Helen Fletcher spoke with Gary Walker of New Zealand-based Coincascade to find out how the market and his operations have evolved and how it will continue to do so in the current climate

Coincascade was set up by Gary Walker and Stuart Jones in 1978 and was given life in Jones’ double car garage in New Zealand. Jones was a technician - starting a part time business, while working shifts for Telecom - while Walker was starting a full time business of his own at the same time as studying for a B.Com in accounting and marketing.

The company started out by providing wall games and then progressed to pinball machines, television tennis, video games, payout machines and ticket machines. At this time, all games coming into New Zealand were controlled by import licensing and it is when Coincascade obtained a licence that it really started to expand as it allowed the company to go national and, at the same time, put the two in touch with LAI founder Malcolm Steinberg, in Australia.

"We initially dealt with Eddy Cochrane, LAI’s import and export manager," said Walker, "as we both attempted to obtain exclusive licence agreements with the main manufacturers in Japan and the US.

"Also at this time we bought PCBs from Japan and then sold hundreds of boards into the market and bought pinballs from the US and sold container loads into New Zealand."

Originally Coincascade was in competition with LAI Australia but in 1997 Walker and Jones negotiated with Cochrane to become the New Zealand representative for LAI. This is a relationship that has lasted through to this day and, according to Walker, has been a great advantage for Coincascade.

"As you may well know, Malcom Steinberg recently celebrated 50 years in the business," said Walker. "As a 10 per cent owner of Coincascade he has always been a friend to us, a mentor and a guide for our business in both good times and bad."

Coincascade currently has five stores in Auckland, one in Hamilton, one in Wellington, five stores in Christchurch and one joint venture store in Dunedin, trading under the Time Zone franchise.

The company also has a number of street locations in New Zealand, which started with cranes, video games and pinballs and then moved on to include Incredible Technologies’ Golden Tee Golf and Merit games and now revolve around Stackers and Tomy capsule vending machines, Big Buck Hunter Pro and Safari.

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Coincascade currently works with some of the world’s best manufacturers and it distributes all the LAI Games as well as titles from Sega, Namco, ICE, Stern, Merit, Bay Tek, Benchmark, Taito, Global VR, Incredible Technologies and Raw Thrills/Betson into the New Zealand market and 20 per cent of its income comes from sales to third parties.

Over the years the company has experienced significant changes in its operations. Up until 1997 it had solid growth - its stores were bright, modern and well placed in busy shopping malls where it could actually pay the rent and still make money.

However, in 1997 business dropped 40 per cent and, according to Walker, never recovered the profitability the company had experienced in the years prior - this period was to signify the end of mainly video arcades in New Zealand.

At its peak, Coincascade had 25 stores with the product mix mainly consisting of generic video cabinets that were upgraded with new PCBs and dedicated video simulators. However, this was all to change and Coincascade moved from a 90 per cent video base to income being split evenly between prize, music, redemption, photo, children’s rides and video equipment.

"Our offer changed dramatically," said Walker, "and we had something for every age group that entered our store."

Having started out in a garage with just two men, Coincascade has since grown to employ around 120 full time members of staff and the business has therefore "grown from flipping coins in a wall machine, to car race simulators and so on - from mechanical monsters to electronic marvels with life-like screens."

So it is natural that in this time Walker and Jones have seen some significant changes within the coin-op amusement industry. Walker notes how crane machines developed steadily and with the advent of well priced relevant licensed toys - this segment really took off.

"The music games from Konami, such as Dance Dance and the drum and guitar games gave customers more reason to visit our stores," added Walker.

"The pinball market is always steady and Gary Stern continues to bring out great titles. The income from these units is always adding to the "size of the pie" and not just canabalising income from other segments."

Walker also notes that the video sector did manage to resurface with Initial D and Tekken combined with the memory cards - giving Coincascade the revenue it had not seen since Daytona first hit the market.

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However, in particular, Walker notes how LAI Games’ Stacker machine, which was inspired by the innovation of Sammy’s Sports Arena, created a whole new genre of game and income stream for the operator.

"This game gave us - and continues to give us - real growth in both the stores and street locations in the new prize machine category," he said. "We now have a game that never really depreciated - we change the prize and the income follows."

Another significant moment for the coin-op sector was the "cashless revolution," which saw the likes of Embed, Sacoa and others introducing debit card systems into large arcades.

"Adding the Embed system to our stores gave us the flexibility to offer customers a loyalty system with pricing offers and the real ability to actually track and reward our loyal customers," said Walker. "This system continues to be the cornerstone of our stores and continues to innovate."

So, here we are in 2009, Walker and Jones have great stores, a whole new range of products appealing to both genders and a far wider age group than in the past, and a great cashless control system that rewards their customers.

The operator has fewer customers but they are spending more money. So the question is - what happens when these customers move on? How does the company expand its appeal and get the customers into its stores?

"The big challenge today - as it always has been for us in New Zealand - is to take this product that people find very acceptable and exciting at home and get those same people out in the stores to play," said Walker.

"The New Zealand market has developed mainly in the smaller store sizes of up to 400sq.m. We have a small population of just 4.2 million people over two small islands - roughly the same physical size as Japan."

For Walker there are also some simple ways in which manufacturers can help operators to succeed, which they might not necessarily be doing at the moment.

"Game repairs and parts, especially electronic parts, are a real nightmare for us. We can have new games out for a month or more while waiting for electronic repairs - many games also have very poor manuals," he said.

"Game exclusivity is also a great advantage. Tekken 6 has been a huge hit for us in New Zealand partly because Namco has gone back to the old distribution model - excite your retail customers by giving the game to the coin-op market first and then release it 12 months later to the home market."

Walker also notes that to continue to move the market forward game manufacturers need to give the operator new mediums through innovation, the games also need to be connectable - "letting it compete all over the world player to player in real time."

Also game updates are essential in his eyes. "We have plenty of wood - give us good conversions to keep this current," he said.

Over the last few years Coincascade has been adding tenpin bowling - both full sized bowling and Highway 66 Bowling from QubicaAMF- Laser Force laser games, pool tables and photo booths as well as large dedicated pieces like the Sega Mini Rider, into its stores. It is also adding bars and food in order to offer the full package.

"The store size is increasing and we are much more aggressive with our marketing budgets, our birthday parties and corporate offers," said Walker. "Games are now part of the offer and the offer is much more exciting with games. For us, this is the future for our business. An integration of facilities and a focus on good value.

"For years game purchase prices have been getting more expensive, especially with the New Zealand exchange rate, but game prices for customers cannot keep pace with these price increases if we want to attract customers - in most stores game utilisation rates are low.

"Hence to prosper and make the returns we need once we have the right mix of games, customer service and environment we need to focus on game utilisation rates," he said.