The Future of Arcades: Profitsharing
It has long been lore that the American arcade experience is dead. It has also long been lore that this decline is irreversible, and stems from a cultural shift in players. No longer a place of social gatherings, the now solitary arcade lacks this soul. None of the above assertions are correct.
Looked at through less rosy glasses, the strength of arcades has always been in offering players a new experience, not in offering a shared one. While there were cultures of PacMan, Super Mario Brothers, and Q-bert players, arcades have traditionally been a distribution medium for new software, not a cultural medium facilitating communication. The lone guy with a row of quarters playing space invaders is a perfect example of this. Games in those days were single-player affairs on jamma-compatible boards, utilizing a 4 position joystick and two or (gasp) three buttons. Because such hardware was so expensive to own personally, people needed to go to the arcades to have the best play experience, and to play a wider variety of games.
Thanks to standardization, that is no longer the case.
During the NES / SNES period, arcade conversions were getting to be "good enough" that one didn't really need to go to the arcade to play excellent games. While the 2600 may have choked on Pac Man (and don't even bring up Q-bert), the Genesis could reasonably approximate NARC, and the SNES did a great job with Teenage Muntant Ninja Turtles. It was during this time that arcades transitioned from distribution centers to competition centers, thanks in no small part to the phenomenon of fighting games. The 4-player TMNT: Turtles in Time and the 6-player X-Men were all hits in the arcade, as were a plethora of multiplayer shooting games, fighting games, and car racing games (polygons were an arcade-exclusive back then).
But that changed with the Voodoo 3dfx and the rise of the computer as a competitor to the console, as well as the coming of networked gaming. Not only were computers capable of delivering compelling realtime 3D to rival (though not, at the time, beat) arcade gaming, but it also could connect separate players to people across physical boundaries. At first this led to neighborhood games of Bolo, later to direct dial-up competitions, and finally to the remote multiplayer frag-fests and Massively Multiplayer Role Playing worlds we see today. The anonymous instant competition with strangers of similar skill levels previously provided by arcades is now available right at your desk. Likewise, the graphical advantage once held by arcade machines has eroded to nothingness... To reduce overhead the machines are based heavily on existing console and computer equipment, which in turn leads to low acquisition costs and very low porting expenses, but leaves little to differentiate the two platforms. Add in direct competition with rental industries, and you have very little reason to go to the arcade.
The arcade does remain, however, and with one last, best reason. Hardware. Light-gun games, dance mats, digital batting cages, etc are prohibitively expensive for the average person to afford, yet can provide fun and unique experiences. Likewise, they are intuitive enough to be picked up and used without instruction by the casual or incidental gamer, the kind that is not likely to have access to many other distribution options at home (consoles or up-to-date graphics cards).
Sadly, as a distribution medium the arcade is faltering badly, in no small part due to the inefficient economic model behind it. 'Core gamers often go to the arcade looking for the "latest and greatest" in entertainment, but find perhaps one or two first run games, with a smattering of older games they don't wish to play. This would be like a movie-goer wanting to see Die Another Day, but only being able to watch Tomorrow Never Dies because the movie house couldn't afford to buy a new reel of tape from the studios. Game distributers still sell boards to the arcade owners, who in turn try to recoup their investment from the gaming public. This is a very inefficient way of going about making the highest profit, as the distributers feed from the arcade owners, who (in their financially weakened state) attempt to feed upon the customers. But it is the customers who bring money into the system as a whole, and it is they whom both the producers and the providers should be focusing upon.
For example, a Capcom vs. SNK machine may lay dormant in an arcade for most of a day while a Capcom vs. SNK 2 machine can still attract many customers per hour. As the difference between the two machines is largely software, and the software development costs are already sunk, what advantage does it provide Capcom if the arcade continues to provide the older game instead of the newer one? If Capcom were to enter into a profitsharing agreement with the arcade owner, the difference in the amount of quarters taken by the updated game could be split between the two parties to the betterment of all. Such profitsharing agreements are what allows Blockbuster video to have 20 copies of the latest movies available for rent... an arrangement that would have been impossible under the older 100-dollars-per-rental-movie paradigm. They realized that they should be looking for ways to maximize income from the consumer, not the business serving the consumer, and that they were in a unique position do to so because they were in an industry, like videogames, with high sunk costs and low materials costs.
If such an agreement could be struck amongst arcades and gaming companies, the consumer might return to the arcade as a "latest and greatest, premium" model showcase, just like theaters are used for today. Instead of being static, with few games coming in or going out, arcades could be dynamic new adventures for all comers. Instead of being irrelevant, arcades could be focal. Instead of hemmoraging money, arcades and the producers they partner with could return to profitability.
Are arcades dying out? Obviously. Are they an evolutionary dead end? Hardly. The next generation arcade needs to better equip itself to face the realities of business in an entertainment economy. And with such a change the industry could thrive.
We might even see a return of the great arcade culture.
Looked at through less rosy glasses, the strength of arcades has always been in offering players a new experience, not in offering a shared one. While there were cultures of PacMan, Super Mario Brothers, and Q-bert players, arcades have traditionally been a distribution medium for new software, not a cultural medium facilitating communication. The lone guy with a row of quarters playing space invaders is a perfect example of this. Games in those days were single-player affairs on jamma-compatible boards, utilizing a 4 position joystick and two or (gasp) three buttons. Because such hardware was so expensive to own personally, people needed to go to the arcades to have the best play experience, and to play a wider variety of games.
Thanks to standardization, that is no longer the case.
During the NES / SNES period, arcade conversions were getting to be "good enough" that one didn't really need to go to the arcade to play excellent games. While the 2600 may have choked on Pac Man (and don't even bring up Q-bert), the Genesis could reasonably approximate NARC, and the SNES did a great job with Teenage Muntant Ninja Turtles. It was during this time that arcades transitioned from distribution centers to competition centers, thanks in no small part to the phenomenon of fighting games. The 4-player TMNT: Turtles in Time and the 6-player X-Men were all hits in the arcade, as were a plethora of multiplayer shooting games, fighting games, and car racing games (polygons were an arcade-exclusive back then).
But that changed with the Voodoo 3dfx and the rise of the computer as a competitor to the console, as well as the coming of networked gaming. Not only were computers capable of delivering compelling realtime 3D to rival (though not, at the time, beat) arcade gaming, but it also could connect separate players to people across physical boundaries. At first this led to neighborhood games of Bolo, later to direct dial-up competitions, and finally to the remote multiplayer frag-fests and Massively Multiplayer Role Playing worlds we see today. The anonymous instant competition with strangers of similar skill levels previously provided by arcades is now available right at your desk. Likewise, the graphical advantage once held by arcade machines has eroded to nothingness... To reduce overhead the machines are based heavily on existing console and computer equipment, which in turn leads to low acquisition costs and very low porting expenses, but leaves little to differentiate the two platforms. Add in direct competition with rental industries, and you have very little reason to go to the arcade.
The arcade does remain, however, and with one last, best reason. Hardware. Light-gun games, dance mats, digital batting cages, etc are prohibitively expensive for the average person to afford, yet can provide fun and unique experiences. Likewise, they are intuitive enough to be picked up and used without instruction by the casual or incidental gamer, the kind that is not likely to have access to many other distribution options at home (consoles or up-to-date graphics cards).
Sadly, as a distribution medium the arcade is faltering badly, in no small part due to the inefficient economic model behind it. 'Core gamers often go to the arcade looking for the "latest and greatest" in entertainment, but find perhaps one or two first run games, with a smattering of older games they don't wish to play. This would be like a movie-goer wanting to see Die Another Day, but only being able to watch Tomorrow Never Dies because the movie house couldn't afford to buy a new reel of tape from the studios. Game distributers still sell boards to the arcade owners, who in turn try to recoup their investment from the gaming public. This is a very inefficient way of going about making the highest profit, as the distributers feed from the arcade owners, who (in their financially weakened state) attempt to feed upon the customers. But it is the customers who bring money into the system as a whole, and it is they whom both the producers and the providers should be focusing upon.
For example, a Capcom vs. SNK machine may lay dormant in an arcade for most of a day while a Capcom vs. SNK 2 machine can still attract many customers per hour. As the difference between the two machines is largely software, and the software development costs are already sunk, what advantage does it provide Capcom if the arcade continues to provide the older game instead of the newer one? If Capcom were to enter into a profitsharing agreement with the arcade owner, the difference in the amount of quarters taken by the updated game could be split between the two parties to the betterment of all. Such profitsharing agreements are what allows Blockbuster video to have 20 copies of the latest movies available for rent... an arrangement that would have been impossible under the older 100-dollars-per-rental-movie paradigm. They realized that they should be looking for ways to maximize income from the consumer, not the business serving the consumer, and that they were in a unique position do to so because they were in an industry, like videogames, with high sunk costs and low materials costs.
If such an agreement could be struck amongst arcades and gaming companies, the consumer might return to the arcade as a "latest and greatest, premium" model showcase, just like theaters are used for today. Instead of being static, with few games coming in or going out, arcades could be dynamic new adventures for all comers. Instead of being irrelevant, arcades could be focal. Instead of hemmoraging money, arcades and the producers they partner with could return to profitability.
Are arcades dying out? Obviously. Are they an evolutionary dead end? Hardly. The next generation arcade needs to better equip itself to face the realities of business in an entertainment economy. And with such a change the industry could thrive.
We might even see a return of the great arcade culture.
posted by Chris at
1:06 AM
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