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This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.
The purpose of this article is to let game developers know how making games for the Public PC and coin-op will make them more money.
The Coin-op Market
In the US alone, coin-op game owners own nearly 2.5 million games in more than 1,000,000 high traffic retail locations. Intel estimates 1.2 million of those games are video machines, with the world wide coin-op market four times larger.
There are two categories of locations in our marketplace, destination based and convenience type locations. Large arcades, family entertainment centers, location based entertainment centers, and theme parks fall into the first, and the millions of games that are in every convenience store, bar, airport, and other type of retail site fall into the second.
The US market has an existing customer base of approximately 88 million players, who spend approximately $6.5 billion dollars a year on coin-op games. Our players are primarily young males between the age of 12 -24 years, dictated by the fact that the software written for our industry is designed for that audience.
We believe the total US audience for games could be 180 million players, based on the fact that state lotteries sell approximately 400 - 500 billion dollars per year in game play to people between the ages of 30 to 70.
Coin-op equipment owners have approximately $5 billion dollars invested in games, and another $1/2 billion or so in plant and equipment to service the games.
One of the most important features of the coin-op market is the fact that many of our players do not own and do not have to own computers to enjoy the games they play. We make our living supplying those computers to our players, one quarter at a time. Our willingness to install PCs in public places immediately opens your market to every person in the nation instead of the limited percentage of the market that have state of the of the art computers.
We intend to take the system we are describing here today to our sister trade organizations in other parts of the world, opening the entire global market to you with this program.
Because we are in the business of supplying state of the art computers to our players we are very interested in seeing the best games you make on the machines we own. For that reason have worked closely with Microsoft and Intel to establish a reference platform that puts very powerful and predictable equipment in the field, so that your games will look better in coin-op than they do in the home.
Another very significant and stabilizing feature of our market is the fact that we believe our members are in the broadcast entertainment business. The millions of coin-op game screens people walk by every day are really the equivalent of a broadcast system, and we have therefore initiated a project with EDS to create the system needed to deliver and manage digital entertainment on the millions of screens we own. The National Amusement Network, or NANI, is the subsidiary of the AMOA which is responsible for building and managing that business.
Why Coin-op Wants PC Game Developers' Games
Coin-op game owners want to buy the games PC game developers make, for a number of reasons:
We lease the space in the 1 million retail sites our games are in, and pay the rent on these space leases with game play revenues. Because our rent is always due we need a continual flow of new games to make our rent payments.
Unlike home game buyers who buy games on a whim, we invest in games in order to make a return. We are the closest thing to a perpetual games money machine you will ever see because if your game is good we can immediately begin turning it into cash and get a tax deduction for buying it. We will therefore never run out of money as along as game players like your games. In our industry, games are like movies. When we play games in a location they draw customers. For that reason our locations constantly want new games.
At the present time, many of the games sold in the amusement industry are designed for a young, mostly male audience, and are built on proprietary computing platforms. Microsoft recently did a report for our industry on the impact proprietary computing platforms have had on our business. That report noted the fact that coin-op is rapidly losing market share to other entertainment venues because proprietary game platforms and limited content have killed innovation. We need your games and your ideas to make our industry grow.
We also want to buy your games because we need your expertise in writing games that adhere to standards such as Direct X and the Intel platform. If you think about our business for a moment you quickly realize that we are little like milkmen. We travel around the country all day long on routes fixing joysticks, emptying coin boxes, and cleaning cabinets. If each of the games we visit had different joysticks, different coin boxes, and vastly different software and operating systems we would be forced to carry hundreds of different types of parts and have SEs in each truck, which would be very expensive. For that reason, the less parts we have to carry and the more standardized the systems are the better. By working with you we know we will get support for hardware and software standards because they let you be more productive in your core business, which is writing game software.
Another reason we need PC games is to change our financing model. In our existing business model we pay $4,000 for proprietary games in firmware. If the game does poorly, which 7 out of 10 do, we are stuck with $4000 worth of plywood and firmware with little residual value. Banks won't finance these games, which forces us to borrow from high cost lenders, compounding our financial problems. With you writing software for us we will buy our computers from Dell or NEC with financing from the banks, and lower our cost of operation so we have more money for content.
The last reason we need PC games is to get out of the moving business. In our existing business model manufacturers force us to buy new hardware in order to get new games. When a game is no longer popular in a location we can't just erase it and install a new game, we have to get a pickup truck and go move it. As you can well appreciate, moving 300 pound games around the country is very expensive. Many of our operators tell us that moving a game from one location to another three to four times per year with refurbishing costs added in can add 25% to the price of the game. We therefore have to go to a software model to reduce these costs.
The PC in Coin-op
The PC coin-op platform we are supporting, has been developed over the last year by Intel, Microsoft and the AMOA. Not surprisingly, it uses Intel processors, Microsoft Direct X technologies, and off-the-shelf PCs. The key components of the coin-op platform include:
This shell is designed to address two major problems that face our industry. One is the fact that coin-op games cost too much to play, and the second is the fact that our players associate our games with our hardware. As stated earlier, we want to get out of the moving business, and therefore want to install more than one game on a machine, which requires an entirely new view of our hardware. To do so we are turning games into entertainment on a channel, in the same way Microsoft has done with MSN, and are using an advertising model to lower the cost of play.
Ads, including full motion video ads with stereo sound, can be attached to any part of the game or any other content on the system, in the same way ads are tied to TV shows. These ads can be linked to web sites and dynamically changed, based on the demographic of the player.
To manage these ads EDS with the help of Microsoft created a content management system to manage games and other digital content on the network. This system not only connects directly to the Public PCs on location, it will also connect directly to point of sale networks.
Unlike the Internet advertising model, which is off to a slow start, we think ad revenues will underwrite the cost of play in our industry starting this year. The reason for this is very simple. On the Internet, people have been receiving services for free for years. They view attempts to get ad data from them along with usage fees as an invasion of their privacy and reduction of their right to free access, which they are. However in our industry, our players are paying roughly $14 per hour to play games and are paying too much. If we can reduce that cost to $5 an hour through advertising they will love us. Perspective is everything.
As good an idea as the Public PC is, manufacturers of proprietary hardware systems and console games hate it. Many of them compete with our members in the location business or would like to control the content we buy (and not surprisingly, the games you write) and are therefore are spreading a lot of uncertainty about the coin-op model that I would like to deal with briefly so that you do not get trapped in a proprietary model that is doomed to fail.
Existing coin-op manufacturers will attempt to tell you that coin-op is about hardware. However, those of you that have been to Japan know that the Japanese use primarily standard game cabinets in all of their locations. The same is the case with all of the slot machines you see in casinos. Other than a few cosmetic differences, they are pretty well all the same. Now think about PCs. Can you imagine what would happen to your business if you had to write games for 150 different keyboard layouts? Obviously the hardware argument is baloney, although there is a place for highly specialized equipment like Wave Runner. You must also remember the fact that cabinet size equates to floor space, and in 95% of the locations we are in floor space is limited, so the bigger the box is the less locations it fits in.
Existing coin-op manufacturers may also try and tell you they know more about our business that the guys who actually operate it. At the last CGDC conference NANI handed out 6,000 copies of the DirectArcade SDK in everyone's conference bag. This SDK enables anyone to begin immediately writing games for coin-op. The SDK on the CD is based on designs requested by hundreds of our members over several years of design sessions. If we don't know our business, who does? .
I do not want to belabor this point too much, but you should understand that the future direction of the games entertainment industry is at stake here and the proprietary model, closed systems guys are doing everything in their power to kill off a move to open PC platforms and the AMOA model. In fact two of the biggest proprietary platform companies from Japan have pulled out of our trade show to try and break our back for supporting the PC. However, the PC model you are hearing about today is showing up the proprietary model for what it is, an anticompettive and destructive system designed to defeat your and my ability to make a living and enrich a just companies. In the case of coin-op, for those of you that study the psychology of markets, I can tell you we have been held captive by proprietary systems for so long we are suffering from the Stockholm syndrome. When we get free from this captivity the frustration our members feel for proprietary platform companies may seriously damage them, which may not be good, although it poses an absolute opportunity for PC game developers. If you don't believe that, I suggest you ask Microsoft what their surveys found about the attitude suppliers and buyers in our industry have toward one another.
The Coin-op Market - Game design issues/features
I would now like to briefly touch on the concepts of designing games for our industry. I will highlight some of the key points and concepts now, and strongly recommend that you talk to the guys in our industry who have been buying games for three generations to find out what makes really great games in our business. They can tell you what has made a good game in the past.
Our trade group is very interested in insuring that you get as much help as possible in designing games for our industry, and for that reason has set up a special developers row in our annual trade show, the largest trade show of its kind in coin-op, to give you a chance to meet directly with the buyers of your games. This year our show is in Atlanta in October, and we urge you to come to our show in one of our developer booths or as an exhibitor, and talk to our people. At first you will have to help us learn to talk to you, because our existing suppliers have made it a practice over the years not to listen to our opinions so they can jam product down our throats, and we may appear shy. However once you open us up I am sure we will be successful together. We also urge you to help us bring our people to your show, because they are just like you, small business people trying to make a living in games, and we both have a direct relationship with players that we need to discuss.
One of the most basic characteristics of coin op games are an ability to adjust the speed and difficulty a game plays at so that the amount of time a player gets on the machine can be limited. From our perspective this feature will continue to be important into the future for those time periods in which our games get the most use, where one person playing the game all the time might turn other players off.
If this seems like an unreasonable limitation in our market, do not be disheartened. We recognized that this was a limitation several years ago and took steps to support a time based model. The math will tell you why. Divide $6.5 billion in revenue by 35 cents per play average, multiply it by a minute and a half which is the average time per play, divide that by the 2.5 million games in the market, and by 365, days in the year, and you get the number of minutes in a day that our machines are working. As you can see, a coin-op game works less than an hour per day to bring in its share of the $6.5 billion we do each year. There are tons of hours in each day in a location in which we can sell time based play, which we could do until the technology we use in NANI came along. Now that we have that technology, we are supporting time based play in our shell. If you have a robot or episodic based game like Warcraft you would like to sell us, we would love to have it.
Another characteristic of coin-op games has been the ability in amusement mode only to computer assist the player if he or she is losing too badly. Because our players may not have seen the game before, if they lose too badly when they first play it, they could be turned off. For that reason the good games in our market include modes to computer assist players that do not play well.
A third feature of coin-op games historically has been the use of short segments that a player travels through in the game. Again this approach has been taken historically on the assumption that we can charge more for the game by selling multiple segments. While this all may be true, we know players are willing to pay more to stay on the game for longer periods of time if they were not interrupted repeatedly.
A fourth characteristic of traditional coin-op games has been the use of replays and timed interruptions called continues to ask for more money. Williams for example, as an outstanding ability to use this feature.
While there are many more technical things you will want to know about designing games for coin-op, let me cover several other concepts that should excite you. While all of you are extremely talented and creative people and love designing the grandest of games, we have had to learn to make money with all types of games, including some of the lowliest. Big and photo realistic is not always better. To give you some examples of what I mean, Virtua Racing was a beautiful game from a realism perspective, but Williams Cruisin' out earns it five to one, and costs one third less.
And while Mortal Kombat was a hit in our market among young boys, and sold roughly 55,000 copies as an upright, PacMan, which is a much simpler game and had broad appeal to women, sold 250,000 copies.
One of the strongest earning games in our market for several years was Windows solitaire, which sold for $2500 and could earn anywhere from $150 to $600 per week. And one of the top sports games in our market is a golf game, which is no where as complex as the products you sell in the PC industry, yet in its base form it can do 200 - $600 per week. If you have any golf, bowling or other sports games you would like to sell us please let us know.
The point I am making here is the fact that our business reaches such a vast and diversified audience, you can make games of all levels and be successful. If those games happen to be simple, 2d games that only cost you a hundred grand to write they could potentially generate millions for your company. Coin-op gives you the opportunity to fill your product line with a line of simple games that are easy to write and make millions of dollars, which will fill the gaps between the 3D blockbusters you are writing. Grandma plays games too.
Another concept I would like to deal with is creativity for its own sake. Your greatest strength is your creativity, however it is also your greatest weakness. Take bowling for example. Bowling is a game of balls, pins, and lanes that generates billions of dollars every year and barely changes. In fact bowling would not work if it changed frequently, because players could never get good at it. You don't have to continually create new games to win. Think of some of your games like they were bowling - they don't have to change much and can be played repeatedly over the years. If you can come up with games that fit that description, our members have been running pool, dart, bowling, pinball, billiards, and other types of continuously playing games in league format for the better part of this century. We have locations in every corner of America and would love to have games that we could run for years with little change. We would both make a fortune off of them.
Another concept I would like to discuss is the lose your butt and recover quickly strategy developed by our industry. As you well know, there is no guarantee that a game will be a hit. We have bought so many dogs over the years that we have had to develop methods of dealing with the problem. For that reason, we have come up with concepts like giving people tickets they can redeem for merchandise when they play a game, promoting leagues so that a game that earns poorly otherwise can be made into profit centers for us and our locations, tournaments for prizes so we can make the game earn longer, and now advertising, couponing, and internet connectivity, so we can lower the cost of play and add value to the game playing equation. Under this latest addition to our industry, we can tie a game to a promotion, and give every person that plays it a buck off gas, which lowers their resistance to playing. We can also play the game for prizes and make it more playable that way. While we would all like to own a constant stream of hits, the reality is that most games will not be. Therefore, as prudent investors in games, we must constantly find ways to move them in the market, and that is really what coin-operated game owners do.
Another feature we support in the AMOA shell is save game. We have the ability in our network to save everything about the game a player just played, can store it centrally and let the player retrieve the save state for play later. A player can pick up a game in any part of the nation, no matter where he left off.
We also have the ability to play games, in score, head to head or save game mode, support LAN based play, and can offer prize events that comply with state gaming laws, which we believe no one else can do. If you do not believe the part about compliance, get an attorney's opinion on operating Internet games in Colorado. As a footnote, please remember I am not saying we can run net games everywhere, especially for prizes, because you cannot. To give you a clue to what I mean, get the answers to the following questions.
While there is a lot more to discuss in this section, that part of the business is being adressed by our organization, so I will move on.
Profiting From Coin-Op
You can profit in coin-op in a number of ways. I have itemized a few for your to consider:
Currently, we buy 200,000 proprietary game machines or kits per year, under extremely unfavorable circumstances. However the economics of the Public PC are so favorable, I believe it will replace the sale of proprietary machines very quickly and grow to a base of somewhere around 500,000 to a million machines over the next five to seven years. Unlike a proprietary game, I think games on the Public PC will turn over faster, and you should see 5 to 20 copies of game rotating through the machine each year.
Because the PC software used in coin-op will be used in a public performance, coin-op machine owners expect to pay more for it. Although I cannot tell you exactly what the market will be, we see a number of models emerging. One will be a model in which we pay you a flat, one-time license for the game. That may be as little as $100 per copy and as much as $500. Another alternative will be a scenario in which you will find an ad sponsor for the game and sell us the game on a royalty basis, say for two cents a play. A third alternative could emerge in which you give is the game for a larger percentage of revenues with no up front fee. And then a fourth scenario may occur with especially hot titles, in which we are willing to pay a combination of all of the above. While I am not sure that any of those alternatives will dominate, our members are willing to try them all. You do the math.
If you design your games to connect to NANI using the AMOA shell, you can use the all of the functionality I described in my session, and a new ad based revenue stream is available. In addition to the ad streams we can generate, if you design your games to support home to arcade play, we can show yu how to create transaction revenues in the home, after you have sold the CD.
In addition to the game playing functions listed above, the NANI network supports connections to merchandise servers. If you have merchandise you want to sell, we have put a system that can process pay for and manage those orders. We would hope that you have a branded merchandise adverting strategy in your future.
As an aside, we have a system in place that can track the copies of the game you distribute to us, and will be able to electronically track and redeem payments to your bank later this year, so you do not have to worry about getting paid for your royalties. This payment system is being maintained by EDS, and they will be wholly responsible for making sure you get paid.
GT Interactive recently announced support for the Public PC and coin-op. If you have titles that you would like to publish for coin-op, I urge you to speak to Dave Adams and Jim Perkins at GT.
$30,000,000 in Performance Bonuses
To celebrate the launch of the Pubic PC and the AMOA model, we are giving away one of three $10,000,000 performance prizes to any company whose single title generates four hundred million paid plays in coin-op over in a one year period, as measured by the NANI system. This is roughly the same number of plays that Williams Mortal Kombat generated in a one year period. If you think that your games are as good as Williams arcade games are, now is your chance to prove it and earn big bucks in doing so.
This event will commence at the AMOA's fall show in Atlanta in October, and run for a one year period. To find out more details about this program, email [email protected].
John Klayh works for the National Amusement Network (NANI), a subsidiary of the Amusement & Music Operators Association, the trade association that has represented owners of coin-operated game machines throughout North America for more than 50 years. The AMOA and its sister organizations represent commercial buyers of games in every major market in the world, including the United States, Canada, Mexico, Australia, and Great Britain.