AWPs are approved by the PTB in Germany, but now the number of games approved bears no stable relationship to the number of machines on site, as much of the hardware contains multiple games. Since 2006, the number of new games approved in Germany has rocketed but the amount of hardware on site has grown more moderately.

In 2008, the number of AWPs that entered in the market came up to around 100,000 whereas the new approvals for gaming software-packages reached 390,542. This high demand for approvals was not only inspired by innovative new games but also because permission for AWPs based on Technical Directive (TD) 3.x ran out at the end of 2008.

These particular AWPs proved to be very attractive and so companies applied for more approvals than they actually needed and many of them were never actually used in the market. As a result, the number of applications for approvals declined somewhat in 2009.

The new-style AWPs are attracting a broader fan base. A growing number of women, for example, now enjoy gaming. The share of women playing AWPs – a former domain of males – has risen from 10.3% (2007) up to 13.9% (2008). A more recent survey shows even a further increase of the share up to 16.7%.

Different factors have contributed to the growth of the AWP sector. Primarily the banning of fun games in the 2006 gaming law. This gave operators freed-up space for the installation of additional AWP machines. Also the new law allowed 12 rather than the previous 10 AWPs per amusement arcade (if sufficient space is available). In restaurants and bars, three instead of only two AWPs are now permitted if an engineered safeguard hinders access to minors.

Along with AWPs, Internet terminals that have been installed in recent years also show an upward trend. All other product groups display a downward trend. In total, the number of installed amusement machines has declined in recent years.

For many years there has been a reduction in the number of the installed music, sport-games and amusement machines arcades. This is due to difficult economic conditions for operators plus the fact that arcades are not open to under 18s, who traditionally enjoy these types of amusement machines.

Source: VDAI; Arbeitskreis gegen Spielsucht e.V.; FfH Institut für Markt- und Wirtschaftsforschung; calculations of the Ifo Institute for Economic Research.

Two factors are worth mentioning in the downward trend for amusement machines. Firstly, operators’ investment budgets have been focused primarily on the procurement of AWPs in recent years, leaving few funds for the purchase of other amusement machines. Also, the increased attractiveness of new AWPs has inspired operators to change over from amusement to gaming machines.

It is likely that the increased investment in new law gaming machines will have concluded by 2009. This means that other sectors, such as amusements, may see an improvement in their prospects this year. It is expected that the share of amusement machines without prizes and of sport-game machines in the stock of installed machines will at least not be further reduced.

In the amusement arcades sector, a tendency towards larger premises based on multiple concessions can be observed in Germany in reent years. Many of these new amusement arcades are an integral part of leisure facilities that additionally comprise cafés, cinemas, bars etc.

This development has contributed to a better public acceptance of amusement arcades in general. Smaller amusement arcades are finding the climate challenging however and are having to find new ways to attract local customers.

Before the new law, all AWP machines had to be replaced after a certain amount of time on site. This has now changed but a type testing is required by law every two years. This has resulted in a steadier cash flow for manufacturers, as they are less dependent on the operators’ investment cycles. Capital endowment and refunding have become more important topics for manufacturers with the redirection of their business.

On the other hand, renting and leasing payments cause permanent liquidity outflow that induce operators to closely watch the profitability of installed AWPs. Contracts for software packages can easily be cancelled and the replacement of non-attractive games has been accelerated.

The changes in the manufacturers’ business models have given rise to some challenges for the wholesale sector. Traditionally, amusement machines were sold via distribution companies but now sales have lost importance. Renting and leasing is not an adequate substitute and commissions are not sufficient to compensate for losses in sales of AWPs.

Distribution firms, which consist of companies affiliated to manufacturers and independent medium-sized enterprises, have to exploit other business areas. Financial services, maintenance, repair and overhaul of machines provide opportunities that incorporate the potential to at least partly compensate for losses in sales of AWPs.

Moreover, other corporate services, such as technical and management consultancy for operators, are being offered. Nonetheless, the wholesale sector has not been able to benefit proportionally from the upward trend of recent years. In spite of all efforts, growth has been suppressed and capacities have had to be adjusted.

Based on the Study Commissioned by the German

Working Committee of Coin-operated Machines

Hans-Günther Vieweg

Department: Industry Branch Research

Institute for Economic Research at the University of Munich

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