As the country prepares for its new gambling scenario, huge opportunities are opening up in the rest of this massive nation for coin-op operators...
The Russian gambling market may currently be in a state of non-existence but the same story cannot be told of the country’s amusement market. As casinos are shut down in preparation for the four gambling zones in 2009, great opportunities are being presented for the coin-op amusement market and it would appear there are both the demand and the locations for it to expand successfully.
A lot of the amusement arcades in Russia tend to be filled with either video simulators or have a strong focus on redemption products and target a much younger audience. This is mainly down to the history of the Russian entertainment market, which goes back to the imports of second hand video machines into the country.
Video games dominate the ‘80s
From the mid 1980s through to the late 1990s the Russian entertainment market was dominated by video games. Occasionally, players got new inexpensive equipment such as air hockey and crane machines, but it was Star Galaxy that brought the most significant change to the coin-op market with the introduction of redemption machines for children.
Russian customers are today financially better off than they used to be, there are more shopping malls being built and networked entertainment operators are emerging, which in turn has increased the demand for larger arcades within shopping malls.
According to Anna Trubetskaya of Fair Play, apart from family entertainment centres and arcades, amusement machines are most likely to succeed within shopping complexes. She said: “Entertainment equipment tends to be located in places where there is an established infrastructure and they provide additional revenue. Therefore as a rule serious investment is not required in these locations. About US$30,000 would need to be invested in a centre in Moscow and about $15,000 in a regional centre.”
The difference in investment stems from the fact that there are over 100 entertainment centres devoted to children’s amusement equipment in Moscow, meaning the competition is tougher. Operators need to invest in the more modern games and the equipment has to fall in line with the interior design of the entertainment centre. An operator in a small town however, does not need to invest so heavily as visitors will happily play the older versions, as they do not have the choice available to them, as they would do in Moscow.
“The development of arcades and FECs in Russia is continuing in all the major cities all the time and there will be even more opportunities when the gambling machines are banned from street locations,” added Trubetskaya.
Some of the main players within the Russian coin-op market are Namco, Sega and Konami. Kjeld Erichsen, international business development manager for Namco, told InterGame: “Manufacturers and operators of gambling machines are now turning to the amusement market and expanding their business. The ban on gambling machines has had a positive affect on the amusement market and is creating a lot of extra business for companies.”
He added: “Operators are moving away from second-hand machines and investing their time and money in newer arcade games. Video games tend to be very popular with players and the driving and shooter games do particularly well.”
Legislation and tax
One thing amusement machines have in common with gaming machines at present is that redemption games are subject to the same taxation rates as gaming machines, which has left a lot of people within the industry very confused.
“The legislators didn’t think about entertainment devices with non-cash prizes,” said Trubetskaya. “Owners of these machines have therefore suffered and the demand for things like cranes and other similar equipment has declined.”
According to Erichsen, there are also plans to create a Russian version of the CE approval, which could bring changes to the market again. It is expected, however, to be to a lot lower standard to the CE approval that currently exists.
Erichsen addded: “I expect it will be very difficult to make any changes within the market over the next five years and it is impossible to predict what state the market will be in, in 10 years’ time.”
However, Trubetskaya told InterGame: “Over the next two years the number of machines is most likely to grow and it will at least double, mainly down to the creation of gambling regions. Cities where there are between 100,000 and 500,000 people usually have two or three cinemas and discos, two parks and a large shopping complex. I would expect that a city of such size would have no more than 10 amusement venues, with five to eight machines per venue. In 10 years’ time I expect there to be more than 5,000 entertainment simulators and almost half will be in Moscow.”