS2 ports built into its control panel (in the US)," he said. "This allowed the player to use their PS2 controller or the arcade control panel - Tekken 6 didn’t have this.

"While speaking with Zak of Zax Amusements, he made a brilliant observation," continued Cotty. "The current generation grew up with the PS2 controller, whereas my generation grew up with a standard arcade control panel interface. As alien as a PS2 controller is to me, kids today find the arcade style of interface unappealing."

Cotty has since found a supplier of PS2 to Jamma interfaces and installed them on his machines. All the regular players bring their own controllers - play has, apparently, increased on these games.

With this in mind Cotty told InterGame: "Manufacturers need to create more games with unique interfaces that cannot be replicated at home. Redemption is out-earning video because we are not able to offer our customers a product that is significantly newer, more exciting or more stimulating than something they can get at home," he said. "Redemption is not earning more than it ever did, video is earning less."

It would certainly seem that both parties - the operator and the manufacturer - agree that innovation is key to the market but while the manufacturers believe they are providing the innovation desired, the operator is saying more is needed. I don’t think it is a matter of who is right and who is wrong but maybe more a case of forgetting what has happened in the past and looking forward to what the future industry could be.

"Video is part of the mix of product for family entertainment, therefore I see there always being a market for the right products at the right price," said Anderson. "There are also other markets where video can still be strong, such as the hospitality market."

Hodges shares this view and told InterGame: "The sector needs to diversify and offer something different. The environment also needs to be different to provide more of a draw. This point is proved by the fact that the UK holiday park market is faring well and is showing no signs of declining."