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The Rebirth Of The U.S. Arcade? GS: GameWorks advertises itself as a facility that can host anything, from birthday parties, corporate events, business meetings, sports team parties, and so on. Which one of these hosting categories have been the most successful for GameWorks? CM: It depends on who is judging success. Ask a ten-year old if his birthday party was successful last Saturday at GameWorks, I'm going to bet he's going to say "yes". Ask Bill Gates if he's had great parties at our Seattle location and he's going to tell you "yes". We did over 13,000 birthday parties last year, that's quite a few. We didn't do that number of corporate events, but the size of those and the number of buyouts continues to grow each year. I think we're finding our bigger success on the corporate side, because by nature what a facility offers, we get those youth events, but by no way are ignoring them, but we can really cater to them. We are looking at new and innovative ways to grow the business to different audiences. When we can get 45-year-old corporate males/females in there to have a great time with all of their co-workers, and they go home and bring their 14/15 year-old kids in over the weekend and they have a great time as a family then we've won. Now that's a success. A good safe, fun, environment for the families, and for the corporations. [Originally founded in 1997, GameWorks was co-developed and operated by DreamWorks SKG, Steven Spielberg and Universal Studios, with its first location being in Seattle. As time went on, DreamWorks SKG began to scale back its many different business ventures, selling its music division and even scrapping plans for construction of a new high-tech studio. GameWorks entered a period of reorganization, and found itself with a new owner in May of 2005: The Sega-Sammy Group. Sega-Sammy is well known for operating its own chain of amusement facilities in its home country of Japan, most notably, the Sega Joypolis.] GS: GameWorks appears to have gone through its own turbulent times as a company; it filed for strategic Chapter 11 bankruptcy in 2004. The joint venture between DreamWorks and Universal has since ended, and it's been over a year since the Sega-Sammy Group of Japan acquired GameWorks. How has Sega-Sammy been treating GameWorks overall since its acquisition? CM: A couple things happened in that whole time frame. One, it was a strategic filing of chapter 11. A lot of companies strategically do that, what we were able to do is go back and re-negotiate a lot of leases and a lot of contracts that were signed in that 96 to 99 timeframe, where the business, mall, and entertainment environment is much different now than it was then. That was the strategic part of being able to go through that where we can't single-handedly deal with 14 different landlords and try to put 14 different deals together. This gave us the ability to go back with a clean slate and really negotiate the leases but our overall contract of where we are since then. It was effective last May when the actual acquisition took place from Sega Corporation. It's been great, last year we spent over $3 million for new games. GameWorks hadn't done that in years. It was bits and pieces of trying to stay up on what all the latest and greatest games were. When you operate over 500 of these places in Japan, and you've got places the size of Joypolis in Japan, you can really see the benefits of running this business well. They [Sega] breathe so much more life into this company. We went back, from May, and we did re-designs of our restaurants in five locations. We put over $3 million dollars in games in these locations. We cleaned and polished them up, we've got management that's excited to work there. We had a turnaround last year, we saw a double-digit turnaround in where the business was trending to where we ended up. So seeing that kind of growth, it really did breath a lot of life into GameWorks. What you can see what Sega is doing in the resurgence of Sonic as a character for the Sega of America through the home console. That's exciting for us, we're part of that family now. We get to inherently digest some of that excitement of what you get from the Sega brand. It's been great, the technology, just understanding what new games are coming from Japan. A better understanding of the industry, the arcade industry, and you know how they operate the facilities in Japan, it's really for those that involved in it – it's really an exciting time. [Also, two experienced amusement industry employees arrived at the Glendale offices of Sega Entertainment with Sega-Sammy's acquisition of GameWorks. Akitoshi Ogawa was appointed executive vice-president of operations and marketing. Takashi Uchijima was appointed senior vice-president of strategic planning. Both had previously served as general manager of Sega Joypolis in Tokyo, and notably Ogawa has been with the company for eighteen years directing sales, marketing and promotion for Sega's 460 arcades across Japan. Ogawa is now specifically in charge of coordinating the expansion of overseas entertainment for Sega Entertainment.] GS: As you say, Sega-Sammy has brought in its own industry veterans, Akitoshi Ogawa and Takashi Uchijima from Sega of Japan. Both have had a long experience managing Sega's own Joypolis amusement center in Tokyo. In your opinion, what kind of knowledge and experience do they bring from a Japanese arcade culture, to an American arcade culture? CM: I report to Akitoshi. I am fortunate enough to deal with them every day. I probably have a different perspective from what others might. They bring a flavor to the gaming industry in the U.S. that hadn't, in my opinion, previously existed. They look at it from so many different angles, than what we do. Some of its based on volume, some of it's based on experience, but what's been able to happen in Japan, they have a lot of tournament based games where you can play and compete in tournaments and it creates a new environment that's exciting. We didn't do anything different, we have the same games, but now we're doing tournaments on it. It might be a niche group of people, but that's pretty cool for that niche group of people. We can do it on Derby Owners Club, but can turn around and do it on Daytona 2, and that's an entirely different audience and group of people. Now we can go over and do it on House of the Dead. We can create weekly tournaments, monthly tournaments, we can do different things. That's a big thing in Japan, what they do. So they bring that knowledge and experience. They will be the first ones to say, "This isn't Japan, things are done differently in the U.S., we need to understand that," and the nice thing for me is, them saying that and understanding that, we're working together on all that stuff. It's not them coming over and saying "This is how it's going to be done." It's saying "Hey, let's figure out this" or "Let's take a look at this" or "What do you think about this?" It's that sort of environment so it's been really nice. GS: In terms of locations, and the games you mentioned Derby Owners Club, is that a game that's installed in select locations? CM: We currently have that in all of our locations either as a four or eight player game, depending on that location. GS: How has that networked game, Derby Owners Club, been performing? CM: It started as a test, but it is a staple. It's a game that's going to be there. It has such a broad appeal. When we talk about that socialization, that game, it really applies to that. You can sit there and have a cocktail and play the game, or you can be a kid with a soda and sandwich and play that game. It's fun for so many different audiences, to build your own horse and to follow that through the ranks, people just have fun with it, it's a very interactive game. GS: Some arcades have brought in video games that are networked together to allow a more competitive atmosphere. Arcade chains has even gone so far as to install networked PC's with first-person shooting games so that it can bring in customers. Do you think the strategy of bringing in networked games, is that bringing more repeat customers? CM: I think it builds that audience. There are far less people aware of doing that that are out there versus just a common user. We pick up a lot of traffic consisting of people looking for entertainment, in an entertainment environment. Those people that are network gamers and they're playing Doom against their friends and doing that at home, there is certainly a huge audience. Don't get me wrong, I know that console gaming is huge and that's why you've got Xbox Live and everything else that's happening. I think what we're starting to see is more and more of that integration, and taking that and putting it in a social environment and setting. Most people are not going to be able to sit at home and play on their flat-screen with great-surround sound in a leather chair and be playing latest and greatest console gaming. We do test and do different games. We bring in other game manufacturers and console gaming. We do stuff with Xbox and tournaments with Xbox from time-to-time. GS: You do bring in Xbox consoles to GameWorks? CM: Yes, we work with GMR Marketing, they work with Xbox, they have a number of clients and we do different console tests and programs and tournaments that we run at our places. There is a shared audience that's there. If you're familiar with the All-Net system in Japan, that's Sega, Konami is part of that. It's a gaming platform where you're linking all the sites together to compete on the games. Sega's getting ready to launch that here in the U.S. in the next couple of months where it starts with one game, let's work the bugs out and get that up and running here. Now you're networking GameWorks facilities. That's one thing GameWorks is able to offer Sega, which is a test platform, where we're not afraid to test it. Not everything we do will be successful, let's figure it out and then let's make it successful. That applies to the industry in the U.S.. That put us as a leader in the industry, and that's where we want to be with the Sega affiliation. GS: Which GameWorks locations have been chosen for these game tournaments? CM: We recently did a Seagate tour, where Seagate partnered with a couple manufacturers, hardware and software, and brought platform units into every GameWorks locations - we did it across the country. Not many people understand or know what Seagate is in the gaming industry, but as far as what they offer with their hardware component in these consoles. The memory function of Xbox, it's all the latest and greatest PC games run by their hardware. It was kind of an education tool for them.
GS: Do you personally play a role in selecting what kind of entertainment will be featured in a GameWorks facility? CM: Yes. The acquisition of GameWorks by Sega-Sammy opens up a brand new door of partnerships and connections with other Sega companies, Sega Amusements USA being one of them. [Sega Amusements USA moved to a new 70,000 square foot office and warehouse complex in Elk Grove Village, Illinois this past March and celebrated the event with visiting Sega executives at an open house event. Several games were put on display at the open house to mark the new distribution efforts by the company, among the games on display were Metal Slug 6, Virtua Tennis 3, Derby Owners Club - World Edition - EX, House of the Dead 4, Virtua Striker 4 - 2006, SpongeBob Squarepants, along with kids trading card games MushiKing, Dinosaur King, and Love & Berry. Over 300 attending guests at the open house even were also treated to a sneak preview of three new gaming attractions: Extreme Hunting 2 Tournament Edition (linked by ALL.Net), Sega UFO Catcher crane game, and House of the Dead 4 – Special, all slated for release this Summer.] GS: How does GameWorks work with Sega Amusement USA in choosing unique arcade games? Do both companies have a close relationship with one another? CM: I don't think it's different than anyone else in the industry. I can have frank conversations and I know that they are working on their own programming, what that they are doing on a title, and GameWorks has nothing to do with it. It's not a "Keep it in the family." They've got their goals and initiatives of growing their business and we've got ours, where we can ask for collateral and ask for material and different content like we're going to ask any other operator. We try to work with them if they've got a game they want to test, if it makes sense for our audience and our business then we want to be involved. If it doesn't then we're the first ones to say "You know what, we're probably not right," because we've got to protect our businesses as much as we want to help. I think it's a good working relationship. I don't think it's anything out of the ordinary in the industry. We would offer suggestions to any of the game manufacturers as far as, "Hey, we need more collateral, we need to support it like this. We saw this at a game show." [Sega Amusements] talks about what they're bringing over from Japan in advance, and they roll it out at AMOA. A lot of the manufacturers and distributors have representation in Japan, and so we'll go to gaming trade shows outside of the U.S. by nature of being involved with Sega, but to see what's out there. It's allowed us the ability to be more informed of the industry. That's the biggest piece that it's done for us, is we can be in front of, or at least on top of what's out there and what exists. What is in Korea, Japan, or China that is offered, is different than what we have in the U.S. Some things apply and some things don't. So it allows us to be on top of it and really understand whether or not it will work in the U.S. GS: Sega Amusements USA just opened up a brand new facility in Elk Grove, Illinois, and announced Extreme Hunting Tournament Edition and SEGA UFO Catcher, which will both be released this summer. Will these new machines be introduced into GameWorks facilities? CM: Yes. Extreme Hunting 2 is the All.net version. That will be the first title with the live networking. Eventually it will go in all GameWorks facilities. GameWorks has launched a "GameWorks Bison & Rifle Tournament" promotional campaign in association with Buckmasters Limited. Six GameWorks locations across the U.S. are hosting a tournament June 3rd to the 18th for GameWorks customers to compete against each other for an array of prizes. Future tournaments will continue to be announced on the Extreme Hunting 2 website (http://www.extremehunting.net/).
ALL.Net already utilizes 7 other titles titles, 45,000 linked boards, and 2800 locations in Japan. Extreme Hunting 2 joins a line of titles already featured at GameWorks such as House of the Dead 4, Dinosaur King, and Initial D Version 3. Sega Amusements USA was also proud to announce their new licensing partnership with Disney Consumer Products (left) to provide plush and plastic toys for its new UFO Catcher crane games that will also be introduced this summer at GameWorks. The announcement for the U.S. market came this month, and follows an established licensing partnership between Disney and Sega that began in Japan ten years ago. The UFO Catcher crane games debuted at the ASI Show in Chicago last March to a positive reception.] GS: Can you talk about any specific expansion plans that GameWorks has in-store for the future? CM: We have some, we're going to grow, some of it starts internally where we're doing these retro-fits and these changes of adding sports bars to a number of our locations, we'll be announcing those in the next few months. As far as additional facilities, we continue to look at those opportunities, and there will be growth there as well. We'll be announcing a couple of those here in the next three or four months. Sega Entertainment is looking at expanding the U.S. market, that's what our focus and vision is. We will work with Sega of Japan, we're going to work with them on taking GameWorks abroad as the opportunities present themselves. Right now we're working on the U.S. and making GameWorks as big as we can.
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