Sega AM2 boss: Arcade market outside Japan is “practically dead”

Twisted Supreme Oct 8, 2008 13

That’s encouraging isn’t it? Admittedly arcades in Europe and American pale in comparison to those in Japan, but I’d like to think they still have a pulse. Hell, they must do because we get a fair few hits everyday on this site alone. Anyways, this is what AM2 boss Makoto Osaki had to say.

Let’s not even go into the overseas market… it’s practically dead, he said. The market there is entirely redemption [prize] machines now. The users in America just don’t go to arcades anymore, because they don’t see why they should invest the effort when they have games at home. In Japan, you’ve got arcades near train and bus stations that the vast majority of the people have to pass going to and from work, so they get a lot of traffic.

[Read on for the full interview which covers the release of Virtua Fighter 5 R – Kikizo]

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13 comments

hmmm October 8, 2008 at 8:36 am

Makoto Osaki is absolutely correct. The market can barely support the few manufactures left. Insiders tell me one of Arcade Heroes favorite American manufactures is bleeding employees and is on its last legs. Things will only get worse for coin op with this downturn.

twistedsupreme October 8, 2008 at 10:08 am

Loving the negativity. With that attidude, it probably will!

only the strong survive..... October 8, 2008 at 10:21 am

Frankly I must respectfully disagree. While the arcade market in America is not quite what it used to be. There is still room for small nimble companies that can control costs and put out quality products. For large companies like SEGA that like to sell $20K plus arcade cabinets…. well yes the market is dead…. the majority of operators cannot support machines at that price point. I see the downturn as an OPPORTUNITY for small companies to thrive in this space and prosper. Give the users arcade games that provide game play not available on the consoles at a reasonable cost to the operator and you will see the market is NOT dead.

editor October 8, 2008 at 12:33 pm

I would feel better if we were using comments from a informed Japanese executive about a area of the industry he understood to any level of expertise – rather than a off the record quip. SEGA AM# has shown poor judgment in the US sector, and has proven appalling in product planning for the territory – to the point that SEGA has reverted to handing over control to a UK executive.

To the point – YES the US market is rubbish, but not ‘practically dead!’ It need skill and new thinking to profit. Sadly we will be hearing in the next couple of days of layoffs in two major distributors and at least two US manufacturers will cut back significantly on business.

But just to put this into perspective – IAAPA next month will see at least eight brand new amusement companies entering the market, over 20 new products released, and a increase in business in FEC, Hospitality and Bowling that has caused some investors to look at Out-of-Home entertainment as a big opportunity. We ship thousands of machines into a market that has nothing to do with the old perception of arcades (see picture above). Go into a cinema, family entertainment center, and bowling alley and see the reality of new machines – this is the market now!

Just to reiterate – ‘ARCADE’ IS DEAD!, AMUSEMENT IS EVOLVING!

Shaggy October 8, 2008 at 2:38 pm

Mr. Osaki should be either reprimanded for these comments. If anyone is in a position to do something about the Western market, shouldn’t it be Mr. Osaki as head of development for Sega? Oh that’s right, he’s too busy making more derivative games that are overpriced. I’m sure that’s the proper way to jump start a market, no?

On top of that we have pointed out two websites for finding arcades: Arcade Finder and Arcade Fly. There are still thousands of arcades in the US and not all of us are redemption centered. The fact of the matter is that there still are developers who release product in the US, both based in the US and Japan. You’re market isn’t dead if they are still creating new product and new businesses are opening. Now could the arcade industry be in a bit of trouble with the world economy being what it is? Yes. But as an arcade business owner, I have seen business INCREASE in the past couple of weeks. Yesterday was my best earning Tuesday ever. I have ONE redemption machine and it has not been a top earning game in weeks. I keep repeating myself but if we can see more innovative games that are affordable, the market will do fine.

Sudha October 8, 2008 at 4:16 pm

I feel arcade games are so expensive if you want to buy it as new. I no need to mention shipping cost!!!.

After investing that much money, to evenout the cost of the game itself is going to take year or two.

When the business owner make money? No wonder may are closing down.

Hope they bring down the cost during this downtime…(maybe i am dreaming)

Good luck to all of you.

2600 October 8, 2008 at 4:48 pm

I recently attended Tokyo Game Action’s Street Fighter IV release party and it was a huge success. I don’t know specifc cost numbers, but 146 people showed up with the majority of them paying 26 bucks for the all day flat rate, the rest paying 20 bucsk for the fighter flat rate. Throw in the insane amount of people buying drinks and food and you got a decent amount of the bill for 4 SFIV cabinets already paid off in one day!

To me Arcades have become “hidden” and when people do manage to find one that cares about the games and the gamers, they seem to gather the crowds. I know many people who have made really long treks (including myself) multiple times to check out great arcades like funspot, 8 on the break, TGA, or Castle Video.

The arcades that I have seen “dying” are the ones that buy some games, charge a high price, treat the gamers like capital instead of people, and never, NEVER repair their cabinets. I can not tell you how many times I have gone to an arcade where a game is completely busted, yet the operator doesn’t bother to place an “out of order” sign, just to get those random quarters from people.

As for the comment about redemption games, yes redemption games are popular in american arcades if you consider “Dave and Busters” an arcade. The arcade market in America has, to me, shifted from the everyday/everwhere location with casual gamers to the hardcore dedicated operators and gamers. As much as I loved being able to go to my local mall and drop 25 cents to play a beat up galaxian cabinet (and deal with poor operators who onyl cared about a quick buck), I’d much rather travel and spend a day playing some machines that are properly being taken care of with fellow gamers.

SaraAB87 October 8, 2008 at 5:35 pm

The arcades that seem to survive where I am are the ones where you can drop your pocket change into a game as your passing. These do extremely well here. I have spoken with the owner of a mall arcade here and he says that he does extremely well with his arcade that is placed in the food court of a local mall. The price is not high, you can enter at will without paying admission or any other policies, and a ton of people will stop to drop in a quarter for nostalgia’s sake and to have some fun. A lot of people dropping a few quarters each = money for the owner! Games in laundromats and some local businesses also do well here, since they only cost 25 cents to 50 cents to play. For this model selection of games does not matter and people tend to prefer the classics.

The Dave and busters model just doesn’t work in America. They have a confusing points system designed to take your money and that you can’t understand, outdated games without adding any new games (at least here) and they charge an exhorbant amount per play. The games are set on fixed 90 seconds of play so you get to play for 90 seconds and then you are prompted to scan the card again. There are no rewards for skill such as extra lives or extra time, its all set on a fixed schedule. So there is no incentive to continue or to beat your high score other than to finish the game and see the ending, and thats not a very good motivator. You have to spend a certain amount to start and you can’t just drop quarters as you play. You will always end up with unused points because each game play takes a weird amount of points. Each play costs around 3$ if you convert the points into dollars. There is one simulator here that costs 20 points in Dave and Busters just for 1 play.

Americans are looking for entertainment value for their money, especially in this economy. 3$ per play and in some cases more for 90 seconds of entertainment is not value. For the cost of a family of 4 to spend a day in Dave and Busters that same family of four could save up the money from 1-2 trips depending on how much they spend per visit and buy an Xbox 360 or a Nintendo Wii and a few games and be entertained for at least 3-4 weeks straight on the initial purchase.

People if you take a kid to one of these places they blow through credits like its free money, in other words they use A LOT of credits, I have experienced it myself with some cousins. You are lucky to get by on 50$ per child for an hour of entertainment. Now lets compare this to the console market, even if you spent the full amount you could buy them 1 50$ game and have them play for at least a couple weeks with that game or take them to Dave and Busters and have that $50 be gone in an hour.

The money goes even further if you only purchase games that have already dropped in price, at 10$ per game you could be purchasing 10 games for 100$. Thats enough to keep kids busy for months! There are lots of 10$ games available on current home console systems that provide an extremely good value for your entertainment dollar in the US (I understand that the pricing is a bit different in other markets). If you resort to older consoles like the PS2 then the startup cost goes down even more and so does the cost of the games. You can still get entertainment from these consoles even though its not the latest.

With this comparison its no wonder the console market is winning out to the arcades.

This is ignoring game selection completely, Dave and Busters boasts a 1994 daytona cabinet as their main attraction. So your paying like 3$ per 90 seconds to play on an extremely outdated machine. This just doesn’t fly these days with everyone into HD TV’s now and realistic graphics. I go to Dave and Busters and find 10 year old games, or more than 10 year old games masquerading as the “latest”. Dave and busters here also has crappy maintenance and rude staff, they have also been continuously cutting staff so there is like one person at the desk to handle everyone who wants prizes and who wants to buy points. Employee morale is better in your local grocery store. I have never been in an establishment where the employees look like they couldn’t possibly hate it more. There are always out of order games in there. They say they have a policy that kids have to be accompanied by adults but thats not what I am seeing, what I am seeing is a glorified CEC with tons of unsupervised kids running around. Adult arcade yeah right, more like adult arcade that has become a drop off babysitting spot for children. For what they are charging customers to play on outdated games in their arcade they should be bowing down to customers and having the utmost concern for the games and how they function.

I apologize for the rant. I am just extremely frustrated because I haven’t seen any machines newer than about 2002 in my area and D&B is the only place to find the latest games but they don’t get them in yet they advertise that they have the latest.

With that being said no arcades are not dead, however the business model needs to change as others have said. These supposedly High end Dave and Busters type places are just not working because they are too expensive and do not deliver what they promise. As others have mentioned it would be better if games were placed in restaurants, bowling alleys, movie theaters, malls, laundromats, bus terminals and airports, anyplace where people are constantly passing.

editor October 9, 2008 at 12:05 am

anyone going to IAAPA?

Lets have a meet?

Old School J October 9, 2008 at 1:04 am

Some good points raised here. The arcade map in London has changed drastically in the last decade going from several locations with an abundance of machines to really, just one primary location and a smaller niche outlet about a mile away that seems to have given up and is very behind the times. However, the primary arcade, known as Funland has gone through numerous changes over the years but has always offered a decent and up to date selection of games with okay maintenance and pricing.

Funland’s location also helps it chug along as it is right in the middle of tourist London and there is an exit from Piccadilly Circus underground station into the Trocadero centre where it’s located. And therefore it is aimed more at the tourist and casual player with a huge selection of popular racing and dancing games, not to mention various redemption machines, a bar and bowling alley. Yet there is room for improvement even here, as the fighting game fan is given just a small cramped section for its gaming and key titles such as Street Fighter 4 are noticeably absent, particularly glaring, as some operators in the US have made an effort to get the game shortly after its Japanese launch and seem to be reaping the rewards.

During the 1990s both Sega and Namco attempted to bring Japanese style Family Entertainment Centres to the west, Sega especially made an effort to set up both a large scale Sega World in the heart of London and a number of smaller Sega Parks in suburban locales. Yet these all failed because what I personally noticed was a selection of mostly Sega games, with silly pricing and little maintenance. The business was purely a commodity to make money without researching its user base and finding a game selection to match.

On the other hand, Namco had great success with its London based Wonderpark for a few years because they would feature a broad and up date, well maintained selection of games. Fighting game fans were especially well catered for and key titles of the era such as Tekken 2 and 3, Soul Blade and Soul Calibur showed up early as test machines and on full release several cabinets played host to these titles and had a big following. But for a number of reasons, including problems with youths and the lease expiring, Namco packed their bags and left. But even today, to those who remember it, Wonderpark got everything right, yet no company has matched their successful business model since. They were a gamer’s arcade, catering to them.

That is the brief history. But arcades are not dead, they just need to transform and adapt to their new audience and its wants and need. At its core it needs to be customer focused, with good games, pricing and maintenance.

It’s interesting to read the whole AM2 interview though, as later on the question is asked about the release of arcade games in different territories and how Sega feels about having some of their franchises updated by development teams outside Japan, although the comments veer towards console updates, notably that of the forthcoming HOTD. It appears that AM2 favour this approach as certain franchises have a big pull outside of Japan. I, for one, have been quite impressed with Sega Rally 3, a very good effort, developed by a British code shop.

Regarding the arcade model, yes, in a way we cannot call it an arcade in a pure sense or at least imagine it to aspire to what we grew up with in the 80s and 90s. Strides are being made by local talents, such as some of the games featured on Arcade Heroes very recently and perhaps this is one way to tackle the issue of so called ‘dead’ arcades. Every effort should be made to encourage such attempts to breathe fresh life into new game designs, especially those which you cannot experience on a console.

Ultimately what we are seeing in the west is an evolution of the concept, as mentioned above. Arcade games are assimilated into a family entertainment centre where you can also play redemption and prize games and grab a bite to eat. Couple this to a unique, region specific, up to date, well maintained inventory and you lay the seeds for a successful business strategy.

Gamer 59 October 9, 2008 at 4:01 pm

The American arcade is dying because of lack of competition in the Arcades. When you walk into a Dave & Busters or Gameworks what do you see? It is nothing more than racing games and shooters and not much else. These are not catering to hardcore gamers but the somewhat occasional gamer most likely on a work outing or for parents to let their kids run around like little ADD demons. I have a pretty good idea that the machines are all set on the highest difficulty setting to gobble up continues from people that attend company outings getting hammered on beer and not realizing that they just spent all twenty dollars of their power card only to get half way through the latest version of House of the Dead or Silent Scope. If they had more games that you might be able to beat without spending twenty dollars and more of a variety in genre to cater to hardcore gamers, it would help. I miss the days of Street Fighter 2 and Mortal Kombat. If you bring competition back to the arcades like that, they could resurface. I like having Xbox Live and being able to play someone across the world but, there is something about being able to stand next to someone and feel the pressure and intimidation and see reactions (don’t mention internet cams either because it’s not the same). I also like playing in person because it prevents a lot of trash talking and a lot of wanna be rappers or singers since a 15 year old kid doesn’t have his internet wuby to be protected by and feel tough on his headset (I barely use my headset because only a handful of people had anything intelligent to say). It used to be that anything made for the arcade was more powerful than any home system and now it’s vice versa. There are still things that can be done for an arcade game which can have no limitations that even Xbox and PS3 that are limited to what they can handle. Almost every company is guilty of the following loop hole. To me it seems that now days, major companies have a one track mind. Spend a few million, make a re hashed product or another sequel, spend more time advertising for the home release (if there is one) than insuring quality, ship, sell and repeat process.

An example of some of the above is what Capcom did with SF4. I was really looking forward to the release of Street Fighter 4 for the arcade and then, Capcom decides to make it just a home release in the States. This was a mistake. I guess they didn’t learn that Street Fighter 2 is what basically saved the arcade industry in the early 90’s by giving players true competition between each other, something new and original and something that a home system couldn’t reproduce (and still can’t with laggy online play). They could have re sparked something state side but went for the easy sell and didn’t even bother with the American arcades’s public. And is it even a true sequel if they have all the characters from SF2 and the story line is between SF2 and SF3? The levels are all the same concepts from SF2. It just seems like another version of SF2 with better graphics and new camera angles. I guess they couldn’t come up with a new SF2 subtitle since it would like be reading a novel so it was branded 4.

Classic hardcore gamers have been forgotten about and only forced to play what is fed to them on home systems now. I hope someone can break away from what seems to be an industry standard to screw out the remaining arcades. There are many gamers who miss what I miss and wouldn’t have a problem supporting local arcades if something came out that would be worth playing and wasn’t a racer or shooter. I have a few ideas for what could help but that’s if I ever open up my own arcade. The main thing is competition. Once that comes back, the arcades should boom again but until then, it will all be the same.

Phil Arrington (Phil ver Zer0) October 9, 2008 at 4:17 pm

When it comes to Arcade distributors, some Arcades in general, its damn near a monopoly. Where there are now winners, only losers.

High prices for machines that do not last long at all and arcade operators/owners force to to jacked up the price in order to get a profit or see a profit. The system is totally fucked up and places like Dave and Busters is not helping since that is more for the “Adult C&C” than an arcade.

And can you blame any of these guys? Arcade owners got force into a position they do not want to be in. They gotta pay 25 grand for a Afterburner Deluxe cab and it break down before if even get close to a profit. Who’s stuck with the problem? Is it the company Sega or the owner of the machine? The owner of course. And fixing the problem might set him back a month or 2 on profits.

Also in California….its not the lack of competition….its the lack of good quality machines. We got the arcades, we just don’t have a place with good machines since owners out here are old as shit and just don’t know what to do anymore since they don’t know what’s up.

I’m going to the boards on this one and hopefully we can have a good discussion/debate on the future of this business.