Wave Issue 9707 4/14/97 Article 5-01

***Facility Review - Sega Gameworks , Seattle - Can it make money?
by John Latta

With considerable fanfare Sega and its partners Dreamworks SKG and
Universal Studios opened its first Gameworks installation in Seattle on
March 12th. With the coin-op industry in difficult times, fresh
approaches to out-of-home game play are examined with great
expectation. Certainly Sega has led in its use of 3D and one expects
that venues such as Gameworks would be a house full of 3D fun. In this
respect one was certainly not disappointed. We counted 148 games and
they ranged from the latest including Super GT based on the Lockheed
Martin Model 3 platform to ancient titles such as Donkey Kong.

Located at the corner of 7th and Pine next to a Cineplex Oden multiplex
theater and Niketown, Gameworks is at the center of entertainment in
downtown Seattle. The inside was well-themed to be what looks like a
friendly old warehouse in two levels. There is a retail center selling
all forms of Gameworks clothing, a bar for adults only, a Fries stand,
a Pizza counter, a place for drinks and the ever present Starbucks. It
has been reported that $20m went into the facility but we came away
with the impression that this is just a container for arcade games. In
fact, at the recent ULI Urban Entertainment Development conference in
Los Angeles, Gameworks Chairman and CEO Skip Hall stated that the
problem with coin-op is not the product but the setting. This is was an
apt description of Gameworks.

Players use smart cards which they buy from machines scattered
throughout the floor. Each machine takes a smart card and deducts the
play for each game. A small LED panel on the game provides the price.
Just as the new Sega games are setting ever higher price levels for the
coin-op operators to buy Gameworks did the same at the retail level.
Here is a sample of the play prices:

Indy 500 $4.00
Daytona $2.00
Super GT $2.00
ManxTT $1.50
Alpine Race $1.50
Virtua Fighter 3 $1.25
Prop Cycle $1.00
Classic Games $0.50
PC Use $2.00/hour

A number of old coin-op games (Classic Games) were in a U-shaped area
on the second floor and we were surprised at the number of players.
Titles included: Missile Command, Galaxian, Popeye and Ms. Pac Man.
Yet, to pay $0.50 for these games seemed high when the prices to buy
many of the old games, at auction, run less than the cost of a home
video game cartridge or PC game on CD-ROM. There were 11 portable PCs
set up for game play and this area was only sparsely occupied.

We did a survey of the facility and found 305 present at 7 pm on a
Friday night, of which 35 were in the bar. The demographics were
diverse. The lower age of children was 12 with the majority of those
present in the 16 - 24 age bracket. However, we saw a number of adult
couples above 30. Game play was dominated by males but there were a
number of female players. The visible staff on the floor was 52.

Given that this was only a few weeks after opening the level of
excitement is still high. The key in the out-of-home market is
sustainability. It is here were we have our greatest doubts. The
question is simple: Will a fancy container sustain what is little more
than a high priced coin-op? Granted that it is the social atmosphere
which plays a major role in the success of a facility we question if
Gameworks brings much to the social component. Dave & Busters certainly
does much more than provide games and their success is a reflection of
that. In other words, will the social context of the facility offset
the high price of participation? Based on our initial review we are
skeptical in its present form.

www.gameworks.com