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Sound Off #87 - Pricing Problems, Entertainment Districts, FOG Gaming, and more!
Sponsored by Intercard!
On this week's episode of Sound Off with Kevin Williams we explore how location-based entertainment venues are fundamentally mispricing their offerings, with inconsistent strategies for their attractions compared to their standardized food pricing approaches.
• Significant pricing inconsistencies exist across entertainment offerings at major venues
• Food pricing shows standardization while entertainment pricing varies widely without clear rationale
• TopGolf CEO's unexpected departure creates uncertainty around the planned Callaway spinoff
• Round One announces ambitious plans to reach 200 North American locations by 2030
• Dave & Buster's expanding internationally into India, Dominican Republic, Australia and Mexico
• Shopping malls integrating entertainment experiences like Museum of Illusions and Sandbox VR
• Sega developing "FOG Gaming" - a cloud-based platform leveraging arcade machines as networked supercomputers
• Space Invaders being developed into a motion picture following Sonic's success
• AI systems now track customer behavior and staff efficiency using Lean principles
Are you on the edge of your seat Because we're about to sound off with Kevin Williams covering today's latest trends in location-based entertainment, brought to you by the LBX Collective your community to connect, engage and inspire. All right, everyone. Let's buckle up. Let's buckle up.
Speaker 2:All right. Well, welcome everybody to the latest SoundOff with Kevin Williams. This is SoundOff number 87 for August 19th 2025. Kevin, how are you doing? I'm doing well. Have you gone on the trampoline yet? Not today. Yesterday I was on the trampoline. I am uh, as uh. As kevin mentioned, I'm at altitude trampoline park in roscoe village in the chicagoland area of illinois and, um, they're here testing out, you know, intelliplay bands jumping on trampolines, going down some split slides. We have a couple of split slides here and, uh, the launch slide is pretty fun, um, but uh, not doing that today. So just here to do a few last bits filming and then head to the airport, all right, but that being said, let's dive into it. And, kevin, what do you do to change my mind?
Speaker 3:well, it's one that is very close to my heart. So I've been a big believer that we're not charging the right price for the entertainment that we offer, and so I'm throwing that question out, that the operators are just not calculating it correctly, and I suppose I'm going to have to put my money where my mouth is. And we did a little bit of a comparison just to give you an idea of the separation between the prices. And there you go For a bowling for an hour per person, of the separation between the prices, and there you go For bowling for an hour per person. We're seeing quite an interesting difference between a brand new facility that's opening up, smash Park, a brand new bowling facility, and then, of course, main event, and you've got to really start to delve into you know their, their websites number one are appalling.
Speaker 3:To try and nail the prices down, you have to work it and then you then suddenly see the magic asterisks of pain appearing, uh, telling you that there are hidden prices. Or you've got to consider peak or off peak and stuff like that. Looking at the darts, which you would think is quite a simple one to uh to work out what the pricing is per person for that is, you're suddenly seeing 25 for an hour compared against a 15 or a 40 and you've got to really ask questions how they're calculating that. And then you come to theboard and you would think that there's nothing easier than shuffleboard to calculate for what an hour per person would be. And then suddenly again you're seeing our friends at Dave Buster's charging 40. And Dave Buster's will argue oh well, you're looking at the minimum price you need to have on your player card to be able to activate, to be able to go over. No, no, a person who is not a marketeer or doesn't work in the industry is just going to look at the website and make a gut decision. Those gut decisions come up with these kinds of pricing.
Speaker 3:So either the pricing model is wrong or the presentation of the pricing model is wrong is wrong, or the presentation of the pricing model is wrong.
Speaker 3:And I can kind of give you an argument about how they are kind of being a fool to themselves in how they're pricing the entertainment when we can see the standardization of the food, because jumping into the food and then suddenly it is easy to know the price of a burger, of a classic burger, and how the prices are very close together across new facilities as well as established facilities, and obviously the pizza again and established.
Speaker 3:Now why is the entertainment as difficult to standardize as the food is to standardize and I could have shown the drink as well if I wanted. The argument is that we in the entertainment industry still haven't standardized the entertainment offering that we're trying to give. And if we haven't standardized the offering, then we're not managing the experience. And if we're not managing the experience, then we're in danger of not getting the message across to our audience of what we're offering. And if you've been watching your sound offs and sleeping through them, you will have noticed that all of these memes seem to be heading towards a very obvious situation, and I think in the next two or three memes we will hit the highway of really where we need to go to move forward in this sector.
Speaker 2:Yeah, I mean this really is. I mean, you know, clearly, food they have a specific cost. They have a specific set margin that they're looking to achieve above and beyond their food costs etc. And so maybe it's just a little bit easier to manage that they want X amount of margin. You know. Again on the food At the same time here shouldn't it be the same for entertainment?
Speaker 3:There's less raw materials here. There's less staffing requirements here.
Speaker 2:Yeah. So this is what I find so interesting, because there really truly is no thinking or strategy that I can tell by looking at this pricing from a value to to um to payment or to value to pricing alignment. So, for example, right, we just look at bowling across the, just smash park, across three different things. Why would my uh, something that takes up significantly less square footage, by the way, and shuffleboard than either of the other two, bowling or darts be the most expensive per person, right? So, in theory, right, I should be generating. If I'm trying to generate more revenue per square foot, then in theory, the bowling should be twenty nine per hour per person and the shuffleboard could be ten dollars per hour. I'm not saying it should be. Shuffleboard could be $10 per hour. I'm not saying it should be, but if you were just looking at that type of revenue for square foot model only, then even then you would see them put lots for what you.
Speaker 3:And, of course, the owners of smash park will stream from the the hilltops that, hey, we're duck pin. Obviously, duck pin is cheaper because it is a smaller experience and I would argue it's an experience. It's an entertainment experience and you're going up against, uh, maybe full-size bowling. Don't underplay your experience. You are devaluing your entertainment experience because you don't understand the worth of your duck pin experience. There's more likelihood that more people will play duck pin than will play full-size bowling because of the need to rent shoes, the need, uh, for the larger balls for some of the female uh audience out there as well as the children audience out there. Right, not understanding what you've got and you're not pricing it accordingly. Two double whammies.
Speaker 2:Yeah, and so I'm not going to go to main event Dave and Buster's. But if you just look at Boulevard alone, right, so they've got, you could say, some standardized pricing for their two competitive socializing games their darts and their shuffleboard. However, you look over at their bowling now, they're charging $30 per lane, not per person. Let's say, six people are in that lane, you're now getting $5 per person per hour versus $15 per person per hour at the other two. Again, why this inconsistency? And are we actually spending the time we should be spending figuring out the right price models for each of these attractions?
Speaker 3:And we're not here to beat these people up.
Speaker 3:No, not at all. We understand, especially from Boulevard and Smash Parks, that there are new operations, they're entering the market, so hopefully they have done the research, they have gone through the hard process that some of us have to do on a regular basis of seeing where the pricing works. And as someone that has to do this as well as chart the entertainment applications, I am not seeing rhyme or reason to the pricing. I am seeing more pricing set by what our competition is doing rather than what we're offering, and I'm not seeing any guidance from any of the trade associations where, in the cinema sector, in the video game sector consumer video games, even in the electronics technology sector, there is some discussion, some collaboration in working out the pricings and the international pricing as well.
Speaker 3:One of the things that I'm concerned about is, if we devalue what the bowling experience is, then we're making it a short burn experience where people will say I've done it, I don't want to do it again with my friends because it wasn't cost effective or it was priced too cheaply or they screwed us over on the food and the drinks that they were offering us while we were there, and that is a danger, especially when you're parachuting in competitive socializing elements into your entertainment. The one thing you can see from the prices that I've calculated I didn't add amusement, I didn't add the single play to play any of the amusement machines, and we can touch upon that at another time.
Speaker 2:Yeah, absolutely All right. Well, coming up after the break, we will dive right into this week's latest trends.
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Speaker 3:Well, thank you, intercard. Well, thank you, intercard. And jumping into the trending, we're recording this at tail end of August, so you know a lot of people are disappearing on vacation, as it were. This is one of the busiest times for a number of our facilities out there, so operators are focused on making the moolah and developers are focused on reading the latest tom clancy on the beach moving forwards, and it's usually during those vacational times that the biggest developments happen.
Speaker 3:And so you wake up one day and you go through your stocks, you look at the products and companies that are on my radar and suddenly there's a big flashing light over our friends at Topgolf and I thought, ah, obviously they have now made the announcement of how the separation from Callaway is going to work. Oh, was I so wrong? So it was decided that the CEO of the company would retire days, if not months, before he was meant to be presenting to the world shareholders and all of the franchisees of how the separation was going to work from Callaway. That has been scheduled, that had been moved forward, and for some reason, this individual decided this was the perfect time to hand in his resignation and take up a job at harley davidson motorbikes. I think he's actually going to be involved with the uh more with the harley davidson uh retail rollout that the corporation is under, but away from that it wasn't planned. Obviously this is an individual that felt he didn't want to be around for the separation of the operation from Callaway, or he has such a love affair with motorbikes that this fantastic opportunity has rolled out.
Speaker 3:I am being flippant, I'm sorry, and I don't want to make this about the person. I want to make this about the person. I want to make this about the situation that the person has put a major corporation into. So now we find ourselves with the Callaway operation, or shall we say, the top call Callaway group finds themselves in a situation where they're going to have to find a replacement for the CEO who's going to also want to bring in his own team, because it isn't just an individual usually on something like this.
Speaker 3:He's going to not take the plan of separation as is that his predecessor has left burning a hole on his table. He's going to want to re-evaluate that, redevelop that, even make considerable changes, or remember this was an option to either separate top uh top golf from callaway or find a buyer. And some people may say that I'm not actually looking very closely at this and the reason for the departure may not be for the person, what didn't want to stick around to be responsible for the separation, but maybe in the wings there is a sugar daddy, a buyer, that is about to step in. I don't want to overthink this. This is quite a major situation. They work very hard to try and put a spin on this, saying that the spin-ff will now have to be moved back until they have the new CEO in place, but this is a considerable black eye. It doesn't look very professional and it begs more questions than it answers.
Speaker 2:Yeah, this was an interesting one when I saw this come across from across my desk as well just the other day. And, um, you know, this is, first of all, you know, the current well, the outgoing ceo of top golf is a generally a gun for hire right before he went if the top off he was the global ceo of pizza hut. So, yes, in a uh, you know a fast casual, can we call pizza fast casual? I guess, uh, you know a fast casual. Can we call pizza fast casual? I guess you know the fast casual brand. And, yeah, and then it takes over Topgolf. Obviously, massive entertainment destination arguably didn't do so well there at Topgolf and it's now going to More time on the fast food than on the fast entertainment.
Speaker 2:Yes, yes, agreed, right, you can't just take IP and throw it on, uh, throw it on something and hope that, uh, your, you know, imagine is going to happen. Um, and so you know, now he's moving on to harley davidson. Okay, fine, do whatever you've got to go. Do again a totally new industry again, after switching to different industries leading up to it. But what confused me really from this is that halloween put the uh spinoff transaction on hold. As a result of this.
Speaker 2:What I would have thought they would have done is take this as the opportunity to take one of their board members or their CFO or COO, make them an interim CEO or a transitionary CEO while they move into a new world, new environment, and then bring on a new CEO for that new environment. Right, instead of now waiting for some new CEO, they're going to have to put that. He or she's going to have to put their stamp on it, as you said, and then now wait another year probably, if not more than that, for them to move and spin this off, and it's only going to continue to impact Topgolf's decline in year-over-year sales while they're waiting for this. Instead, get the freaking transaction done, put in via an interim CEO or the chairman of the board or whatever, takes the reins for the period of time. Get that transaction done while also simultaneously doing a search for a new CEO in the new environment, new world. That's what this is. That's a part about this that confused me.
Speaker 3:Totally agree. You had a perfect opportunity in front of you. I would have argued that it would have looked like if he had handed in his resignation and an interim had been pushed forward, that they had encouraged it to happen. But it feels like it was the departing CEO that has decided that he didn't like the spinoff option. Remember, it was Callaway who accelerated the spinoff. They had previously said that it was going to be considered whether they'd find a sale or a spinoff. Then we had those quite alarming site-on-site sales numbers which rocked the sector, and then it was decided that Callaway needed to spin off. And amongst all of this, still we haven't had a definitive answer about whether the top golf swing suites, golf lounges, are going to be spun off from Callaway. So there's a lot of unanswered questions, there was a lot of ambiguity, there's a lot of confusion, and the one thing the investment community doesn't like is confusion, especially from a premier brand that should be in a position where golf is extremely popular at the moment. So I would argue that you're going to have people with lanterns and pitchforks chasing after you from the franchisees, the people who've used their hard-earned retirement money to build their top golf facility. You're going to have the licensors and the licensees who've had their properties and products, as well as their beverages and foods and other items represented through the facility, and then you're going to just have the Callaway boys, who are going to be very confused. So it is a poison chalice. Uh, whoever comes in? Unless, unless, unless there is a white knight buyer in the background, and this can all be sorted out with a wave of the wand. Um, some company names have been thrown into the ring in current discussions once this news broke about a possible acquisition, and we should know one way or the other. I would argue that we will know midway september whoever is going to be walking into this position. I know it's a quick, but I I get the feeling that they know what they want to do and if we get to the end of September and we still don't know, then plan B is in place, which is confusion, fire and famine anyway.
Speaker 3:Moving on and we just had the conclusion of the season in saudi arabia, the esports world cup took place, ewc very successful as always lots of players, big competition, large, large golden cup and big cardboard check for all of the vast amounts of money. But it continues to reiterate the point that I keep on trying to make, that esports is still hot and it still drives a lot of interest, bums on seats and entertainment, a high level of streaming of the event, as well as an increase in certain aspects of the esports sector. This year we saw a major increase in the number of race rigs and racing sim competition being exercised. This year. It was quite large the last time I was there, but I think it showed a little bit more increase in investment, as well as some questions being asked now about why in the Middle East, especially in the UAE sector, that we're seeing esports generating vast amounts of money.
Speaker 3:In the Asian sector, we're seeing esports still going strong, but in the Western market it's gone a little bit soft. Now that softness may be linked to the viewing habits of the audience, but I also think it's linked to the sponsorship and the promotion of this, and while we're seeing the new golfing experiences gaining a lot of traction with the target audience, maybe some money needs to be parachuted into the esports marketing and promotion sector, and I wouldn't be surprised after the EWC if we don't see the results of the decisions that are made during that event sort of made during that event.
Speaker 2:Yeah, you know, I've been really surprised, frankly, at how much this sector has expanded and maybe it's F1 Arcade getting into the mix, coming in with their own brand, with their own sims, their own socializing locations but really surprised at the aggressive growth that the racing sims have seen. You know, esports has obviously continued. We saw it uh attempt, make an attempt as an attraction in the fec space. Obviously didn't work super well and so you know we're seeing it as more standalone facilities. Uh, and I'm still seeing lots of cuts, like the ea sports football, the one that you showcased just a minute ago.
Speaker 3:Yeah, the situation regarding racing sims in the commercial entertainment sector. You know, our friends at Andretti's have done this, other venues have done this. I would argue that F1 Arcade is an exemplar case. It's a unique case and not every facility is going to be able to parachute in 60 simulators into their competitive socializing venue. But esports, race sims as well as golf sims are areas of the market that we need to keep an eye on. So, moving on and we had some development.
Speaker 3:So, really looking at the mall sector and how certain mall facilities are now embracing having a competitive, socializing and a social entertainment component to them, normally I'd be charting this in sound, open and shut, but we'll do it here in sound off. So, uh, the downtown common in santa mona in california, uh, it is a, you know it's. It's been a constantly updating mall, high level mall since the 1970s. It has, you know, a very high level throughput the last time I was there. You know it's the gucci stores and the tesla stores stores. It is not your common or garden shopping mall. But they have also decided to parachute in not one, not two, but three what we would call social entertainment offerings. So they've got the Museum of Illusion 10,000 square no slouch.
Speaker 3:Museum of Illusion 10,000 square no slouch. I throw that into the Meow Wolf kind of category of awe and wonder. Walk around. We have Escapology 5,000 square that's more of your escape and command room experience. And then we have Sandbox VR, which is your virtual reality free roaming. None of those are repeat visitation facilities. If we're really honest with ourselves, none of those facilities have their own F&B component. So this is really using entertainment as an anchor, and as an occasional anchor, and this is the kind of decision that certain malls are going to have to make, as they have more and more free real estate appearing as certain of their department stores and larger tenants move on to other things, is how much are they just going to parachute in one offering and come up with a mixed-use leisure entertainment conglomerate? It can include a sandbox, it can incorporate a scapeology, but you're going to have to brand it all under one umbrella rather than just hoping that one, two or three brands can make up the vacuum that you have brands can make up the vacuum that you have.
Speaker 2:Yeah, and I thought when I saw this it was interesting, because you don't. I couldn't speak for every Escapology franchise location or Museum of Illusions location, which are both franchises in addition to Sandbox VR, but you rarely see an Escapology or Museum of Illusions in a mall. Those tend to be standalone or they're in shopping centers, versus an actual shopping mall that has requirements around when they have to be open, when they have to be closed. There are limitations to when visitors are going to be coming in. The mall is closed at 7. Well, you're not having any late-night events. You're not having any late-night corporate events for escapology or those kind of things. So it does limit you when you're in the middle of a mall versus in a shopping center, which is why I think, historically not seen, they've not been in these malls. Sandbox VR, we know, goes into malls fairly frequently. They are a small square foot footprints and so they do fit well enough, but also have the same issues when it comes to whether people can access these locations when the mall is closed.
Speaker 3:So, as we've seen with Dave and Buster's main events, even when they're connected to a mall, they're not really fully connected. They still have the capability of having entrance and exit from the curbside, as it were, from the parking lot, so they can still have their late license. And, adam, if he was on this cast, he would be able to give us chapter and verse about the difficulties of having to keep up with the limitations of the mall venue operator against your business. I am interested that these three franchises have decided to take up the option. They're all different to each other, so you know they're not going to vampire at the moment, but again I would argue that they may have limited themselves by going into an area that how much of their business is from foot traffic and how much of it is from trip advisor? These are the kind of questions that uh operators and franchisees need to ask themselves. Maybe you can have these sites away in the woods rather than having to have them in very expensive real estate.
Speaker 2:Yeah, I think the only way that I would see this really fundamentally working in their favor.
Speaker 2:Right, I think this works in a mall's favor to have these attractions there, of course, for a number of reasons One for traffic development as well as obviously just uh, leases, um, so you just have the revenue coming in from them.
Speaker 2:But where this could work is you take a scenario where, if you said main event dave and buster's round one is notorious for doing the same thing going into big shopping malls and taking one of those external entrance facilities, taking one of those external entrance facilities, taking one of those ground floors and creating a multi-gate situation where you still have the external and you have an entertainment venue destination that has an external entrance, has the internal mall entrance that you come in and it's almost like a mini mall within the mall of different entertainment venues, different doorways that go into Museum of Illusion, to Skateology, Sandbox, maybe an arcade, et cetera, and now you've actually got a really interesting entertainment district in your mall. Still can drive the foot traffic for the mall, but also creates a scenario in which these operators can operate for extended periods of time when the mall isn't necessarily open when the mall isn't necessarily open.
Speaker 3:A mixed use multi-gate facility that can be parachuted into a mall or into available.
Speaker 3:You've been reading my notebook, obvious oh, I have you know, so of course yes, uh, it'll be interesting to see how the market wakes up to what we're talking about. But let's keep our egos in check and move on to our friends at Dave Busters who have, you know, been opening outside of North America. You know we've been seeing them now moving into India, we've been seeing them moving into the Dominican Republic, australia, mexico, and you know they've thrown their hat into the ring. They've said that a large amount of their rollouts they will be planning will be not in the normal or the usual suspect states of North America and Canada, but they will now be looking at new territories, emerging territories for location-based entertainment deployment. This is big, this is number one.
Speaker 3:Our industry will have to recognize that the level of sophistication for pay-to-play now extends beyond the usual suspects, beyond Europe, beyond Saudi Arabia, beyond Asia, beyond North America top of North America. We are now going to have to start looking more at South America. We're also going to have to start looking at some of the other less represented venues. If Dave and Bustos is doing this, then others will follow quickly behind to jump on this bandwagon. Again, another important consideration that means that the level of service support, machine equipment availability will have to match the openings there, and it also begs the question about how, as an industry, we represent ourselves, and we've known for some time privately that the trade associations have are starting to get to a situation where we need to standardize the entertainment offering and come up with better pricing and better structure if we're going to be opening in new markets. Oh, but didn't I just touch upon that at the beginning of this? Anyway, markets.
Speaker 2:Oh, but didn't I just touch upon that at the beginning of this? Anyway, yeah, so this says a couple of things to me. One this says that Dave and Buster's is definitely seeing a saturation point in the US, or the North American markets potentially.
Speaker 3:Or it's easier to go for these low-hanging fruit than going for their normal low-hanging fruit.
Speaker 2:Well, ok, so easier, perhaps, right, new markets, but there's a lot of complexity when going into other markets, right, especially other markets that speak different languages. Now, obviously, perth and Australia, you don't have to worry as much, but there's still colloquialisms and differences there. But you've got Mexico and Dominican Republic. Again, while they both speak Spanish, there is variances in those, those dialects. And they have the Philippines. You could argue oh well, they speak English there. Well, ok, sure, but there's Filipino as well, right, and so I think you have to, you really, really question their expansion plans. And it's, it's the broad dispersal here.
Speaker 3:And it's the broad dispersal here and this comes with, as it were, as well as their entry into other markets has emboidened the franchise and international team and I know that as a separate team to the main operation, as North American headquarters has been going through chaos and confusion over restructuring and disappearances and trying to work days into their navel about what they're trying to do in their core market. The franchise boys have taken the bone and run with it literally, and now we're at that point of view where, from an investor's point of view, you're kind of seeing their franchise international oceanic business is doing much better than their internal core business and they don't want to stop these guys from doing this. So they've given them, as it were, enough rope to hang themselves. How much this will impact the other businesses? A big question, especially, as you know, obviously, the new CEO still hasn't really got his feet under the table yet.
Speaker 3:Moving on, and another company that is stretching its stuff regarding its international business our friends at round one. They've been appearing in the japanese financial market, showing their numbers and giving us a snapshot of their four year and five year plans. So at the moment they have about 50 odd facilities in North America and they turned around and said that they are looking at by the end of the decade, they're going to have 200 facilities in North America Bit of a heart attack. They also shared a list. For those of you that can zoom in on this cast, you can see the list of American new facilities that they are in the process of nailing down, which is a vast list of the usual suspect cities and states that you would expect expect to see. Um, and you know, we've only got a few years before. It is 2030, so this is quite ambitious.
Speaker 3:At the same time, there was a very interesting report from their ceo that talked about where they saw their audience coming from and what they're trying to do to support that audience and it kind of underlines the feeling by some Japanese operations that Asian culture is a major part in the success that some of these facilities are seeing or some of these brands are seeing outside of their home markets. We're seeing an audience that is keen to socialize, especially in North America, that wants a safe environment where the food has to be priced right. There was even talk in one of the reports I was reading about religion and how the American audience, target audience, have now moved away from religion and alcohol, wanted to find a social entertainment engagement. I'm not going to get into the minutiae of that. There were some comments there that I thought were lost in translation and needed a little bit more skin in the game to understand. But fundamentally we're seeing Round 1 make a major push in North America and this is even before we talk about round one delicious, which we've touched upon in previous sound offs, and how that seems such a schism compared to the round one operation. One of the things that many people miss out when they talk about round one, one of the things we laugh about, is the quality of their food. But the issue is there that they also offer japanese fast food and in this report they were actually calling their their food japanese b-grade gourmet food. I'd hate to see what a and b looks like and c looks like if yeah, but you know I'm not gonna not here to shoot the messenger, the.
Speaker 3:The issue that I found incredibly interesting here is that, just compiling the latest entertainment social arena report, we look quite closely at sport attainment, social entertainment, including a sports component.
Speaker 3:Poland, you know everything from.
Speaker 3:You know our friends at Five Irons with their sport team and with golf to you know the bat and cage from Home Run Dugout, and one of those ones that we have to add in there is the active entertainment sport team system.
Speaker 3:And one of those companies that has quite a big investment both in Japan and now growing in North America, is round one. How many people when they look at a round one, bowling and arcade, miss that little SoCal logo at the bottom that represents their sports and active entertainment component that all of these venues are beginning to add to their mix. Entertainment component that all of these venues are beginning to add to their mix. It is understanding how much these brands are manipulating their audience but also evolving to attract the next generation of audience. And, though I may be very dismissive of the quality of their food. It is focused at an audience that they feel that they can target that quality of f and b at. And I would point to round one as well, as I keep on doing together and other companies that are coming from asia, that they are basing a lot of the Asian culture, the IP and branding. We've seen how well Nintendo has done with their brand.
Speaker 2:Sega is basking in the success of the Sonic and we will see more from those companies and corporations in our sector and it will be very dangerous for some of us in the out-of-home entertainment to sit on our laurels and not consider embracing this component yeah, I mean a number of things here for round one and first of all, I do love the word schism, by the way that you, as you threw out there when it came to their their f and b, and the word delicious, so round one, delicious. There's definitely, definitely a schism there. I don't think those two things are aligned and I know we've, we've, we've made fun of round one's food. Enough on on this, uh, this show and then others one thing we get.
Speaker 3:One thing we're gonna have to do, brandon, when, when we're together next we're gonna have to go to a round one, we're gonna have to order a meal so people can understand where we're coming from because I've had their food.
Speaker 2:I mean so like this isn't, I'm just not. You know, I've had and not enjoyed their food. But anyway, um, so to to speak about just their expansion plans as well, I mean, as we talked about the first analysis expansion plan, this is pushing in order of almost a venue per week over the next three years in order to hit their 200 site target and that is an absolutely absurd growth rate and I do worry about the level of saturation and the ability for the US market to really be able to handle that many round ones alongside everything else. That's very similar to round one. If you take out the SPOCH component, the sports challenge component, that's their SPOCHCHA component, the sports challenge component, that's their SPO-CHA, which is the active entertainment element. They really just look like a main event Bigger arcade, obviously more Japanese influence in the amount of cranes and the amount of music games that exist as well. That is unique to round one, but otherwise it's bowling, it's some party rooms that can also double as karaoke rooms and it's arcade and it's mediocre F&B and they, you know, sometimes will have a laser tag, sometimes they won't. Now, again, it's.
Speaker 2:There's not much differentiation between some of their existing competitors out there, except for their Spochon.
Speaker 2:I think that is one thing that is unique about them and one of the things that, well, I don't necessarily think that there is a massive market Again, because now Spochon begins to come and push against all of your trampoline parks and adventure parks and everything else that's already out there.
Speaker 2:Yes, they have some soccer fields, they have some basketball they have, but they have ninja courses and they have trampolines and they have, you know, some basketball they have, but they have ninja courses and they have trampolines and they have, you know um so little mini bowlings and and some batting cages and like. Again, this stuff exists already in this market and they were unique in japan and other parts of asia with that model, less unique here. So we'll see how they succeed over the next few years with this rollout. But this is massive and, frankly, if I am looking to build a standard FEC, I would be lucky to see is round one planning to be coming into my market? Because if one isn't there, it's very likely in three years there's going to be one in your market. So be very careful where you're thinking about putting your standard FEC if it in any way competes with round one.
Speaker 3:So you're in a very difficult position. If you're going to open anything bigger than 20,000 square, you're going to have to be mindful of a round one eating your lunch. And one thing you know in compiling the report for the Entertainment Social Arena, I touched on a number of sportainment brands that are migrating from entertainment. So you know, round 1 is not the only one that has an active entertainment aim for its audience. Socha has to compete against Pete's Pizza and their entertainment component. They have to compete against the Chuck E Cheese active entertainment zone that has just been rebranded. So they're just in that aspect, away from the competitive, socializing side. Just that is a crowded market. Then you think about all of the trampoline parks that will wake up with a cold sweat to hear that round one is going to turn up. I could speak from experience that there are a number of active entertainment facility operators and franchisees, developers, that were not aware that round one had added this component to their makeup and they were very surprised when I brought this up, or even angrier when they found out how close it was to them and it was eating their, their lunch. But that's a conversation for another day.
Speaker 3:Moving on and talking of chucky cheese and it's always nice to see chucky cheese in the news. If it isn't watching their mascot being arrested and walked away in cuffs, it's now watching not a child in a crane machine but an adult in one of their amusement machines, having to use the local fire brigade to pull them out. I used to live not a million miles away from the Burbank Chuck E Cheese facility. Yeah, burbank fire team are some of the best out there, some of the best earthquake preparedness team out there, so I'm sure they were happy to have something less fraught to have to deal with. But again it's another Chuck E Cheese moment. Now their marketing team may say that there's no such thing as bad PR. I don't subscribe to that novel concept. I think that maybe it's time to get the fire team again into the facility, along with the person they extricated from the machine to do a photo.
Speaker 2:What I don't understand. I don't know if anybody's familiar with the Snow Day amusement machine by Coastal Amusements, but I don't understand if it's stuck in there. I mean, they have.
Speaker 3:They have a little when you pick it up, you don't let go. Or you're greedy and you have a certain size of hands and you grab a number of items, force them into the hole where you're meant to drop them right then, like the monkey with a sugar cube, you can't let okay, so maybe her hand it.
Speaker 2:I thought thought she was physically stuck. It's a big entrance and there's all those little hangy things. There's not a door even you just go in and out of one. So I think that's the prize.
Speaker 3:Yeah, she's stuck in the ball drop-off area. The ball dropper okay.
Speaker 2:All right, that's totally different and hilarious.
Speaker 3:Yeah, and also hopefully our friends who manufacture the system have looked at that very closely. Anyway, let's hope Chuck E Cheese just stays in this level of news giving rather than anything else. We mentioned Sega and I want to bring up Sega Japan again. A lot of developments I've touched upon in previous sound-offs and opens and shots about the openings of their store. So you know we follow through.
Speaker 3:They were a major amusement operator and amusement machine manufacturer in the day. They have repositioned themselves over the years. They have sold off their Japanese well, their international, as it were amusement involvement. They still manufacture amusement machines in Japan, though the Sega that we know in the West is a licensor of the brand Sega Amusement International rather than being a representation of Sega. But we're in a position now where Sega has decided that a physical process or footprint is essential to themselves, their IP and brand. Their culture. The Japanese culture, as we were talking about previously, is hot at the moment. They've had success with the Sonic movie franchise. They've had success with recent rollouts of video games. They've even announced that they will be doing a film based upon the OutRun arcade classic. So while they're hot, they're hot and they've also been working on a pet project in the background and that pet project has been eating a lot of their money, a lot of their uh. So we say shared gold and so we have the financial q1 figures appear in the market and I'm sitting there going through and I'm seeing a major net sale decline. They've seen things drop considerably by 22% from what they're doing. They've focused so much now of their business on their next generational project that they've allowed their current projects to kind of wither a little bit on the on the vine.
Speaker 3:And you know the the board of directors is making it very clear that, yes, this is now, but you should see what's coming next. You would expect them to say that, but I don't think that they are overplaying their hands here. They are going to be pushing very heavily on their IP portfolio. I reported previously after the IALPA show that Sega's international licensing team that was sponsoring their area of the show is pushing very hard to have the Sonic and their other IP part of people's thinkings for licensing and incorporation into products and attractions. We have seen now the rollout of the Sega Store which they have been pushing their IP and their brands, the first with the Shanghai facility, then with the Tokyo facility, now with the Los Angeles facility and we're just going to be releasing news of the next location, so they're rolling this out. And then, in the background, there's the 100-pound gorilla that stalks the shadows of this discussion, which is Sega's super-secret Next Generation project.
Speaker 3:And we had a little bit of transparency to that next generation project in a Q&A conference session that took place in Japan that we were lucky enough to be pointed to and to sit through, and it's interesting. For those of you that want to know a little bit more detail, just type into a search engine Sega Fog and that will take you to a discussion about a cloud-based gaming platform that Sega has been investing into, which would use permanent venues, arcade sites, as routers of a high-level, high-premium, low-latency entertainment experience that would be consumed not through a console but through a dumb terminal. So you would be able not to have to rush out and buy a 10th generation console, but you would be able to buy a dumb box that would be able to hook in to this fog network. A fogging network means a close proximity multiple router connection that would then allow the facilities when they're not open 24-7, but when they're not open, they're still generating revenue through being connected to an online super game, and that super game could be described as a kind of an amusement metaverse. I've heard lots of discussion about what this is.
Speaker 3:We're waiting to see, but from the amount of money, time and treasure that sega has put into this, they're serious about this and we're only, I feel, a matter of months away from seeing the first examples we can now point to uh, the facts and figures that sega shared in this conference of what they're talking about.
Speaker 3:That said, some of you are feverishly typing into the comments, but Sega doesn't have any facility operations at the moment. Well, they have some relationships, they have their machines. The AllNet systems that offer downloadable content are very popular in Japan and Taito and Gendo, and many facilities have these connected machines in their facilities, and I wouldn't be surprised that our friends at Sega haven't worked out a way of coming up with a means to partner with operators of machines. Whether that means Sega will directly throw a hat into the ring and run their own facilities is hard to say, but whether that means that they will partner with the key suspects and have a placement of their fog machine infrastructure within someone else's facility that they can benefit from, I say this is something to keep a very close eye on.
Speaker 2:Yeah, this is very, very interesting.
Speaker 2:Again, what they're essentially doing is leveraging the CPUs and GPUs that exist in each of these arcade machines to basically create a supercomputer or a widely distributed networks supercomputer that allows for low latency for people to play these games again without having to have that full-blown console, potentially just on their phones or on their computers, or what you would call a dumb terminal.
Speaker 2:You know, because it's a smartphone, but as far as like a gaming is concerned, this is considered a dumb terminal compared to a console, right?
Speaker 2:So this allows me to be able to play sega ip based games or other games that they create specifically for this fog platform. I think it's really interesting. And where this gets really interesting is not so much, again, the fact that Sega doesn't have a bunch of locations, but if this is something that, for example, genda can deploy against their entire network of all the locations they've, oh, just happened to acquire here in the US, by the way, with all of these different CPUs and GPUs and every single one of those arcade games that's sitting there, underutilized most of the day that, if they can be a part of a broader network to distribute content Sega IP and potentially other IP that becomes really interesting and a great revenue source for a group like Genda, where they have all this real estate, all this square footage, and there are times throughout the day and the evenings when so much of that square footage is not generating revenue because there aren't people playing those games.
Speaker 3:This is the fidgetful environment that I keep on shouting about, and for those of you that are perceiving this as just being able to play your PlayStation 5 game on a dumb terminal, no, we're talking about a much higher quality game experience and a much higher level of engagement that is achievable from the current systems. I would argue that they will be competing more with the top-scale GPUs from NVIDIA and such like that are coming in the future with this kind of platform rather than with the current generation, the ninth generation of console machines, and this will start a war. If this works, just part of this works, just a little bit of this works, then every person that has, or every corporation that has, access to facilities, ip and the deep pockets to compete will want to have their fog network going up against Sega, and this will push the games as a service revenue model right to the front. And the only people that I think will be shocked the most will be be the game publishers, because they will then have to consider a two-tier uh software development process, where they will be developing content for the traditional uh platforms, uh current generation, and then they will have to think about content created for the super game environments that would be represented through this kind of thing. I think by that time our friends at Wired will come up with a much more sexier term than fog gaming to describe this.
Speaker 3:But this is an opportunity for us in the out-of-home entertainment markets to play a part in the next generation of location-based entertainment as well as consumer gaming. It is a dream that we've had since the days of Chuck E Cheese and following on to the Neo Geo that there would be a direct connection between what you play at the location and what you play when you get home. The arcade-at-home aspiration would be manifest large with this kind of approach. Uh, I'm I will go into a little bit more about this in the incoming stinger reports. There's a another high level conference presentation where sega will drop their trousers a little further to understand exactly what they will be doing with this first rollout. And if it isn't on your radar, it soon will be. No matter, no man's an island and you can't stick your head in the sand.
Speaker 3:And the other argument is that if this does take the momentum that, I think it will it will brush aside the more traditional approach to amusement as we then have to think about a two-tiered revenue model, because if your money's not just coming from the coins deposited in your cash box but also coming from the transactions through a streamed portal service, then it just totally changes the way that we invest into entertainment. Moving on and you know I mentioned that sega's ip is being leveraged into the movies. They've had their success with their sonic the hedgehog series of films and everybody wants a piece of that cheddar. And so, surprise, surprise, our friends at tato suddenly revealed that space invaders is now being considered to be turned into a motion picture. We're not sure if it is going to be a pure motion picture or a stream series. We have to take it as large. Weed Road Pictures has a track record of working both in television as well as film. Anyway, the writers have been selected to come up with the treatment for for the film uh, and I'm sure it will be a much better film than the awful uh. Last time we saw the space invaders ip on the big screen with pixel uh. But uh, we also have to be mindful that this is the beginning of a series of major Asian video game IP that are going to be getting the big cinema treatment under the new conditions that Hollywood as well as the rest of the cinema and streaming service find themselves under themselves under.
Speaker 3:Finally, to some tech trends and going on again about Asian products. It's as if I've been researching a lot of Asian products recently. Our friend Satarkate here was one of the first to break the news about a streaming entertainment service as well. Well, an IP from Asia that has both a manga and a streaming entertainment existence. If you're not familiar with One Piece it's a good series.
Speaker 3:I would recommend the streaming version of it. It works quite, you know, gets across the entertainment value very well. Worked quite, you know, gets across the entertainment value very well. And our friends at bandai namco have dusted off the uh, the old punch video game system, a game concept platform that was first seen in the 1990s. They dusted off how original. They slap in one piece content and this one will be doing the rounds. Whether this particular product makes it to the west will be interesting, because there's a little bit of history about uh, the sonic blast man machine, more suits and fractured hands. If you don't know much about that story, then I recommend you go over toade Heroes and see some of the coverage that I wrote about that back in the day. Anyway, moving on, we have a little bit of AI news to wind up with, and the robots are coming playing from my constant memes on our social media.
Speaker 3:Well, they've come to us in the entertainment and social entertainment sector a zoo is using robots to pretend to be dinosaurs that walk around the the zoo, stopping off every now and then to do little tableaus and interact with the guests. Very cute, very fun. If you haven't seen the promotional teaser video for this, go over to friends of the stinger report facebook and have a look at it there. It's a good. It's a good teaser video. Fundamentally it's those four-legged walking robots covered in latex, but it works very well and I wouldn't be surprised if we're going to see a lot more of this. Of course, our friends at Disney are going to shout that they were the first to have robots walking around their facility, but I would argue that those weren't autonomous. They had a gentleman or a lady with a joystick in the background, where these are going to be left to their own devices as long as their batteries keep up. Left to their own devices as long as their batteries keep up.
Speaker 2:It's a creative use of Boston Dynamics' spot. That is the. If anybody's watched online the memes, those legs sure look like a spot. Every one of those dinosaurs has the reverse jointed legs.
Speaker 3:I can show you some Chinese companies that sell the same kind of system as well well, okay, fair enough.
Speaker 2:They may not be the spots themselves and maybe chinese ripoffs, but they're. They're modeled after the same, uh, the same function. Um, yeah, I don't know any dinosaur that has their, their joints, that direction. But you know, whatever that's fine.
Speaker 3:I've never met a real dinosaur in life, so I can't comment about it.
Speaker 2:Okay, I've never seen a dinosaur skeleton with their joints that direction.
Speaker 3:They put the bones together. Wrong, didn't they? Oh, they're backwards Aliens.
Speaker 2:It's an interesting one.
Speaker 3:I want to see the video of the first one of these accidentally accidentally walk into the leopards uh enclosure and be rendered down to its metal component, but it had to happen and so you know, mark the date in your calendar.
Speaker 3:This was when the robots started to appear in the entertainment. Even though this is zoological, it's still an attraction by any means, and I expect that we're going to be molested by a large number of these during the Orlando show, but we'll have to wait and see. And continuing again with AI, machine learning and the abilities of the technology to entertain our audience through robots and to monitor our business through AI tracking, it is important that the new technology that is appearing on the horizon is I say appearing on the horizon is already amongst us. There are operations in the food and service industry that are starting to employ AI guest and staff tracking. The picture for those of you that are just listening to this but can't see is a snapshot from an AI tracking system which pushes into the lean principle, and this shows the movement of the staff, the dwell time of the customers, their activities. It is also color-coded so you can see if agitation or body language is being represented through the patrons. You can also see the agitation and the work ethic or the work activity of the staff at this barista, at this coffee store. It's very interesting to watch and it is technology that can be applied to any public-facing operation and should be If this isn't on your radar literally to be applied. You don't have to invade anyone's privacy. You don't have to capture facial data and their names and their credit card numbers. And their names and their credit card numbers, you're just checking customer and staff activities and you're getting a readout and a pushout from the app that is linked into this AI system and that will follow the lean principles. That will tell you if the individuals that are being served are satisfied, but it also sees what the staff are doing. It will look at some of the most important issues, such as if you can build upon their activities and their processes to make it easier for them, more cost-effective for you and more engaging for the customer.
Speaker 3:If you're not constantly looking at lean in your day-to-day entertainment service, then you're missing out on really how you should interact with your guests and this kind of through the. You know there is method. To my madness, this kind of connects itself to the beginning of my presentation, when we were saying that we don't really understand what we're trying to offer our guests and we haven't correctly priced it. You can't make those decisions if you don't have the data to feed off of, to understand the reaction to what you are already offering to your audience. And a process like this may turn around and tell you that you are totally misjudging how popular, for example, your coffees are in your facilities and if your coffees are so popular that you are totally undervaluing how much you can get away from selling it. This kind of data, backed up with lean applications, will allow you to make those decisions rather than just sticking a wet finger in the air and hoping that you get it right.
Speaker 3:Anyway, that is it from me. We have a lot of newsletters out there and I would point you to the latest Sting reports coming out. Please make sure they're appearing in your inbox, okay. Also, understand that you can listen to these services as well as watch these videos, and please give us a like and send us emails if you have any questions or comments that you would like to make.
Speaker 2:Anyway, brian, yeah, ultimately we want to hear from you guys, so please keep us in the loop with what's going on with you, questions et cetera. So definitely keep us in the loop. And, yeah, excited about the potential use of that AI for Lean principles, especially as it relates to guest flow, et cetera. So thanks for bringing that up and sharing that. And another great sound off Kevin.
Speaker 3:Thank you very much and see you lot later.
