Coin-Operated Amusement Devices

Coin-operated amusement devices were once the staple of video arcades of the 1970s and 1980s. Large rooms, found in malls, restaurants, resorts, shopping strips, and college campuses, among many other places, were gathering places for youth, who fed quarters into an array of video games. However, the growing popularity and advancing technology of home gaming systems, beginning with the NES and advancing in the 2000s to Playstation 3, Xbox 360, and Nintendo Wii, led to the near complete demise of the large youth-targeted arcades. In their place came family entertainment centers (FECs), casual dining facilities with large game rooms geared to a range of ages, including younger and older children and adults, and gambling operations, including casinos and horse racing tracks in states that allow them to have slot machines as a means for competing with casinos.

The modern-day FEC began to emerge in the 1980s and differed from past entertainment areas that featured coin-operated amusement arcades, which were commonly found in theme and amusement parks or in vacation or downtown areas and relied on tourism. The modern FEC is usually a large indoor facility set in a residential area, offering multiple attractions including play areas, miniature golf, bowling, go-karts, batting cages, laser tag, and sections with coin- or token-operated games. The development in the 1970s of soft, contained play equipment, safe for children to bump against, helped spawn the modern FEC, allowing developers to combine large and adventurous play and gaming areas. FECs can range in size from 15,000 to 200,000 square feet.

Many FECs depend on coin- or token-operated games for a portion of their revenues. Per capita expenditures are less than $15 per visit, so FECs rely on repeat visits and a steady flow of new customers. Although not always the main drawing point of the FEC, token-oriented games account for approximately 25 percent of the income of these establishments.

Coin- and token-operated amusements are also significant at smaller venues, like Chuck E Cheese, which operated a chain of 530 pizza restaurant-game rooms in 2009, where games and merchandise account for nearly 50 percent of revenues. Chuck E Cheese's began in San Jose, California, in 1977, with the concept of merging two favorites of children, coin-operated rides and pizza. After being purchased in 1984 and merged with Showbiz Pizza Place, Chuck E Cheese's proved a stronger brand name and all Showbiz establishments were changed to Chuck E Cheese's by 1993. Since 1997, Chuck E Cheese's have operated under the corporate name CEC Entertainment, Inc., of Irving, Texas. CEC posted revenue of $814.5 million in 2008.

More adult versions of entertainment centers feature casual dining, full bar service, and cavernous game rooms. Among the most popular are Dave and Buster's, based in Dallas, Texas, which has about 50 locations in 20 states with $536.3 million in revenue in 2008. Dave and Buster's "coin-operated" games have gone high-tech. Patrons purchase a card on which they load points. Each game costs a certain amount of points, which is removed from the patron's card when it is slid through the vending device. ESPN Zone, started by the cable sports network, has eight locations, each of which offer food and drinks, more than 150 monitors showing sporting events and feeds from the various ESPN channels, and more than 10,000 square feet of interactive sports games.

Concurrent with FECs and entertainment centers geared toward adults both becoming well established during the final quarter of the twentieth century, the proliferation of legalized gambling produced dramatic growth for some participants in another segment of the coin-operated amusements industry. Slot machines have become so popular that they provide 70 to 75 percent of casino revenues. The American Gaming Association (AGA) refers to revenue as gross gambling revenue (GGR), the amount wagered minus the winnings returned to players. GGR, according to the AGA, "is the figure used to determine what a casino, racetrack, lottery or other gaming operation earns before taxes, salaries and other expenses are paid." GGR increased annually since the mid-1990s, reaching $32.54 billion in 2008. Five casino markets had gross revenue surpassing $1 billion in 2008: the Las Vegas Strip with $6.12 billion; Atlantic City, $5.55 billion; Chicagoland, Indiana/Illinois, $2.25 billion; Connecticut, $1.57 billion; and Detroit, $1.36 billion.

Another popular coin-operated gambling device is the video lottery terminal (VLT). VLTs are slot machines that display video games, such as video poker and bingo, for low-stakes gambling. In states where these machines are operated, they are part of the state lottery system. The VLT terminals are the same as the video poker machines in Las Vegas, Nevada, except for the payment devices. Money is fed into the machine, and winnings and losses are electronically calculated and printed out for the player. State lottery revenues have slacked off, and the video lottery is a means for states to increase revenues. Video lottery terminal machines offer the gambler the opportunity to play video poker, blackjack, keno, or bingo for a nickel to $2.50 a bet.

The leader in the gambling segment of the industry is International Game Technology (IGT), the world's largest manufacturer and designer of gaming machines and software. IGT controls more than 70 percent of the U.S. slot machine market and had revenues of $2.53 billion annually in 2008. Its products include spinning reel slots like Cleopatra, Double Diamond, and Elvis; video slots like Alien and the Addams Family; and video poker. In addition, IGT develops video gaming, player tracking, and accounting systems, terminals for government-sponsored lotteries, and progressive jackpot slot-machine networks (MegaJackpots) that link slot machines from several casinos. Bally Technologies, Inc., which had sales of $883 million in 2008, also develops systems for linking slot machines together and, through its Bally Gaming and Systems subsidiary, makes slot and video gaming machines.

Regulation of coin-operated amusement devices varies from state to state. Some are very strict regarding every aspect of the industry, including use and location of the machines. For instance, in Texas, regulations determine the percentage operators may pay to the owner of the establishment in which their machine in located. Operators must also keep records of income from individual machines. By contrast, some other states regulate less strictly and allow operators wider parameters.