David Snook discovers how licensing, piracy and the need for endless choice is shaping today's jukebox industry

The jukebox is a better long-term investment than an AWP machine. The same thing can be said of the pool table, or in some countries, the electronic darts game. It may sound like a startling statement, but in fact it is simply a comparison of incomes and life-on-site.

There are jukeboxes still in operation around the world, which are 25 years old - no AWP is going to compete with that. Yet the device is still regarded as something of a ‘Cinderella’ product, often dismissed as an ancillary to the business and something of a specialist machine to operate.

In reality, the complexity of installation is a historic argument, designed as an excuse for avoiding the necessity to set up the organisation to operate jukeboxes. They do require some new and unique procedures, it is true, but the jukebox today is nowhere near as work-intensive as it once was.

"The modern jukebox is far easier to install than 10 years ago and floor space required has been cut drastically because there is no longer a need to store CDs and records," said Siegfried Dattl Jnr, managing director of TAB Austria. "Machines are lighter and therefore easier to transport and contain fewer moving parts."

TAB has made considerable impact with its Max Fire jukebox introducing elements to simplify handling - the machines are smaller and more practical with low-maintenance and with the Online Music Shop, players can download directly.

"There is an increasing trend towards jukebox operating because they are so versatile, always up to date, can play music or videos and we find that operators run Max Fire alongside our other machines such as the Silverball terminal or the Fun4Four amusement poker game as they don’t compete."

What makes Max Fire an even better return on investment, says TAB, is the additional features and back-up which comes as standard. Access to the latest international charts coupled with easy online terminal management and the ‘music to go’ download feature, are designed to win friends among operators and players.

Numbers are, of course, obscure, but those who know the industry reckon that there may be around 600,000 jukeboxes in operation around the world, half of that number in the US. Of those, perhaps 40 per cent are digital, meaning that they download content directly from the internet and that means that hundreds of thousands, or even millions of tracks can be installed quickly and easily.

So why aren’t more jukeboxes digital? The answer is a combination of costs and legislation. Performing Rights, the bane of jukebox operation in many countries, is never a standard rate. It varies from country to country and that often precludes the operation of jukeboxes at all, or suppresses technology. In Denmark, for example, there are fees of about €0.50c for every track a jukebox can carry. A digital box, therefore, with multitudes of tracks, becomes impossible to operate.

However, opinions within the jukebox content supply market are solidly behind the view that licensing, whether from Performing Rights or through creative organisations are only part of the problem. They see a need for the entire industry to remodel itself.

Simon Davis, from music provider Soundnet, which offers content for over 12,000 boxes in the UK, Ireland, Spain, Italy and France, agrees that long-term jukeboxes are a better investment than AWPs. "But the real barrier has been perception, not licensing. Yes, the licences are expensive and occasionally inflexible, but among the top-end sites there is good money to be made from jukeboxes. The problem is persuading an operator who hasn’t dealt with jukeboxes for 10 years, that digital is a wise investment.

"In mainland Europe, jukeboxes have always been auxiliary products. Vinyl and CD boxes were successful in France but the removal of gaming has severely weakened this market. In Italy and Spain jukebox penetration has always been limited and in Germany there is almost none."

Davis believes that the job of content suppliers and manufacturers is to rebrand the jukebox by introducing new features to permit jukeboxes to be sold as entertainment products suitable for any venue in any country. "We are not worried about music pirates; we can always see them coming - they have parrots on their shoulders."

Wayne Hall from another content supplier on the other side of the world, SBA Music in Australia, has more serious licensing problems. "I believe that in Australia we are experiencing a final attempt by the record industry association (ARIA) to get what it can out of the legitimate licensed content suppliers by trying to tie licence fees to non-music elements of the jukebox, such as hardware rental. All of this is against a background where the piracy association - of which ARIA is a part-owner - sits by and does nothing."

Australia is largely not digitally online with its box content and generally companies like SBA Music are facing dubbing or reproduction licences rather than Public Performance licences. "Globally, in mature, licensed markets, two dubbing licences are required, a publishing licence and a recording licence. The latter gets the attention because it is usually around two to three times the cost of the former.

"Short-term this fee is a really destructive action by ARIA because it has the potential to add significant costs to the content, sometimes doubling the music program fee, which in turn squeezes the operator’s margin or results in piracy."

But Hall believes that in the medium-to-long term, the smart content operators will come up with a new supply model where the recording and dubbing licence fees to the record company are remitted directly to the owners and the associations either lose their collection business altogether or adjust.

"If we can get through this period alive, I am optimistic that there will be a downward adjustment in licensing fees and coupled with extended territory, licences will become available from the record companies."

Hall believes that the value of music has fallen as a result of digital downloading. "Record companies acknowledge this off the record and will soon reflect it with lower pricing in the consumer market. This may have some benefits in the business-to-business market."

He believes that manufacturers must begin to build more user-friendly features to add value for the content supplier, operator, venue and user. "It has taken them far too long to integrate simple, cost-effective digital signage and Bluetooth modules for advertising and downloads. Aside from giving the operator greater site security and revenue, this would provide the content supplier with serious bargaining power when negotiating licence fees with the record companies."

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This is where the UK’s NSM Music steps in. For general manager Martin Agabeg the introduction of value added features and diversification are the way forward for its jukebox business. "You Tube was added to the new Icon 2 box earlier this year and coin drop in many venues has increased phenomenally. The new Icon Apollo jukebox, with its Samsung 40ins LCD monitor as well as access to profitable advertising opportunities is another example of adding value to the product mix."

Then there is the cost of conversion. A CD box, still numerically the majority on the global stage, may not be an economic proposition to replace - the site would not support the new technology. This is often frustrating for the operator, as they may struggle to convince a site-owner that investing in a digital box would actually result in higher income and therefore justify itself.

It is also frustrating for the manufacturers, of whom there are surprisingly few. The big producers - I use that adjective judiciously, as they might all be ‘serious’, but we are trying to get at those which are substantial - number less than 10. In the US there is Ami (Rowe) and TouchTunes; Austria has TAB; and the UK has Sound Leisure and NSM. After that you are down to dedicated, but small outfits such as Ireland’s Almotech and the UK’s Jaybox.

This is not to say that these small outfits are any less involved in the industry and their presence could be considered a healthy trend - the arrival of fresh thinking -adding a further dimension to the business.
Jaybox has its own online digital box, which may be free-standing or wall mounted and Richard Elsy, sales director at the company, has been particularly active in the UK market with his company’s products, running presentations and seminars and is keen to make contacts outside of the UK for the product.

For Almotech’s Brian Costigan, having just completed a UK tour, there is a growing confidence in his company’s products.

"We’re not the largest jukebox manufacturer but operators are more readily accepting that we make a high quality box with software second to none."

"I know the CD market well," continued Costigan, "having a background at Sony Disc and Digital Corporation we made about 20 per cent of the world’s CDs but I have no doubt that in jukeboxes it is all about customer choice and that means at least 100,000 selections. The CD box may still be in the market place but as a general format, CD is dead because of the limited repertoire."

Costigan believes that operators should invest in digital jukeboxes simply because of the return on investment they will receive. "Cashboxes will receive a minimum 50 per cent uplift immediately."

You are also down to what are often referred to as rogue manufacturers, people who put out a few jukeboxes without any reference to Performing Rights, unlicensed products and therefore illegal products. This puts an unfair pressure on the legitimate manufacturers, which are at a distinct disadvantage. But Performing Rights itself doesn’t help through its patchy policework, varying from country to country, both in rates of dues and in ensuring complicity.

"We all want to see the jukebox industry expand," said Sound Leisure managing director Chris Black (pictured below), "and we all want it to be legitimate. There are areas of the world where there is potential which is largely untapped, yet for a variety of reasons, mostly licensing issues, it is very difficult to penetrate those markets."

He would point out that in Eastern Europe, an industry, which remains comparatively young, sees a handful of producers ‘assembling in their garages’, which often put out reasonable product, but without worrying about licensing or other issues, such as safety certificates. "They may be perfectly safe," said Black, "but they don’t have the piece of paper to prove it; and have no intention of getting it, because of the cost involved."

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Should these manufacturers be in business at all? Or should they be encouraged to help the industry expand? "A difficult one….part of me objects to the absence of standards which makes it impossible for me to get into, Poland for example. Another part of me takes pleasure in seeing new manufacturers help to open up new territories."

Licensing, says Black - and most of the other producers - remains the single biggest issue and they all despair that Performing Rights will ever manage to unify dues across the world - and at an affordable rate. Beyond that there are geographic issues. The Asian market, for example, remains difficult because of the difficulty in overcoming localised issues, such as music content from that region (and therefore licensing problems), getting music producers involved, programming boxes into a multiplicity of languages and technical issues over screens. In fact, in the days of CD boxes, the lower grade of technology involved made operating jukeboxes in Asia and Africa easier.

Not so in other parts of the world, however. With half of the market in North America, significant points are made by John Margold at Ami, who makes a compelling case for the relative economics of CD boxes against digital. "Operators upgrading to digital find the improved sound from better installations and better technology attracting plays of 50c and $1."

He also does not see licensing fees as a major problem to the industry, telling InterGame: "We have always had them. Before digital jukeboxes the fee was buried in the price of the CD, so an operator paid $16 for a disc that cost 80cents to make. It was part of the cost of doing business.

"Today’s fee structure is actually more fair to the operator," he continued. "If a track generates a lot of play the fees associated with it are higher - it’s a kind of pay as you go system.

"Most operators I talk with in the US don’t use the words problem and jukebox in the same sentence," he continued. "The return on investment is quite good, the hardware is reliable and will last for five to 10 times longer than break-even point. If the cost is $5,500 and the operator’s share after licence fees and the location’s split is $80 a week, it will take less than 18 months for the original cost to be returned and a jukebox will run for 10 years."

The problem, he says, is finding good locations at a time when most states have introduced smoking bans in public places, including bars and taverns. "This has hurt the traffic in locations. People don’t stay as long and that has an effect on the location’s profitability and the coin drop on amusement devices."

But for all of the problems of the industry, the jukebox remains the product for the coin-op sector with some heavyweight advantages. It is totally non-controversial virtually all over the world, it offers universal entertainment, lasts infinitely longer than most other forms of coin-op, can help to fill a location - or clear it, if your compilations are wrong and basically offers long-term, reliable return on investment.

And in times when the global gaming industry is suffering from the recession the jukebox could become an increasingly attractive investment to cabinet designers out there, with Taiwanese manufacturer Weche being one of the first to sign up. For the company’s Vincent Lai, developing products suitable for non-gaming countries is certainly something it is considering in these trying times. "We are hoping to start providing products in areas like the Middle East where gaming is not allowed," he said.

The challenge for the industry is to overcome the next three-to-five years. The whole world of music provision is changing in terms of how the entertainment is presented. The end user now has a host of options open to them through the internet and it is unquestionably time for the licensing side of the industry to get real and move with the times.

No-one wants music piracy except the pirates, but there must be more flexibility in the way that licensing works - for everyone’s sake. This is the view of all of the jukebox manufacturers currently engaged in providing the means to distribute the content in places where people congregate socially.

Soundnet’s Davies believes that the job of content suppliers and manufacturers is to rebrand the jukebox by introducing new features to permit jukeboxes to be sold as entertainment products suitable for any venue in any country. After all, as Siegfried Dattl Jnr sees it: "A song is worth a thousand words - so if you have something to say, say it with a song."