Arcade

The Quarter-Devouring Economics of Arcades

It may be game over for most arcades, but the machines themselves are still out there — and kinda thriving

For a couple decades starting in the late 1970s and lasting well into the 1990s, video game arcades were everywhere. In an age of less-intense parental supervision, they were a bit like informal clubhouses, a place where Gen-Xers could spend hours while spending just a bit of money. The establishments were dark, the machines were loud and flashy, the carpet was old and the air often stank of cigarette smoke, spilled soda and dude-heavy body odor. Since they dealt only in cash and never needed to issue receipts, many were used by criminals for money laundering, but hey, it was the days before the internet, and the youth needed somewhere to go and waste time. (Lou Reed, a pinball enthusiast, even took his groomsmen to a favorite arcade of his in Times Square on the night of his wedding.)

Eventually brought to their knees by recessions, next-generation home-gaming systems like PlayStation and Xbox, and the enduring suspicion of parents that arcades were seedy, nefarious places, they’re mostly gone now. But those big, cabinet-enclosed games are still all around us — at bowling alleys, family amusement centers like Chuck E. Cheese, theme parks, bars and video-game-focused “barcades.” So is there still money in them? How much do they make, and how? With the help of Earl Rizzo, a second-generation video game and entertainment machine operator and repairman near San Diego, we (high) scored some answers.

Everyone’s got a phone with games on it, and a gaming system at home. Why do arcade-style video games even still exist?

They’re usually located in places where people aren’t coming in just to play games — think kids’ trampoline centers, or in the back of bowling alleys. “If they have extra time, or there’s a wait [for their bowling lane, for example], they’ll play games,” Rizzo says. “And the little kids are always attracted to games.”

A lot of arcade-style games you see out and about nowadays also have elaborate cabinets: driving games with steering wheels or handlebars and gas pedals, or shooter games with long-barrel guns. Basically, they offer an experience you can’t replicate at home or on your phone.

So they’re kinda just a distraction, rather than the main event.

Actually, no! A call to the local bowling alley, which offers a small array of arcade games, revealed that lots of people come in during their lunch hour specifically to play video games — no bowling involved! So they still draw people to them.

Are these games owned or leased?

Rizzo says that most of the freestanding amusement places like Chuck E. Cheese or Dave and Busters — places with a lot of games — own theirs. They, of course, get to keep all the quarters (though the machines at these types of places usually utilize a prepaid, card-swipe system). But many other places lease their games from operators like Rizzo.

Who gets the revenue on a leased machine?

Rizzo says that’s often split. On video games, it’s 50–50. But on redemption games — like the claw machine — that’s more like 70–30, because an operator like Rizzo pays for the prizes. For new equipment, Rizzo generally arranges to earn a minimum, just because the volume of gameplay may not support the game’s value, especially if it turns out not to be immediately popular. He also does all the maintenance on games he leases when they malfunction.

Wait, people still play those stupid claw games?

Yes! It’s one of Rizzo’s most popular machines, in fact (he also operates jukeboxes, pinball machines, interactive stuff like basketball and air hockey machines, and ATMs). “I remember when they first came out in the early 1980s, my dad and I were talking about it. I said, ‘How long do you think this is gonna last — a couple years? How many stuffed animals does a person want to buy?’ And here we are 40 years later and it’s our most popular machine,” Rizzo says. “Kids want that instant gratification, and they like playing the crane machine.”

So how much does an arcade game, pinball machine or whatever actually bring in?

Not a lot, although it varies widely. “I have locations that do $2 a week, and I have locations that do $200 a week,” Rizzo says. But machines that pull in $40 or less often aren’t worth his time because it’s not economical to drive out and service them.

What’s the deal with those bars that have lots of old-school arcade games?

Ah, “barcades.” They’re everywhere now: Ground Kontrol in Portland; The Detour in San Francisco; Coin-Op Game Room in San Diego; 16-Bit Bar throughout the Midwest; Galloping Ghost in Chicago; Kung Fu Saloon in Texas; Barcade on the East Coast; and many others in this great nation of ours. “They’ve given the video game industry a boost,” Rizzo says. The popularity of places like these has increased the value of classic games in the past five to eight years, he explains.

But still, don’t think of them as some kind of arcade revival: The revenue comes from food and alcohol sales, not from quarters. Rizzo says some barcades will even set the machines to free play just to draw customers in, since the games don’t pull in big money anyway. Kung Fu Saloon reportedly earns only four percent of its revenue from the video games.

Still, booze and games: Sounds like a great business!

Not so fast, Rizzo says. He gets calls all the time from people who want to open barcades, but have no plan for bringing in customers. He stays away from these types. “Some people think you just bring the games in and they make money,” he says. “Coin-Op Game Room is doing more than just putting games in a bar. There’s a whole concept.”

A successful barcade, he says, involves savvy social media, hiring top bartenders, constant promotions, availability for private functions and a steady stream of events. You think crowds are gonna bust down your door just to play NBA Jam or Spy Hunter? You’ve got to offer them something more. There’s also the small matter of keeping a bunch of ancient technology up and running. 

What’s the biggest threat to arcade games, then?

Arcade games are particularly vulnerable to recessions — and Rizzo has survived many of them. “When people don’t have disposable income, they’re going to play games less,” he says. “In the recession several years ago, we were pulling our hair out wondering how long can we stick this out and show a loss. Then the market turns around, and we’re making more money now than we’ve ever made. We’ve had a lot of recessions, and there’s always been a resurgence of some kind [in the industry].”

The key, Rizzo says, is diversifying. “The money we were making in the 1980s bought me a house and paid for my college education — it was great,” he said. “Then it fizzled out, and it just makes you get more creative. There’s always ways to think out of the box and do things different, you just have to step up. Sometimes you don’t want to do what’s different because it’s difficult, but you’ve got to embrace change if you want to succeed.”

In hindsight, the golden age of arcades was pretty short-lived. But, decades later, arcade games are still all around us and still making a bit of money — they’re just not at the top of the leaderboard anymore.