When there is risk, there is opportunity... That's how the old saying goes and never has it been more true than in the case of the Hong Kong amusement arcade industry.

The TELA (Television and Entertainment Licensing Authority), which is responsible for licensing arcades and approving all kinds of coin-operated machines that are permitted into the territory, perhaps now feels that it bit off more than it could chew when it declared war on touchscreen poker and strip games in 2003.

In short, it lost. And the risk by the arcade operators of Hong Kong opened the door to a wealth of new product going into the territory’s 400 game centres.

Hundreds of pushers, baccarat games, blackjack and slots are now installed alongside the conventional amusement games. Even without any type of cash payout or prize, these games have proved to be a huge success, drawing in new players and increasing cashbox returns. More significantly, they have helped the operators to combat the competition from internet cafés and bars.

Games in amusement-only locations such as family entertainment centres are examined for compliance with the Control of Obscene and Indecent Articles Ordinance and with the Gambling Ordinance, which used to just apply to games for adult game centres.

Basically, therefore, if it is clean and doesn’t give prizes, then it should be ok. The Chinese authorities have done nothing to interfere with the way in which TELA works and the industry is administered.

Interference with the industry is not something, which has bothered the Hong Kong amusement centre operator; what they are bothered about, however, is the same set of issues that bother all arcade operators such as escalating costs of amusement games, falling cashboxes, competition from home games and internet cafés/bars.

To make a difference and to retain customers, dedicated arcade games were essential, even if they come at higher costs. For the smaller location - and there are many of these in Hong Kong - the cost:profit equation is a continuing headache. In 2000, when the industry was at its lowest point, the business was rescued by touchscreen games. It was a short step from there to poker games and strip poker games in those touchscreen units and some found it irresistible.

The crunch came in 2003 when the TELA took a case to court. It wanted a clear ruling on the legality of touchscreen gambling games. It failed and opened up a new page in Hong Kong amusement game history. It was successfully shown that gambling was not a part of the touchscreen games as no bet was laid and no prize was given. There was therefore no breach of the Gambling Ordinance.

It naturally followed that the industry made the most of the resulting opportunities. In came big gambling names, correctly configured to zero payouts with no cash value, of course.

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Konami’s G1 Winning Sire was an instant hit as a horse racing game, perhaps because horse racing is the only legalised gambling activity in Hong Kong. In came more machines, pushers from Japan and slots from Taiwan.

By 2007, hundreds of gaming machines were installed in a Mongkok game centre, MK88. It was the first game centre, which was to aggressively change its character from an amusement arcade to a ‘casino.’ It presented players with an entirely new experience, set on two levels and operating until 2am. Thousands visited MK88 each day and continue to do so.

The future was set. Amusement arcades were supplanted by lookalike casinos.  Almost half of the game centres in Hong Kong now have gambling machines without cash payouts. If a centre has 100 machines, 80 will be gambling devices and 20 will be amusement machines.

This transfer of accent from one type of product to another has led to increased costs for the operator as it is all new investment, as well as importing the technical and systems support. The machines are token-operated so the maintenance costs are higher as there is a demand for more technicians. The metal tokens themselves, at a cost of just US$0.25, are nevertheless another cost element that was not there before.

That cost is for steel tokens, which are easily faked, but copper and stainless steel tokens are also available. No cash value, but players love the sound and excitement that the tokens bring when the ‘reward’ is being paid.

The tokens are all customised to the location, meaning that they are not transferable to another location and it is against the law to take them out of the centre. Locations have tried to help in this area by issuing ‘savings cards’ on which token values could be collected for another day, or even a hi-tech fingerprint system to facilitate token savings.

Automatic change machines to convert cash into tokens are also used in the locations. China is these days considered a prime source of all things coin-operated.

At first, gaming machines were imported from other countries, including Taiwan and Japan but some game centre operators in Hong Kong banded together to set up their own development team to work on their behalf in China.

The baccarat game was the first product of this co-operative scheme and the final product is very similar to the baccarat games popular in Macau. That has been followed by a slot game, Three Kingdom Spin, with cabinet and PCB made in China and the game design coming from the Hong Kong operators themselves. It is even linked to a centralised control system, which will monitor machine income from a network of locations.

Perversely, the fact that gambling machines are offered but without cash payouts, is seen by many in Hong Kong as a positive benefit. They service the regular gambler’s tastes without actually removing him from most of his resources, as might happen if he travelled to Macau. But for most of the regulars at the Hong Kong game centres, it is a case of killing time and entertainment.

Other elements coming into the Hong Kong game centres in recent years include the smoking ban in 2000. It has been spasmodically enforced and is generally observed in larger game centres but only loosely in smaller locations.

It has helped to bring new people into centres, however, especially young females and older couples. In the case of the older clientele, many locations waive the usual deposit, or ‘cover charge’ of the equivalent of US$6.5 for the necessary E-card.

The E-card is another change in the format of Hong Kong centres. Instead of changing money for tokens at a counter, it is done at a machine, using a mechanism imported from the US and built into a Chinese cabinet.

And what of the amusement industry in Hong Kong as a result of all this? In fact, that sector has evolved too. Go to Jumpin Gym USA - or at least go to any one of its 50 branches in Hong Kong.

This is the epitome of how the amusement industry has developed there - the family entertainment centre. Most of them are in shopping malls and they are equally dependent upon the TELA for a licence to operate, except this time it is an amusement with prizes licence.

Jumpin Gym was founded by Hong Kong operators with no former background in the game centre business and was first into the territory with soft play aimed at small children.

There were several other FECs opening in Hong Kong, especially in the 1980s, but with better management and the right kind of investment, Jumpin Gym has survived and beaten off the competition.

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These days it is far more than soft play, especially as that type of equipment became familiar through local community centres and other locations. Jumpin Gym these days works with a heavy emphasis on redemption games and a few fun games. Among them are scattered pusher machines.

In one typical shopping mall location within a residential area with a catchment of perhaps 32,000 people, one third of the machines are pushers. The machines are all second hand, perhaps 60 per cent from Japan with the remainder from the US. Other novelty devices such as Sega’s Galaxy Dream, Konami’s Dragon Palace, Namco’s Sweetland and Lazer-Tron’s Pirates Cold, Dino Rally, Jungle Five and so on are all old games but remain popular.

Having seen the success of large pushers in game centres, Jumpin Gym found their appeal irresistible and has now begun to install some Sega Monopoly games in some of its outlets. Strictly speaking, it is in contravention of its FEC licence unless the video screen of the machine is switched off.

Redemption prizes can be quite large. Some electronic home appliances can require large numbers of tickets, but they do encourage players to spend time on the pushers.

There are other prizes, stationery, toys, etc., but at the top end, the iPhone, PC notebook, digicam can all make their appearance at special events. Themes are used to decorate the exterior of the locations to make them more appealing to customers, including Circus Kingdom, Panda Paradise, Toyland and other names.

The first location was opened in 1994. Since then, Jumpin Gym has developed into an integrated family entertainment business with fun retailing and catering.  Now it is planning to expand the business overseas and preparing to list on the Hong Kong Stock Exchange.

The two sides of Hong Kong arcades therefore, have each gone in their own directions, the one into pseudo-gambling and the other into FECs. The separate development of the two disciplines of coin-op has set them on diverging courses, perhaps never to meet again.