I’ve just returned from the Amusement Expo International (March 26-28 in Las Vegas NV), and there was a lot of new products to see there. The traffic was heavy, and it stayed that way for both days of the show. This was a good sign for the industry: there’s a lot of interest out there, and confidence that people are craving out-of-home entertainment and experiences at a price they can afford.

I’ll have more to say about Amusement Expo in future columns. For now, one unique thing I observed casts some light on a subject I have been fully involved with over the past 20 years: point-of-sale cards for family entertainment centers and for street locations. These systems have been making serious headway toward replacing coins/bills and tokens in game rooms. I estimate that about 18% to 20% of entertainment centers (and almost all of the new ones) are using debit card systems.

The simplest POS system is designed as a straightforward way to pay for gameplay. The customer benefits from greater convenience in purchasing play time, and the operator benefits from not having to handle cash (reduces collection time and frequency), and from having an electronic record of transactions that do away with reading meters and counting coins. Note that for redemption games, the system also keeps track of how many points are on each debit card.

The original motive for developing a card-based POS for games was to retain the pricing flexibility that tokens provided while eliminating the tokens. Contrary to widespread belief, I don’t think tokens completely qualify as a “cashless payment” medium. What they do is transfer many of the drawbacks of cash to objects that aren’t legal tender, but do have some value outside of the facility (even though we always put “No Cash Value” on one side of each token). Tokens also offer advantages over cash: they provide promotional opportunities, they can publicize an operation – your name, logo, and website on one side – and they can work very well in pusher games if the operator merchandises this category of game intelligently.

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The industry narrative explains that tokens became prevalent when large chains attempted to gain a competitive edge by lowering the price per play. This might involve offering five tokens for $1, which reduced the play price to 20¢. However, some went overboard and offered 150 tokens for $20 instead of the normal 80 tokens. That kind of discounting continued and, in the eyes of many operators, got out of hand, leading to the “token wars” of the early ’80s.

I remember complaints from smaller arcade operators that the tokens sold cheaply by a big chain often worked in games run by the chain’s competitors, which had a negative effect on profits. I observed, at the time, that it wasn’t total loss for these competitors: those bogus tokens (as we called them) could be batched and sold back to the chain, and – more importantly  – they demonstrated that players preferred the complainer’s arcade, that was receiving the bogus tokens, to the chain location because his/her games worked better, and there was a better selection of redemption prizes that could be redeemed for fewer points. This was a merchandising advantage that could be leveraged: if people obviously liked your place better, you could give them more reasons to patronize it. Thus, VIP and loyalty programs were created.

Side story:  Tokens sometimes could be a blessing and a nuisance – as, in New York City, where subway turnstile tokens were the same size and weight as my game tokens. No wonder my bill changers would run out of tokens and few of the tokens ended up in my games! During the period in question, the subway fare was much more than a quarter; I think it was $1.25 (three times more, after 1981). Note that tokens at that time cost about 7¢ each, so selling four for $1 netted a 257% profit!

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Apparently, the NY Transit Authority noted they were getting thousands of foreign tokens, so they converted to a different size token. The other side of the story: the older subway tokens also worked in our games, and we had to sort them out when counting; they were not counted in the collection, so we kept them. I gave them to my employees, and also sold them to students at a discount for $1 each. Game operators, like myself, are true entrepreneurs at heart!

Service Calls Cost Money

Another problem is that tokens, like coins, would hang up and jam the coin mechs. This involved a service call, and those are expensive. A street cigarette vending operator from that era calculated that it cost him an average of $65 to send a technician to fix a jammed coin mech. I did that same analysis for the games industry and calculated the cost to be an average of $25 per service call. (Does this mean that the vending industry paid higher salaries or that the cost of sending a vending truck out is much more than sending out a high-mileage car or motorcycle?)

I used to give my locations the keys to the games, so they could take care of coin jams by themselves. Sure, tokens sometimes got stolen – there always was some shrinkage – but that cost was much less than sending out a technician.

For these reasons, moving to a simple magnetic stripe card to which the patron adds value at a charging station was attractive, especially in a larger game room. It’s become even more attractive as the POS developers have made it easier and easier to manage promotional pricing, keep track of redemption points won (saving the cost of tickets ), conduct loyalty programs and serve as a single payment medium for games, other attractions, food and beverages, and even amenities like lockers. All this reduces pilferage and the cost of collecting, moving, sorting, counting and loading small items – and creates opportunities for merchandising. As card systems transition to apps running on patrons’ smartphones, more possibilities open up.

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We can complain about all the ways in which things are worse than they used to be, but we need to recognize the ways they’re better. How much better they can be, for both you and your business, is entirely up to you.

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Vending Times – April/May 2019