While I have been working on getting my own arcade started I have dealt with the problem where it is difficult to come by useful information on arcade business statistics. I know that many of you have also encountered the problem of finding good information on arcades or just working on getting your arcade business started. I feel that it would be useful to hold a discussion about it and share information that I have come across in my quest to open up my own arcade – together with The Stinger Report and your own comments, I believe that we can have a great discussion on this subject.
First off, many wonder if it is feasible to open up an arcade at this time with news of arcade closures in places like Japan. If you need any reassurances, take a look at recent trade shows where developers and distributors have an optimistic outlook on the arcade scene. 2008 will see a lot of new releases, some of them with a good amount of hype behind them. Prices on new arcades have come down from where they were a couple of years ago which makes it easier for new operators to start up although one doesn’t have to open an arcade with nothing but new games – just games that have proven earnings. So there are positives to look at but as opening and running a business is more complicated than that, we’ll need to delve further into the subject. Hit the post break for more.
Since I first saw the movie Tron I knew I wanted to be like the character Flynn – no not being digitized into a computer but in running my very own arcade. As I have stuck with that dream, I have been working hard on getting this started since I bought my first arcade cabinet in 2000. For this particular feature I will focus on four major points in getting started:
1) Have a passion for video games
2) You need a compelling idea
3) Create a business plan to focus on that idea
4) Use all of your resources to gather information for the plan
Point #1: Have a passion for video games, in particular arcade titles. Why does passion matter? I believe that it is simple answer. If you have two businesses that are virtually identical save for the passion that the owers have for the business, then when difficult times come the owner who holds a strong passion for what he or she is doing is more likely to weather the storm. Running a small business is not an easy task to undertake and statistically the numbers are against new businesses so I firmly believe that those that love what it is that they are doing and will believe that they will make it are more likely to survive. The human mind and heart are powerful things and if you need some encouragement in that direction, I would recommend the book “Think and Grow Rich” by Napolean Hill as an essential read for any prospective arcade owner.
Point #2: Create a compelling idea. While the purpose of this initial discussion is not to focus on how economies work (you can take a class or find a book to freshen up on that subject) I want to make the point of the importance of gauging how well your local economy is doing. If the outlook is bleak then that does not mean that opening up an arcade will equal instant (or even eventual) failure but it will mean that you will need to create an environment even more compelling than what may be the standard to get people to leave their homes and come to you. And this leads me to my first point of launching an arcade busiess and that’s creating a compelling idea for your business. There are many ways that you can go about taking the basic idea of an arcade and improving upon it – researching local tastes is the only way to tell how your idea may be received in the area. An arcade doesn’t have to be ‘just an arcade’ but can be an arcade with other attractive aspects to it. I researching information for my own arcade I have been told a few times that arcades alone will not survive – it needs some other attraction to bring the people in. Now this can vary – sometimes that means ticket redemption games, sometimes it means “Eatertainment” where you offer food, it might mean adding a PC game café, or it may mean creating a competitive arcade scene. I suggest that anyone looking to open an arcade consider these extra avenues because those people telling you this are generally distributors, who are people who best understand the industry. But it is possible to bring people in with just an arcade but your game selection will have to be pretty spectacular to do such a thing to carve out a fan base.
Point # 3: Create a business plan. YOU NEED TO MAKE A BUSINESS PLAN. I repeat that subject and put it in caps becase it is very important and strangely it is often overlooked because people do not want to take the time to “plan their business out”. This lack of desire to plan out something so important is unfortunate and also foolish. While many people say that they don’t need a plan because it’s all in their head, if you need to seek funding from an investor or bank and say it’s all in your head, they will not take you very seriously. Recently I visited the credit union I am banking with to get my loan and the agent said that he was very impressed with me because out of the many people that comes to him for funding, I was one of the very few that was prepared and had a business plan in hand. But that is actually not the most important reason for creating a business plan – making a plan will force you to research all of the revelvant (and sometimes irrelevant) points that are needed to create a successful business, it will help you formulate your idea and strategy and if done properly you will know if it is feasible to go ahead with the idea or not. On top of that it also allows the potential operator to design an operational pattern that can be used to create a working system whereby the business can run if applied to any situation. Imagine that you are creating a franchise (even if you don’t plan on franchising your idea) where you would need to create a system that could be sold to anyone as a model for running a successful business. If you need proof look at franchised businesses like McDonalds – it just takes a good idea and a good, proven system to work.
If you need a good resource for creating a business plan, I’d suggest checking out SCORE.org. They have some templates there that are easy to understand and use. I used their template for creating a business plan and was able to create my business plan without really needing to use existing plans for help (which in the case of an arcade was nearly impossible to come by).
Point # 4: Gather information. This could be considered point 3.5 as a plan requires research to be created but I am making it a separate point as we could talk about it separately for a while. One option that should be considered although it may not be possible for everyone to try out, is to work at an arcade. Why? Because you will better understand the aspects of the business if you do. It will also help you understand what it is like from the perspective of an employee, which I feel is important when it comes to managing employees. I worked in an arcade when I was 17 and 18 and it was one experience that helped me decide that I really wanted to run an arcade. In addition to working as an ‘entry level’ person I worked my way up into managing the arcade where I learned how to handle customers, scheduling, hiring, firing, payroll, opening, closing and more. This perspective will help me in running my own arcade. Also doing this you will get an idea of how much the arcade makes in your area. Knowing this can be a very good help as you can then take what you learn from this experience, find out what can be improved and use that in your arcade.
Let’s say that you cannot go this route due to reasons such as you have a family to support (arcade employees generally make minimum wage or slightly higher because young people are generally employed) or maybe your area doesn’t have any arcades (if that is the case you need to find out if there are any laws prohibiting arcades – find this out early or you’ll waste time. You may need to find another local city that doesn’t have any anti-arcade legislation). If so then find some arcades to visit and talk to the management about their business. Of course it is possible that they would not be willing to open up about their business if they know you’re going to be competing with them but that depends on the operator. I did this in my area (I was in school at the time studying business and I made my own project where I created a report where I was gathering information about how a business is run with how much do they make a week, how many customers do they get on average, what was their most popular game, etc.) and I was able to learn some astounding information that otherwise I would have not realized through any other means. For example, one local arcade stated that they made $10,000 a week on average. They have about 100 games, charge an admission fee and have a number of ticket redemption games. They also have been around for about 20 years so they are well known. Another arcade I visited was much smaller, charged no admission fee, uses a magnetic key system and made about $4000/wk average. For both of these businesses these amounts nearly doubled in the summer time. I also knew from my time managing an arcade that the arcade I worked for generally made between $5000-$6000/wk. So it can vary but what surprised me the most was these numbers compared to a local internet/game café. I visited one of those and unless they were feeding me the wrong information (which is doubtful) they only make $650/wk. They don’t charge as much as many other game café’s I know of however because the local area isn’t willing to pay more than $2/hr for that service. Some areas are willing to pay up to $5 or higher so again it will vary.
If you are unable to talk with a local arcade then find out which coin-operated machine distributors are in your area and talk to their sales managers. In my experience these people are very informed on the subject and will turn out to be one of your most useful resources in creating your business. They know which games are popular, which ones pull in the most cash and will be familiar with the situation surrounding the local economy. They also might have critical statistics you need to build a sound business plan as some distributors (such as BMI Gaming) actually have plans to help people get started.
If you need demographic data, check with your local library or use the internet. Both resources should have easy access to such information. You may also obtain this from a realtor – if you go with a realtor to obtain a place of business they can obtain demographic data for an area that encompasses several miles within the area that your store will be located in.
There is more to getting a business going, but this is a start. It will take some hard work but it is worth it in the end and that’s important to remember as while it may be difficult to start and run a business, the feeling of building something from your own mind and accomplishing such an effort is a sweet reward that everyone could get but few actually try.
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Neil
I think arcades could very well be viable again. The biggest issue and problem is most arcade video games provide an inferior experience to that of the home systems. Furthermore the costs for the games themselves are ridiculous.
Capcom wants close to $10,000 for Street Fighter IV and Namco wants $15,000 for Tekken 10.9. I could see $5,000 as a -slightly- reasonable price point for either game, but even then it’s too much.
Previously, arcade games used custom hardware and used to be significantly superior to the home systems, hence the a lot of money went into the development of the hardware.
Now, technology is so advanced that an arcade game can be run off of a modified home game console or PC. However, the cost of developing the software has gone through the roof.
BUT, the plus side is that the arcade games can now be ported almost perfectly (or better) to the home systems with little effort, which is the main source of revenue.
The overall biggest problem is that no game company is pushing the envelope anymore with arcade games. I had hoped by 2008 that arcade games would have been significantly more realistic and innovative than what exists today. It seems that the arcade manufactures simply regressed into a lowest common denominator approach, instead of taking the high road.
Arcades could be more viable if home console manufactures created cross-arcade/home games, as an example.
I could talk about this all day, but I gotta go to work 🙂