It occurred to me at the recent ASI show in Las Vegas that many operators might not be aware that Enco Systems offers a 12-month warranty on every Philips CD Pro player that we sell through our distribution partners. Joel Friedman and I talked to a number of operators at the show, and several of them were surprised to learn that new Enco/Philips players carry our one-year warranty.

So, allow me to clear up any confusion and to inform those jukebox operators who might not know. Enco warranties each player we sell for one year from the date of shipment from our facility in Detroit. To be clear, the warranty we extend is technically to the distributor who sells the player to the operator. So when you purchase a player through your local distributor, any warranty claims do need to go through that distributor.

We’re aware that there are a lot of “gray market” options out there. Factory rejects, rebuilt players sold as new, and counterfeit components claiming to be original Philips service parts are out there. Operators need to know that Philips has never sold authorized service parts at component level. Any organization claiming to sell “original factory replacement parts,” or other such claims, are getting these optics through third parties in the Far East. These parts may work, but they are not factory-authorized and their quality and reliability can be somewhat sketchy.

When you buy a factory new, factory fresh Philips CD Pro that has been supplied by Enco, you can be confident that that player came direct from the factory in central Europe. Enco Systems has been supplying Philips CD players to the jukebox industry since 1988. I have shaken the hand of Felician Kovatch, the quality manager at the factory who vouches for every player that comes off of the line.

Chris and Felician Kovatch at the Philips factory

Obviously, we hope that operators never have to avail themselves of the warranty, but crazy things happen in the jukebox world. Sometimes those things are difficult to explain, and it’s nice to know that Enco’s got your back.

The AAMA-sponsored Amusement Showcase International (ASI) happened last week, March 11-13, at the Las Vegas Convention Center. Enco Systems was in attendance, along with Mr. Jukebox Joel Friedman.

The things that were most interesting at ASI weren’t taking place at ASI — they were in the hall next door. The Pizza Expo was jammed with exhibitors and visitors. Kudos to the AAMA for making the date change to run the ASI concurrently with the Pizza Expo. Replay Magazine reported that the pizza show brought in over 500 additional official visitors to ASI, and probably more who snuck around the back curtain. A lot of us went over to their show too for some delicioso free eats.

The rehash of the numbers on the decline in attendance and the decline in exhibitor booth space has been all over the trade press. The point is that this used to be two shows — ASI and Fun Expo — that used to occupy two separate halls. This time it was combined, and the attendance number was still down over 25%. The number of exhibitors was down almost 30%. And the amount of booth space was down over 40%. (Again, I’m getting these numbers from Replay’s report.) You could have fit this show into a ballroom at most hotels.

Barry Zweeben (left) and Ingrid Adlum Milkes of Replay with Joel and Chris at ASI

This goes beyond the abysmal state of the global economy. Operators, the guys who make this industry hum, don’t want to go to all these shows. There was an operator cocktail reception at the Flamingo and there were very few operators in attendance. The unofficial buzz around the show floor was that people are planning to skip AMOA in September, due to its proximity on the calendar to the IAAPA show (also in Vegas) in November.

If I may, allow me to add to the drumbeat for some show consolidation. Clearly, there is a need to at least combine ASI and AMOA. I know that’s difficult since these shows are how the two trade associations fund their operations. But I am simply echoing the chorus that is being sung in unison by virtually everyone in this industry.

I would go a step further and combine the two shows with the spring NAMA Expo. NAMA usually has their spring show in April — in Las Vegas. Wouldn’t it be nice if AMOA, AAMA and NAMA could finally form a mutually-beneficial friendship? A spring mega-expo in Las Vegas could get a critical mass of exhibitors and visitors going, and give operators a reason to stick around for three days. We could all appreciate a show of coin-op strength at this critical juncture for our industries.

The jukebox world awoke this morning to find that Rowe International is packing its manufacturing bags and heading to Mexico. In a story appearing on the Vending Times Web site late last night, Nick Montano wrote:

In a key part of the streamlining plan, Rowe will shift manufacturing from Grand Rapids, MI, to Reynosa, Mexico, on the Texas-Mexico border. This includes Rowe jukeboxes and money-changing machines, as well as Merit terminals. The transition is expected to complete by the end of 2009, when the Rowe factory will close. About 100 jobs will be affected.

Read the full Vending Times story

Mike Maas, Rowe’s president and CEO, issued a statement about controlling costs and increasing efficiencies that’s becoming all too familiar. We’re hearing similar and more severe statements from leaders of companies around the world in all kinds of industries. I applaud Mr. Maas for doing his best to preserve his company and save as many jobs as he can. I get it. I run a business that has had to shift focus over the years in response to changing markets.

However, as I observed on a recent trip to London for the ATEI and IGX trade shows, our industry has deeper systemic issues. We once set the standard for video games and were once a medium for breaking new music. Now we’ve become myopic and timid. We’re clinging to products and business models that are no longer compelling.

How can we expect to inspire a new generation of enthusiasts when as an industry we’re losing the passion we once had for true innovation? Granted, the price of innovation can be high in this uncertain economic climate, but the very survival of our industry depends on us recapturing the bold spirit and vision that used to define us. We can’t blame the current economy for problems that have plagued us for the better part of this decade. And simply improving efficiency and controlling costs will not lead us into the next era of prosperity.

Around the corner and down the street from the ATEI amusement trade show at Earl’s Court exhibition center in London, InterGame magazine sponsored a competing event at the Hotel Ibis. Dubbed IGX, it fared rather better than I had expected of a lower-cost show in a smallish hotel ball room. Sound Leisure, the UK-based jukebox company, was clearly the headliner. Alan Black, the affable chairman of Sound Leisure, reported that he was hosting as much traffic as he had in recent years at ATEI.

Show floor at IGX London 2009

Still, IGX was quite small and could be experienced in about 10 minutes. (It reminded me of the last tiny EXIME show that I attended in Mexico City in 2006.) Despite its small size, IGX was a spirited gathering. There was even an amusing moment in which IGX organizer and InterGame editor Phil Clegg was briefly denied entry into the ATEI exhibition hall. Provided InterGame made enough money to have another go next year – this event may indeed build momentum.

Sound Leisure’s defection from ATEI was definitely IGX’s gain. It seemed like most of the visitors to the Hotel Ibis were there to see the boys from Leeds. Alan Black was, as always, a gracious host and was justifiably proud that the company was celebrating the sale of its 12,000th digital jukebox. However, aside from adding location-controlled advertising capability to add via a USB port to its jukeboxes, Sound Leisure wasn’t featuring much that was new. Company veteran Rob Navarre did point out that they are now offering more back catalog and more new tracks than ever. Their “Milestones in Music” service includes over 2.5 million licensed tracks.

In comparison, AMI Entertainment offers 500,000+ licensed tracks and eCast 250,000+, according to their Web sites. TouchTunes’s site claims, “With hundreds of thousands of songs available on our catalog and over 2 million licensed tracks in our music library…” I’m not exactly sure what that means.

Alan Black (left) and Rob Navarre

“Milestones in Music” inspired some discussion about the differences between the UK and the U.S. regarding music licensing. Black and Navarre described a much different system for the UK. With only one licensing organization to deal with, the UK system seems more streamlined than ours in the States. I’ll take an in-depth look at the differences in an upcoming post.

NSM Music expanded their presence at the ATEI international amusement industry trade show in London this year with a much larger space than they have taken in recent years. Their higher profile seems to signal a renewed commitment to the jukebox business, evidenced by the energy of Alex Kirby, son of long-time NSM director Barry Kirby. Alex was very eager to promote the company’s new Icon Apollo, a large-format touch-screen wall box featuring YouTube content. The Apollo looks quite similar to the eCast EQ, utilizing the top portion of the touch screen to display video content, an informational “crawl” in the middle section and jukebox user-interface in the bottom portion of the screen.

Alex Kirby shows off NSM’s new Apollo jukebox

The Apollo allows jukebox patrons to not only select songs and traditional music videos, they can also browse and play content from YouTube, the popular video site. The YouTube feature is a creditable experiment and generated a lot of discussion. Some visitors wondered if patrons would pay for something that many can already watch on Internet-enabled mobile phones. Some wondered if people browsing YouTube would deter others from selecting music. Alex Kirby assessed the feature by pointing out, “If it makes money, it’s good. If it doesn’t, the operator can disable it.”

According to Kirby, NSM is considering a potential future for the Apollo in the States, but there’s been no decision on that yet. The company has developed a proprietary software platform for the Apollo and I’m not sure how it would mesh with their American partner, eCast. I found the YouTube feature interesting, but it’s a fairly safe attempt at innovation using a function that has already gained popularity in a different marketplace.

DATELINE: London

I didn’t want to miss an opportunity to dash off a quick post from the City of London. I’ve been over here attending the ATEI at Earl’s Court exhibition center and the new IGX show happening at nearby Ibis Hotel and sponsored by InterGame magazine.

ATEI 2009 at Earl’s Court in London

Attendance was respectable at these shows, given the challenging economic climate that all countries are dealing with right now. ATEI was the more lively affair. Not surprising, what with more booths and some glow thrown off by the considerably more robust ICE gaming show also taking place at Earl’s Court. But ICE has eaten ATEI alive and is slowly digesting it. Our industry looks somewhat cheesy and irrelevant next to the big-spending glamour of ICE.

IGX, for its part, faired better than expected. Sound Leisure, the UK jukebox company, was clearly the headliner. Alan Black, the main man at SL, reported that he was hosting just as much traffic as he had in recent years at ATEI. But this show was small and could be experienced in about 10 minutes. If this show made enough money for its organizers to have another go next year, I’m sure it will build some momentum.

There was very little new on offer at either show. If you’ve been a regular attender at our industry trade fairs, you’ve seen all this stuff before. I’m obviously most interested in music and was disappointed that there wasn’t more on offer in the jukebox category. (I guess I shouldn’t have been surprised, since the registration form didn’t even provide a check box for “music” or “jukebox.”)

A quick rundown of the interesting bits, some of which I will expand upon when I’m back Stateside:

>NSM’s new large-format touchscreen jukebox with YouTube capability

>Sound Leisure’s new “Milestones in Music” service that includes over 2.5 million tracks

>Ireland-based Almotech’s juke running the Rowe ami platform

>JayBox, a recent addition to the UK landscape with a slightly different take on music library theory and search features

>The conspicuous absence of the myriad independent digital jukebox companies that we’ve seen at the London show in the recent past.

And… (drumroll please) No CD jukeboxes. Again, no surprise as the UK and Europe have lead the way full-bore into the digital realm. Sound Leisure still offer a CD nostalgia, but that’s not much support for the beleaguered CD.

I’ll be back in a couple days and will begin posting my thoughts on the London events and how it relates to the States. I just couldn’t resist bellying up at this Internet cafe, wafting the scent of clove cigarettes and patchouli-oiled backpackers and giving you a quick synopsis.

Chris Bisha rocking some Stern pinball

The following piece originally appeared in the September issue of Playmeter magazine, a trade journal for the coin-operated amusement industry.

Jukebox music is a shared experience. We can listen to our favorite songs as often as we’d like in our homes and on our headphones, but we are drawn to share music with the communities of people we find at our local taverns.

Traditionally, the music offered on a vinyl or CD jukebox has made a statement about the character of those taverns. Walking into a joint and finding a lot of Gretchen Wilson and Rascal Flatts on the jukebox is very different from finding the juke packed with show tunes. We learn something about the people who hang out there and we are invited, at a cost of three plays for a dollar, to be part of the community.

Recently my girlfriend and I traveled to a small town in Michigan and went to the local roadhouse to watch a Detroit Tigers baseball game with an old friend of mine. Instead of the TV sound, the jukebox was playing. Some guys were shooting pool and experimenting with the new digital machine that had recently replaced the CD jukebox. These fine fellows treated us to about 45 minutes of songs by the metal band Slayer, courtesy of the machine’s central server and its “Make Mine First” feature. The barmaid apologetically assured us that this wouldn’t have been possible with their previous jukebox. Old-school heavy metal didn’t seem consistent with the character of the place.

Reflecting on our experience, it occurred to me that digital jukeboxes subtly, but significantly, alter our location communities. If, via downloading, virtually any song is available at any time, it makes one person’s desires more important than those of the community. The character of that community is changed.

If every jukebox offers essentially infinite choices we run the risk of homogenizing the location music experience — or at least turning the place into somebody’s personal slumber party. Personally, I don’t want someone to be able to play Justin Timberlake’s “SexyBack” at my favorite watering hole, just like I don’t want to eat at TGIFriday’s when I visit Chicago.

There’s no questioning the fact that the rise of digital technology has altered all forms of entertainment. The seemingly unstoppable force of digital music is changing traditional business models. The recording industry is under siege, seeking to defend itself with the blunt instrument of litigation. Music consumers hunger for the convenience and immediate gratification that digital music promises. We can’t go back and we can’t shut our eyes. Now more than ever it is critical that operators be wise and keep a close eye on the more subtle shifts in the jukebox business model.

Our taverns stand to lose a bit of their unique character with the advent of digital music; that is probably just a sign of the times. More importantly, operators seem to be sacrificing some of the autonomy of their locations, even as they’re enjoying a net gain in the cashbox with the new technology. New so-called “intelligent music management” systems claim to select the most appropriate music for a location without operator involvement. With the shift toward cashless, card-based transaction processing, remote collection is becoming a practical reality.

At the 2008 ATEI trade show in London, I spoke with one digital jukebox music provider who explained that their system automatically updates tracks to fit location profiles. This representative went on to make the claim, “Never again will a customer pick a track that will ruin an atmosphere.”

Music content programming has traditionally been the responsibility of the operator. Granted, the music provider I spoke with at ATEI is serving the UK and not the States, but in any centralized system the operator gives up a certain amount of control. In a television interview aired last year, a representative of one domestic jukebox music provider discussed his role in music programming for their entire network. “Our operators don’t necessarily know what the hot records are. I’m that guy for all of our jukeboxes.” He went on to explain that all the updates to their system are handled remotely.

Another domestic music provider claims on their Web site that they “work hard with the operators to create hard drives that contain the right mix for any demographic group.” There are 18 different packages available, and those can be customized within the first 30 days the machine is on location. My sense however, is that most boxes aren’t being customized; it’s easier and more profitable for operators to allow patrons to program a box themselves with premium-priced, on-demand downloads from the server.

Yet another domestic music provider, as I understand it, still has a majority of its machines on location without patron Internet access to its server. These machines are deployed with hard drives that often contain the provider’s entire library of songs. For their Internet-enabled machines, they offer patrons the ability to create play lists away from the location. Interestingly, their Web site describes a new feature of the operating system as follows, “Your jukebox will send you an email to anticipate problems so you can take care of business.”

I’m not encouraging technophobia or trying to arouse “Big Brother” paranoia. It is, however, important to be aware that the digital age is bringing profound changes to media-based business models. Digital music is increasingly seen as an advertising-supported proposition in most markets. One domestic jukebox music supplier went so far as to describe their digital jukebox as a “Trojan horse for a media network.”

Advertising has become the true prize in the competition for digital jukebox network connections. This focus on delivering a “common denominator” to advertisers will continue to homogenize the location music experience. It will also take vast amounts of information about locations and patrons out of the hands of the operator. Operators should be aware of this and consider the implications.

In another corner of the digital music world there is an interesting new development that may present some new opportunities and alternatives for jukebox music. The major record labels are beginning to embrace the concept of selling DRM-free music. That is, tracks that carry no copy-protection scheme. All four major labels agreed to supply Amazon with unprotected tracks in an effort to create a viable competitor in North America to Apple’s dominant iTunes. That initiative is experiencing some success, evidenced by Amazon’s announcement of a similar European venture.

In the near future there may be an opportunity for alternative jukebox business models, driven by DRM-free digital music. A proactive trade association like AMOA could conceivably negotiate an omnibus licensing agreement with the publishers and the performing-rights organizations. Such an agreement could be similar to the Jukebox License Agreement, allowing operators to acquire digital music legally from a variety of sources. For instance, tracks could be purchased at a rate determined by the number of jukeboxes licensed to an individual operator. Such an agreement would help operators maintain their autonomy and could bring down the cost of digital music.

The technology exists to support a wide variety of legal alternatives for digital jukebox music. As with most digital music business models, the most difficult hurdle for our industry is licensing. This is a critical time in the history of the jukebox business. Operators have a significant opportunity to work together to preserve the unique character of taverns and other locations. Our local watering holes should be a refuge from the relentless intrusion of advertising and its inevitable cultural homogenization. I want to go where everybody knows my name, not my demographic profile.

I recently read the following interesting bit on www.digitalmusicnews.com

The internet has little sway over most music-related buying decisions, at least according to a survey released by the Pew Internet American Life Project. “The internet helps music buyers connect with artists and learn more about music, but it doesn’t strongly influence what or how they buy,” the group asserted in a recently-published report.

In telephone surveys traversing several thousand adults, the group found that 83 percent of Americans discover music through terrestrial radio, movies, or television. A total of 64 percent pointed to tips from friends and family, while another 56 percent pointed to online sources.

And when it comes to actual purchasing decisions, the survey showed that offline sources carry the greatest influence. In fact, 51 percent responded that the internet carried no influence whatsoever on purchasing decisions, while 37 percent pointed to a minor impact. A total of 12 percent pointed a major role, according to the survey results.

But post-purchase, fans generally started engaging with the artist more online. Meanwhile, Pew cautioned against a premature dismissal of the CD. According to the data, 82 percent of music buyers reported that most or all of their purchases were in the form of a disc. That figure lessened somewhat to 69 percent among buyers under the age of 36.

I don’t know… If 56% of respondents are discovering new music through online sources, and 49% report that online sources have some kind of influence on their music purchase decisions, that seems like more than “little sway” to me.

A copy of the report can be found at http://www.digitalmusicnews.com/stories/052208pew

New schools of thought in the music industry suggest that a subscription service is becoming a more attractive option for digital jukebox music. Under a subscription model, operators would still contract with a music provider for access to digital music. However, this model would differ from the current one in that the operator would pay a flat monthly fee per jukebox, instead of paying the music provider as much as 20% of gross revenue per box. For this flat rate the jukebox would have access to all songs on the music service. Music would be streamed via a broadband connection. I like this model and think it would have benefits for our industry.

Subscription services are becoming more popular in the broader consumer digital music market. Napster and Rhapsody are now subscription services. I subscribed to Yahoo!’s Music Unlimited service earlier this year. The service costs $6 a month and requires the Yahoo! Music Jukebox player software. As a subscriber I can listen to any of the 2 million-plus songs in their library, streamed to my computer. I can purchase tracks at a reduced price (typically $0.79, $9.99 for albums) which I keep even if my subscription lapses. Purchased tracks can be transferred to a portable device or burned to a CD. I have found Yahoo!’s catalog deep and rich, covering more genres than I knew even existed. It’s been rare that I haven’t found something I’ve been looking for. (Note: Since this post, Yahoo! has sold their music service to Rhapsody.)

Record labels, weary of slumping CD sales and the erosion of profits, have seen the writing on the wall for the traditional distribution model and seem to be warming to the idea of a subscription model. Non-traditional label insiders contend that a subscription model is the best hope for a crumbling industry. Legendary producer Rick Rubin, famous for reinvigorating Johnny Cash’s career, was recently hired by Sony to co-head Columbia Records and made this assessment of his new employer and the industry in the New York Times:

“Columbia is stuck in the dark ages. I have great confidence that we will have the best record company in the industry, but the reality is, in today’s world, we might have the best dinosaur. Until a new model is agreed upon and rolling, we can be the best at the existing paradigm, but until the paradigm shifts, it’s going to be a declining business. This model is done.”

Rubin went on to say that he believes the subscription model is the only way to save the music business. He contends that if music is easily available at a price of five or six dollars a month, piracy could be drastically reduced.

For the subscription model to be effective in the consumer digital music market, all the record companies will have to agree. The so-called “big four” — Sony BMG, EMI, Universal and Warner — have been in rabid competition for years and haven’t shown much willingness to play nice together. We’ll see how this plays out.

Any of the current subscription services’ music libraries would work for the coin-op industry, but public performance rights would also have to be secured with the performance rights organizations (PROs) — BMI, ASCAP and SESAC. This would be no small task.

The subscription model would benefit the operator by taking the music provider out of the collection process. The operator would be back in an autonomous relationship with the location. He could set play pricing and commission splits. He could even operate machines on a cash-only basis if he so desired. It would also benefit the music provider by creating predictable revenue streams. Even the record labels might be happier, since music would be streamed to the jukebox with no copy remaining on the juke’s hard drive.

Certainly, there are some significant hurdles that need to be cleared before a subscription service is viable for our industry. Encouragingly, an open, third-party music source is the official position of the AMOA. Its jukebox subcommittee is pursuing this option in its ongoing dialog with the PROs.

Check out one of the subscription services and see if you think a version of the model would be good for the coin-op industry. I’d like to hear more opinions on the subject.

Broadband speeds will get considerably faster over the next four years, according to a research note issued Tuesday by Parks Associates. The Dallas-based group noted that more than 33 million US households will enjoy speeds of 10mbps (megabytes per second) or higher by 2012, a jump from 5.7 million currently. This increased speed is a critical ingredient for continued innovation from companies leveraging internet-based technologies, particularly music, video and game delivery.

Research like this supports my contention that, as we move through the digital maturity process, technology that delivers content to jukeboxes will inevitably change. For instance, faster throughput, higher capacity and greater reliability in the broadband infrastructure will make streaming technology feasible and viable. And as DRM-free, unprotected music files become the industry standard, more digital music options will become available to operators. (I was interested to note that Amazon’s MP3 store now offers DRM-free music from all four major labels.)

According to the Parks associates report, just 9% of households are currently wired with 10mbps or faster broadband service. But users are thirsty for extra bandwidth, and ISPs are likely to satisfy the demand. This increased speed will obviously be available to locations, as well. Cable companies like Comcast and Cox are upgrading their cable infrastructure and AT&T is busy laying miles of new fiber in an effort to compete with the cable companies. 10mbps is coming soon to locations on every operator’s route.

Fattening pipes will power a continued surge of innovation in music, video and gaming. The next four years will likely see a dramatic shift in technology delivering content to locations. Operators will do well to keep their eyes on this dynamic and rapidly changing environment and be ready to take advantage of new opportunities. Be aware that the contracts and hardware you commit to today might not support the profitable technologies of tomorrow.