John Appleton of Mitchells and Butlers responds to our article last month about video AWPs.
The purpose of responding to this article is to provide further insight into this important subject for the UK industry, by providing a pub retailing perspective, which is where the majority of this gaming machine type is sited.
MAB has its own management systems to track machine model performance and tests a significant proportion of all the gaming machines produced for primary and secondary test in the UK by all the major manufacturers. We have detailed insight and experience of the UK market. Our view is, inevitably for a retailer, evaluated by the amount of cash in box.
Pub retailers in the UK seldom voice their views in the trade press, but there is a need to put forward a retailer’s viewpoint on this subject.
Digital Category Cs are not a recent phenomenon, they have been around for more than 15 years. However, no one would doubt the potential impact of the great technological developments that have improved the graphics and game capabilities immensely. Gaming machine manufacturers and suppliers have invested significant sums in developing digital platforms and products. It is entirely understandable that they have done this as anyone would expect that the traditional Category C would be replaced by the digital Category C.
Surely the game attributes and depth of game would lead the player to want to play the digital version and turn away, by choice, from the traditional Category C. The supplier of traditional product, the company that buys the product, moves the machines from site to site, as well as providing maintenance and collection services understandably, instinctively and strategically, wants the digital product to succeed. Who wouldn’t?
It should mean lower costs of operation and potentially less competition, with associated higher margins, as the barriers to entry are greater than those of traditional product. This is all very logical; a model that has been around conceptually for more than 15 years waiting for the enabling digital product to succeed.
Why then, despite significant investment and trying various ways to force the product through the supply chain, with loss leaders being produced in some volume, has the digital product thus far spectacularly failed to take off in the UK compared to the traditional product, even though fair testing has been supported? It seems like an ‘Emperor’s New Clothes’ situation with Danny Kaye nostalgically entering from stage left singing “the product is in the altogether, the altogether…”
MAB has just had Christmas results from traditional Category Cs at the time of writing, which we are happy about. Who knows what January and February will bring, but industry-wide the UK is still suffering decline from the smoking bans introduced in 2007.
MAB has always tested and continues to welcome digital product tests; we want successful new products, we would like to see the digital product succeed. We base our opinion on cash in box every time and over the life of a machine. If digital Category Cs produce cash in box they will flourish, without being ‘forced’ into the market; subsidising digital products cannot be funded indefinitely. To date no digital product, other than in a very few sites, has performed as well as the traditional product, and has often halved in our tests the cash in box.
Why is the digital product not taking anywhere near the cash in box of traditional Category C products in the UK, or more, to warrant the investment and returns required? Is it because percentage payouts and low tech games have not appealed to the UK player on these low stake and prize machines compared to fixed odds betting terminals and Section 16 and 21 machines where the stake and prize is sufficient to attract harder gambling? Probably that has a part to play.
Or is it because the killer application/game has not yet been found? Again, probably otherwise it would have worked before now, but why do games in digital format do less well across a wide range of sites than traditional games?
Players are demanding creatures as was stated in the recent article; to date they have voted with their hard-earned money, which the industry must respect or ignore at its peril.
Companies installing in good income earning site positions have not delivered as much cash in box from the digital product as the traditional product and have responded by lowering the performance bar by testing the digital product in secondary positions. This is fine, but ultimately for the supply chain to work effectively the digital machine has to perform in the top sites as well.
The concern is that a supply chain that is artificially distorted is likely to suffer a painful correction as Darwinism steps in. We do not want the goose that lays the golden egg to become extinct, unless we have already established a better, proven, new species.
We would like intelligent, measured investment to continue in digital Category Cs until such time as the product competes commercially with the traditional product. We welcome tests of any new ideas and if they produce sufficient cash in box we will embrace them. We are, however, concerned that companies ‘bet their ranch’ in one way or another on digital product before it is successful.
Focus needs to be on the traditional product at this time, certainly until there is a proven alternative. The traditional product is still producing great results compared to its digital counterpart. Bell-Fruit Games in the UK, for example, has produced incredible results with its range of Deal Or No Deal models. If the other manufacturers can effectively respond with traditional product it would make for a very healthy situation.
MAB has certainly not reduced investment in its machine inventory and is benefiting from this approach.
It may not be palatable for companies to face up publicly to the long acknowledged lesson that cash in box is king, but as yet the digital product is not producing the necessary cash in box. The sooner this is done the better and the industry can focus for now on the traditional product. Let’s let those that sell hope for the digital product continue their good work, as eventually it should succeed. The only question here is for the financiers - when?
