So I went over to Pinside today to see what was going on in the pinball world, and there was the inevitable thread complaining about the price of a new pinball machines because of flippers. The specific thread that I’m referring to is http://pinside.com/pinball/forum/topic/are-you-fn-kidding-me-already.
Basically, the thread is complaining about pinball flippers, the high price of pinball machines, scalpers, prices dropping six months after the pinball is out, etc. One thing that comes up during the thread is if Stern is going to raise their prices because their pinballs keep selling out immediately. (Specifically the Metallica pinball sold out, I guess, in under 24 hours). People are of course talking about it being the “best looking” pinball that they’ve seen for years.
Let me describe my understanding of business 101. When I worked in telecom, the model that we used ended up being that the price of our product was six times our Bill of Materials (BOM). How that was broken down was that you have the cost of the pieces going into the product (BOM) + the price to make the product (assumed to be 1 * BOM) + price for development over the lifetime of the product (assumed to be 2 * BOM) + the discount given to distributors (assumed to be 2 * BOM). That gives you the list price is 6 * BOM. Very simple model. This gave the distributors a 33.3% discount, and if a distributor didn’t sell enough, he got a lesser discount. If you scored a sale directly to a customer, that increased your profit margin by that 33%. Simple. (I’ve subsequently worked in other industries where they had much more complex pricing models and they really didn’t work any better than the simple one.)
Here is what I don’t get. If Stern wanted to make more of the profit margin, they should be marketing the new pinball machine to get people as excited about it as possible and drive direct sales. Far as I know, the number one way to see if a new pinball game is a good playing game is to actually play the game. Since it hasn’t been made yet, that option is out. What about a simulation of the game. Stern probably has the layout already completed, why not release a virtual pinball or future pinball table of the game. It should be something that your programmers should be able to kick out relatively quickly and should help them hammer out some of the advanced modes in the game. Another way to get feedback would be to take white board versions to shows to allow lots of people play it and really get a good idea if the flow of the game is correct. You could do the white board thing with, or without the people even knowing that they are playing a potential future pinball machine. Might even do this continuously trying out different ideas and seeing how people react to them at the different shows.
My guess is that Stern is happy with their profit margin. They don’t want to deal with the end user, because it is just too difficult to make that extra 30% profit. They sell directly to distributors and are willing for the distributors to take out some of the risk because their machines are “sold out” before they make the first machine. Maybe distributors have the pay a certain amount for each reserved machine, and then that actually funds the development. That is a nice business model because now you have upfront money for development.
If the above is true, it doesn’t make any sense for Stern to do more marketing. They have “sold out” all of their machines, and they don’t need to keep hyping them up. It doesn’t really matter if they produce good or innovative machines because the machine is already paid for before it is produced. If they produce a bad machine, it will hurt them two or three machines down the road. They would need to get a name for producing bad or crappy machines before people would stop pre-ordering them or distributors would refuse to pick up their machines.
JJP is trying to take that 30% margin themselves and is selling directly to customers. Because of that, they make more money per pin, but they need to hire more people to answer the phones, take orders, etc. They also have to deal with pinball enthusiasts who are a terribly fickle bunch. They are also a new company and if their first couple of products stink, they will end up going out of business. (Note: I have not played any JJP machines at this point, and would love the opportunity. Jack, if you read this post, please ship me a NIB WOZ machine so that I can properly review it. When the Pinball Wizard Arcade in Pelham, NH arcade gets theirs, I will make the pilgrimage.)
I’m not going to be buying a new pinball machine sight unseen probably ever in my life. I’m not that kind of a guy. (I’m the kind of guy that buys a 20 – 30 year old pinball machine that is proven to be a good machine.) If you buy a machine that is new without anyone playing it, you are rolling the dice. Maybe it will be the best pinball created, maybe it will be a complete dud. You put your money on it without having any true information on how it will play. (If you like the theme and the artwork, that is great, but I tend not care about pin artwork as much as playability.) Looking at IPDB, Stern has been producing machines from about 7.5 to about 7.9 in the last eight years. Here’s the link for the results from IPDB. http://www.ipdb.org/search.pl?mfgid=303&yr=2005-2013&searchtype=advanced. I would expect that range of a machine. Not spectacular, but not a bad playing machine.
If I were one of those people who bought new machines, I would want to play the machine before I bought it. I would want to see a simulation of the pinball game running. I would want to a virtual pinball table/future pinball simulation to see if I liked how it played. If I lived near a large metro area, I would expect my distributors to have a “floor” model that I could play before I actually plunked my money down. If that wasn’t possible, I would expect early versions of the machines to be brought to pinball shows with them clearly marked as pre-production so I could play early versions before I bought one.
As a manufacturer, I would bring pre-production models to the show to get feedback on a new machine. There are not that many big pinball shows in a year, and since they draw a lot of enthusiasts, I would want their feedback early in the process. The earlier that a manufacturer can get feedback in the process, the better chance that the feedback can be used to make it a better product. I would bring multiple white board pins to shows to try out different ideas and illicit feedback. These could be completely un-themed. When I needed to start a new design, I could take these white boards as a basis for a new design.
I’m going to post my blatherings on pinside to get some feedback. I’m just wondering what other people think about this stuff. More than likely it will start a flame war. The pinside topic is http://pinside.com/pinball/forum/topic/rambling-topic-that-ends-by-blaming-buyers-for-high-prices-on-new-machines.