I know there's been a half a billion articles out there claiming that the arcade scene in the US is dead, buried, decayed, and anyone even thinking about opening an arcade is either pants-on-head retarded or has lots of money to throw around. It's not that there isn't evidence of this. Chinatown Fair shutting down a while ago, then reopening as a ticket/"family" place (with Henry Cen opening Next Level to cater to the locals). The super recent news that Gemini won't be renewing the lease on their location. A bunch of overseas locations are shutting down. The list goes on and on.
Despite all of that, there are places where arcades thrive. Galloping Ghost is the prime example, but Doc and Gerry very smartly skirt the biggest problem with the arcade business model. Barcades and FEC's work well, but the arcade games are merely there to serve as an attraction instead of the money maker (food/drink pull down the vast majority of revenue). Even in my location the arcades are something to help draw parents in along with their children. While the kids tend to poke around at the Pokemon crap, the adults are wanting to drop a few quarters into the games.
As an aside, this is a complete flip flop of most people's expectations. A sign of the changing times if you will.
So, what's to blame for the decline of the US Arcade. A lot of people want to pin it on console systems. Ok, you can pin it on console systems all you want. For a $100-$500 up front cost, then $60 a game you get to keep the game for as long as you want. Or you can play a one dollar game on your phone, often times it's Pac-Man or Donkey Kong (incidentally games that people keep asking for at my location).
Consoles may have stolen the thunder from arcades in terms of side scrollers (which don't really exist anymore) and fighting games, but arcades still reign supreme for driving, light gun, and other simulation type stuff. Plus Consoles tend to not involve as much social activity.
No, there's more REAL external problems facing the traditional arcade than just console games. I can think of a mishmash of a bunch of reasons, so here they are in no particular order.
I'll lead off with something I know Aaron Azunis (Editor of ArcadeHeroes.com and owner of The Game Grid Arcade in Utah), Henry Cen, and a few other operators have brought up repeatedly. The costs of running an arcade and customer expectations on price per play are so far out of whack that it's not even funny. People seem to expect every game to cost a quarter per play. I want to stress the word EVERY in that sentence.
Sure a quarter a play works nicely for games that just inhale quarters. I'm referring to games like Teenage Mutant Ninja Turtles and that ilk. A quarter a play is fine there. Where it doesn't work is if a game is brand new or at least recent. A quick pop over to BMIgaming shows a 42" screen snowmobile game for merely $7875! Wow, so cheap! Pac-Man Battle Royale cost around $4000 per unit. Street Fighter 4 units (in plural because you had to buy two and link them) were insane costing upwards of $10,000. New PIU machines go for around $9-11k (and Pump earns like crap in most US areas).
How in the ever living, unholy fuck is a location going to make those kinds of initial investments back a a quarter? Even the cheapest thing I listed (Pac-Man Battle Royale) would take 12,000 plays at a quarter to make that back. It's also worth noting that the average round of the game lasts around a minute. Games tend to go three or five rounds.
Whee, a dollar on average every four to seven minutes!
Now let's look at that PIU. I'm going to work with $10,000 as the price. That's FORTY THOUSAND PLAYS at a quarter a game with each game taking 5-9 minutes.
This also doesn't mention that a quarter now is worth nothing. When was the last time you were able to get anything not out of a candy vending machine for a quarter?
The cost of doing business is insane now too. Henry Cen has stated on video that the vast majority of his arcade income goes right back to rent (he probably doesn't make much profit, if any). The games at my location wouldn't remotely cover the rent. Hell, they barely cover the licensing fees we have to pay for them. I should also mention that Illinois has surprisingly reasonable licensing fees, and Joliet is marginally reasonable. The two licensing fees combined don't even add up to what another local town, or even Chicago used to charge per machine.
All of that is to say whatever town you're in doesn't have an outright ban like Orland Park, Illinois had until they allowed a Dave & Busters. Or if your city some strange rule regarding the number of machines in a location, similar to Brookfield, Illinois' limit of no more than 10-15 coin-operated devices in a single location (this being the impetus for Galloping Ghost running free play with an entry fee). Even Chicago has basically gone to not allowing any location to have an arcade game unless they serve alcohol on site.
When you put all of this together, you get a baseline that looks something along the lines of:
High initial costs, High operation costs, variable municipal rules, unrealistic customer expectations, fat chance of making money.
Honestly, my (really our, I have partners) location works well enough for what it is because all six games there were purchased for cheap, and had either earned all or the vast majority of their money back through conventions. We have the luxury of keeping our games cheap because they're not what makes the money in the store, we have ways of getting them to make a bunch of money in a short period of time, and honestly, what they pull down is already profit.
For reference, the location holds a DDR Supernova at .75 for 3 songs, a single Time Crisis 2 at .50 (this just recently went down), a Six Player X-Men at .25 for 2 lives, a House of the Dead at .50 for 4 lives, a TMNT at .25 for 2 lives, and a Marvel vs. Capcom 2 at .50 per player. A few people have complained that the Supernova price is too high, then said it should be a quarter for three songs. They were promptly told they should leave the mall the store is located in.
Of course you can look at people's expectations and the amount of money they're willing to spend all you want. It doesn't matter in a coin-operated situation when PEOPLE DON'T CARRY ANY DAMNED CASH ANYMORE. And before you try to call me out on this, I'm guilty too. I rarely carry cash at this point for numerous reasons.
This can be alleviated with credit card accepting changers spitting out tokens, or card systems, but those all cost a lot of money that locations may or may not have (again, a point for the Galloping Ghost business model). My group has been able to sidestep this with a mobile credit card reader, but some customers are still skeptical and they have a bad habit of not accepting pre-load cards or specialty gift cards for some reason. All of this doesn't mention that you're going to get dinged for credit card processing costs as well.
It also doesn't help that upkeep on a lot of coin-op machines in the wild tends to be utter ass. I know people that have operated (even in a temporary situation) who utterly refused to perform even the most basic of maintenance unless it was preventing people from dropping money into a game. The guy treated it as if everyone owed him money just for having the games, fuck if you could actually have an active start button so you could play the thing.
There's a few people out there who work at taking care of their games. I try to keep all of the games I'm in charge of in as good of shape as possible (though I admit I'm falling behind because of age and volume of games between my day job and company assets). Aaron Azunis spends a lot of time on Facebook going over his repair work. Doc at GGA has the herculean task of upkeep on 375 games. Game upkeep isn't easy, especially when something can go wrong and it can be weeks before you find out about it. Another problem with customer expectations, but I digress.
So, where the hell am I even going with this? What's the actual problem with the American Arcade as people remember it?
It's pretty simple, really. With inflation, customer expectations, costs of business, upkeep time and costs, people relying on credit/debit, the standard arcade method of coin-operation generally isn't viable as a stand alone business. Add in money from a bar, bowling alley, restaurant and things work. But coin-op in that instance only accounts for a minority of income.
This shouldn't come as a surprise, given I've mentioned this repeatedly, but Galloping Ghost really did sidestep nearly all of the problems with the old school arcade business model by virtue of Brookfield's limit on coin-op. I told Doc when we were in the location trying to get games up and running that I thought the business plan was brilliant and that GGA would essentially be the epicenter of an arcade resurgence. GGA does have other sources of income with food, drinks, snacks, and some trinkets for sale, but the majority of their intake is from admission to their location.
The fact the model has been copied numerous times in the two years they've been open proves I'm right. GGA opened at the perfect time to re-ignite the general populace's interest in arcades, and did it without the feeling of being nickel and dimed at a coin-op location.
Were I to open a location or consult on a location opening, I likely wouldn't even consider coin-operation as an option. When Gemini Arcade reopens in a new location, I would honestly recommend to Juli that they just use an all encompassing admission/free play setup. Or at least give it a shot as a special. I'd do it, but it's worthless with six games.
Ok, enough ranting.