STRATEGIC PARTNERS
A new batch of Internet-enabled amusement machines has been launched in the past year in Europe, prompting competitive excitement and questions in the kiosk industry.
February 18, 2002
BRUSSELS, Belgium -- It is a trickle that has become a flood, and it has implications for the kiosk industry. Every significant video amusement machine manufacturer in Europe has launched a network-enabled product within the past two years.
The benefits for the gaming industry are compelling. Games and other content are kept fresh through the network. Player loyalty is increased through multi-site tournaments with player rankings and prizes. A new generation of players can be attracted through Internet and mobile-based services.
The challenge for the industry has been how to achieve all of this with scaleable and reliable solutions, compelling content and attractive packaging while at the same time generating an acceptable return on investment.
For the kiosk industry, integration and cohabitation with the gaming industry boils down to two basic questions: How and when.
Machines and kiosks
The amusement machine industry is very large and includes many categories of products - pinball, video games, and pay-per-use games of chance. Games of chance include coin-operated gaming machines with touchscreens that allow the user to play trivia, card, and other games. Most of these games are installed in bars or video arcades.
The use of the Internet keeps content fresh, offers varied types of entertainment, and keeps track of cash intake and machine performance. The savings and potential for increase traffic mean the games can be profitable over a longer period of time.
The convergence of Europe's amusement and kiosk industries has not been lost on some of the best-known technology providers in both industries.
Companies such as NetShift Software Ltd. and Elo TouchSystems Inc. are leveraging their positions in the kiosk industry to successfully enter the amusement market. Similarly, 3M Touch Systems is leveraging its position in the amusement industry to successfully enter the kiosk market.
Among other technology companies, ePoint has won projects in both the kiosk and amusement markets.
Identical twins?
One key to convergence is the practically interchangeable nature of kiosks and amusement machines. Most kiosks and gaming machines alike feature enclosures, interactive displays, graphical user interfaces suited to touchscreens, multimedia capabilities, computers, and network connections.
However, this is about where the similarity ends.
Who's who in gaming A list of leading amusement game manufacturers in Europe and North America:
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Content is significantly different, locations are different, and ruggedness requirements are different. Games tend to include proprietary hardware/software/network platforms to handle coins and notes and to copy protect games. Kiosks tend to have a more open architecture with improvements for user interface security, transaction security, remote management, and delivery of updated content.
Another important difference involves scale. The amusement machine industry deals with significantly larger volumes than the kiosk industry. According to Intergame, a trade publication for the amusement industry, there were about 217,000 touchscreen games in Europe in 2000. Given that the average lifespan of an amusement machine is just under three years, that means 70,000 or more games would have been installed during 2000. By contrast, in Germany, considered one of Europe's leading kiosk deployers, 11,120 kiosks were installed during 2000.
Formulating strategies - part one
The key to convergence could focus on how the amusement industry approaches the Internet access segment of the kiosk market. Two leading European game manufacturers, funworld AG and Leisure Link Group Ltd. are already eying that market.
In 1999, funworld became the world's leading producer of touchscreen games, a status it still enjoys. By focusing on strong content, customization by country, and a reliable hardware platform, funworld is currently producing more than 30,000 terminals annually.
Beginning in 1998, funworld established its fun.net and fun-dot.com operations. These groups link the company's Photo Play terminals into an international tournament system and execute major projects requiring custom applications and integrations. After three years, funworld has 11,500 networked machines with about 610,000 registered players.
The company views the network as a strategic tool to develop a global amusement brand and to have direct contact with the players. Prior to the network, Photo Play players interacted with site owners and operators, not with funworld itself.
Early last year, funworld launched its Touch2Web terminal. Originally launched with e-mail, news, and Internet browsing capabilities, Touch2Web is being marketed by fun-dot.com as part of a turnkey solution approach for kiosk projects. Company officials would not discuss how many units have been shipped, but said the biggest challenge in 2001 was solving ISP problems. In 2002, funworld plans to add telephony services.
Photo Play and Touch2Web inhabit the same technology universe, but take different approaches, according to funworld public relations manager Ilse Retzek.
"funworld positions its Photo Play terminals as 80% games and 20% communication and information," Retzek said. "The Touch2Web initiative is positioned for 80% communication and information and 20% games. We have a lot of excellent, positive content in our systems and we are extending our Positive Games concept into the online environment and to mobile telephone networks."
Formulating strategies - part two
Leisure Link is the UK's largest operator of amusement machines. They manage more than 90,000 pay-to-play units in more than 30,000 locations. This is approximately twice the size of their largest competitor, Kunick PLC.
In January of 2001, Leisure Link launched the itbox, a next generation game based on a touchscreen/PC/Windows platform that accepts coins, notes, and cards. Network connectivity via ISDN or ADSL and an advanced server-side infrastructure are integral parts of the design. The end result is an amusement game with the technological niceties of a kiosk.
"One of the key benefits of the product are its choice of content, including games, SMS messaging, videos, multi-site tournaments, and new ringtones and screen logos for mobile phones," said Chris Simon, Leisure Link marketing director. "The other key benefit is the technology platform, both hardware and software. These features are attracting new players and reducing cost of ownership which serves the interests of both the operator and the site owner"
About 1600 units have been installed in pubs and clubs with a further 400 sites on a waiting list. Players have been willing to pay per-minute charges of about 75 cents. The games are expected to take longer to reach profitability because of the equipment and infrastructure, but the longer life of the game is expected to create greater long-term profitability.
While the project has met its goals, it faces continuing challenges, particularly on the remote management side. The machine's event logs are pulled only overnight, so Leisure Link's goal is to get closer to real-time performance management to optimize reliability.
Plans for 2002 include deploying up to 4,000 additional units, and invest in additional content. The platform has already been adapted to provide a different feature set for 100 licensed betting offices in the UK. Simon sees this trend continuing with new itbox versions developed for different sites. He also sees the content platform eventually becoming independent of the game equipment itself.
"itbox will become its own form of branded entertainment as it delivers a consistent, high-quality player experience and moves to other platforms and locations," Simon said. "After this first experience, we will be investing in our own content creation capabilities. This is the only way to realize long term value from a new entertainment medium."
What it all means
Both funworld and Leisure Link are focused on creating a new type of branded entertainment and envision networked entertainment as a way to increase the numbers of locations where people play, lower installation and maintenance costs, and attract a new generation of players.
Both companies have a strong penetration in pubs, clubs, and arcades and these locations remain their primary focus. The networks they have created allow them to get closer to their players, but the games must continue generating revenue for site owners to remain viable.
But in some ways, the games they are creating will stand aside, rather than compete with, traditional kiosks.
Because of the high margins necessary for profitability, requiring the machines to charge 75 cents a minute, it is unlikely these games will compete head-on with Internet access kiosks for customers.
And Internet kiosk operators have found it difficult to exist in the environment that works for amusement machines. A French company, Webfinger, tried installing Internet access kiosk in pubs throughout Europe, but went bankrupt.
Leisure Link, while developing a sophisticated entertainment technology platform, has resisted the temptation to expand its business opportunities in order to focus on its core business.
"We are actively seeking further opportunities to expand into other sectors utilizing the core technology and content from the itbox platform," Simon said "It remains to be seen whether this will include a major push into traditional kiosk applications."
But funworld is willing to go farther, branching its core entertainment games business into payment-accepting, self-service devices similar to kiosks, such as Touch2Web. Time will tell what sort of impact a manufacturer such as funworld can have on the European kiosk market.
