The bowling industry has “awakened” to the fact that redemption (ticket dispensing) games have been earning five times as much as video games. Redemption games now account for 70-75% of the total game revenue in leisure facilities that have incorporated redemption games (merchandise dispensing games are averaging approximately 15% and video 10-15% depending on facility style). The potential game revenue of a bowling center can be easily calculated:
Attendance x $4.00 per capita = potential game revenue
About 80% of bowling centers are having their games supplied by a game vendor on a revenue-share basis. A huge majority (95%+) of these game vendors supply video, novelty and merchandise dispensing machines (cranes) but have chosen not to get into redemption games. That means that it is up to the bowling proprietors to start the ball rolling if they wish to average above $200 per week per game or are happy with a score of $40/week/game.
Redemption Games 101
There are several familiar excuses bowling center operators use for not jumping on the redemption bandwagon:
- “We don’t have any space for more games.”
- “We can’t add a redemption prize center to our bowling desk.”
- “Our 10 games earn $400 per week—isn’t that a lot of money?”
- “Our pro shop needs to occupy the top revenue generating space up front.”
- “My manager needs a big office in our prime space to keep all of his/her paperwork.”
- “Our pool tables used to make a lot more money before the smoking ban.”
The solution has arrived in the form of the completely automated self-contained redemption prize center!
Two of the most popular models are Tickets to Prizes by Benchmark Games and The Prize Center by Smart Industries. [3 years after this article was written BayTek released their new Prize Hub automatic redemption prize center. See my comments after this blog post concludes.] Customers insert their redemption tickets, their points are totaled, they choose their prizes, the items are dispensed, and customers’ points are automatically deducted.
At the end of the transaction, each customer either receives tickets for any remaining points (Tickets to Prizes) or can get a numbered receipt for future use (The Prize Center).
“The video game business is all but dead,” says Al Kress, Benchmark President. “Today’s customers want instant gratification and something in return for the money they spend on games. If you have 300-400 square feet you are ready to start. We have built Tickets to Prizes with a depth of only 36 inches so it can fit up against any wall in your center. We give back actual tickets for any remaining points because we know that putting tickets into a customer’s hand causes them to go back and play more games.” Tickets to Prizes retails for approximately $15,000 (including freight).
Bay-Tek, another top redemption game manufacturer has teamed up with Benchmark and both companies provide an 8-Game Package and a 12-Game Package that includes Tickets to Prizes and $1,000-1,500 worth of prizes and about $100 worth of spare parts for each game purchased.
According to Todd Louthian, Bay-Tek’s National Accounts Manager, “Bowling centers have little to no experience with redemption or the coin-op industry. We wanted to make sure that each center receives the proper number of play value games, quick coin games and children’s games so the customer receives as much entertainment value as possible. For example, an alley game is instantly recognized as a ticket redemption game.”
“Tickets to Prizes opens up new locations for redemption that weren’t there before,” adds Louthian. “Many facilities don’t want to staff a redemption prize counter. I approached Benchmark because even though they make great redemption games, their lineup isn’t deep enough to cover the needs of a well-balanced 8-12 game set-up. Between our two companies, we have this aspect completely covered. In addition, the service is much easier as the game parts are basically interchangeable and the troubleshooting features are very similar. Our goal is to make the lives of the proprietor and the bowling technician easier by eliminating a lot of the headaches.”
The Smart Prize Center promotes itself to entertainment center operators as “The most valuable employee you can get!”.
“We originally started with a bulk vendor and nine-coil system, but operators wanted more selection for smaller prizes,” says Jim Dupree, VP Sales for Smart Industries. “So we expanded the coil vending options to a 12-coil, 16-coil and a 22-coil vendor. Our system is modular so it can be expanded. For around $12,000 we offer the Master Cabinet and two additional coil vendors or a bulk cabinet (holds 900 one-inch capsules) and a coil vendor for a total of 4,000 prizes.”
Dupree also believes the database feature could help bowling center operators. “If there are tickets left over, the customer receives a printed numbered receipt,” he says. “At a later time, a customer can bring one or more of his/her receipts back and enter each receipt’s five-digit alpha-numeric code into the Prize Center to claim the ticket value. This is a way to manage customers saving thousands of tickets for the larger prizes and creating more repeat customers.”
The Hands-off Approach
George Loucks of J&G Vending, Johnston, N.Y., uses six Smart Prize Center modules to help run his non-attended 1,400 square-foot redemption game center inside a mall. He has also installed 16 digital cameras so he can watch his games on his home computer. Loucks has installed large prize display showcases with signs that let customers know if they want these big prizes, to come in on a certain day and time.
“My 14 redemption games have been averaging from $3,000-3,500 per week,” reports Loucks. “The total for all of the games is approximately $5,000 per week so I am very happy about my redemption game revenues. I have been redeeming an average of three flat-screen TVs each week. Glider airplanes and fans are the most popular prizes.”
The success isn’t limited to stand-alone game centers. “By the way, I have also placed another Smart Prize Center in a bowling center where the seven redemption games have been averaging $1,300 per week consistently,” says Loucks. “My only problem so far is [that] I could use a hand-held device to punch in the customer’s receipt codes when they want a large prize from the overhead window display that is not a part of the Prize Center. For now, I have to do it by hand.”
David Katz, President of Bonita Marie, a well-known merchandise supplier with 18 full-time people committed to this movement toward automation, is very excited about the automatic redemption centers. “This phenomenon is like the American industrial revolution and the Model T Ford that permitted every family to own a car,” he says. “This is the ‘prize revolution’ that allows every location with enough traffic to now have a redemption program.”
“Game operators and facility owners don’t have to choose the prizes,” says Katz. “We have set up the ordering by ticket value from 25 points up to 2,500 points. Our patented hanging device makes sure that none of the prizes get hung up and don’t fall properly. This is a major feature of what makes the entire process successful.”
First State Lanes in Wilmington, Del., recently installed a Tickets to Prizes center. The seven redemption games initially grossed $1,000 per week when operated on quarters.
After some additional debate, the games were switched over to tokens, so that tokens could be included as a part of the birthday party and group packages. “The redemption game revenues range from six games doing $2,500/week to 40 games doing $5,000/week,” says proprietor Dave Katz. “One of the big bowling chains already has 18 Tickets to Prizes. My best estimate is that more than 130 units from Benchmark and Smart are already in the field and many thousands will be sold over the next couple of years.”
Doing The Math
To justify the purchase of an automated redemption prize center, let’s assume that one unit is being financed over a 60-month period at a total cost (including interest) of $20,000 ($4,000 per year or almost $80 per week).
Let’s assume that the prize center is taking care of eight redemption games. One could look at this as each redemption game covering $10/week.
If each redemption game generates $200 per week with an average ticket payout percentage (cost of sales for prizes) of 25% or $50, that leaves $140 per week net gross for each redemption game. This is found money.
If a game vendor is involved, perhaps this $10/week can be deducted off the top of each redemption game to pay for the prize center. If the bowling center purchases the prize center, the center’s cost would be $80 per week.
An ideal scenario could also involve the bowling proprietor and game operator splitting the financing cost of a prize center, whereby both parties own half of the unit and also share in the costs of repair parts.
My prediction is that within a year or two, a majority of the bowling proprietors who use the prize center as a stepping stone to get into redemption will want to expand their redemption game operations and move on to operating a staffed redemption prize center. When that happens, the market will certainly be ready to absorb the “used” prize centers that can easily be sold for a few thousand dollars less than their original purchase price.
There are always game vendors and location owners who must wait a couple of years before making a buying decision to make sure that this isn’t a fad.
I have been involved in operating redemption games for 40+ years. With less than 175,000 redemption games currently operating in the U.S., my guess is that we have just seen the tip of the iceberg and the redemption game market will easily triple in the next decade.
Bowling Center Management – Entertainment Center News (Spring 2008)