The Last Pinball Wizard



Brian Cady brianinatlanta2001 at yahoo.com
Thu Mar 31 17:55:35 CST 2005


>From Business Week at:
http://tinyurl.com/49r96

OFFBEAT 
By Seth Porges 

Portrait of a Pinball Wizard 

Most entrepreneurs dream of building a successful
company and one day eliminating the competition. For
Gary Stern, that dream became a reality. As president
and owner of Stern Pinball, he presides over the
planet's sole surviving pinball-machine manufacturer. 

In 1932, there were an estimated 150 pinball-machine
makers worldwide. Today, Stern Pinball stands alone.
Based in Melrose Park, Ill., about 10 miles west of
Chicago, Stern has been the only game in town since
its remaining competition folded in 1999, making Gary
Stern -- its silver-haired, pinball-tie-wearing Willy
Wonka of sorts -- the only person keeping this piece
of Americana from extinction. "If we ever quit," he
says, "that will be the end of pinball." 

The game, developed in Chicago around the time of the
Great Depression, has come down to this: A single
privately held company with 56 full-time employees and
revenue of just over $30 million that puts out three
or four new models a year. The entire world's supply
of new coin-operated pinball machines is limited to
the roughly 10,000 that roll off the Stern assembly
line each year. 

"IT'S KISMET."  Stern has been around bumpers and
flippers nearly his entire life. In 1961, at age 16,
he began working as a stock boy for Williams
Electronics Games, a Chicago-based pinball
manufacturer. His father, who got his own start in the
1930s as a game operator, ultimately founded Stern
Electronics in 1976, and father and son ran the
business together, after Gary's stint as an attorney. 

In 1986, not long after his dad's company folded, he
branched out on his own, selling a business plan for
Data East Pinball, and was hired as general manager of
the newly incorporated concern. Japanese video-game
giant Sega purchased Data East in 1994, rechristening
it Sega Pinball. Five years later, Stern bought it
himself and put his own name on the shingle. Right
around the same time, Williams -- the only other
surviving manufacturer and, ironically, the place
Stern got his start as a teenager -- was shuttered by
its parent company, slot-machine maker WMS Gaming,
giving the market solely to Stern. 

"For Gary, pinball is absolutely something that's near
and dear to his heart," says Roger Sharpe, an industry
veteran still employed by WMS and author of Pinball!,
which chronicles the game's history. "It's something
he believes in wholeheartedly, it's something he has
been around his whole life. It's kismet." 

HARD TO OUTSOURCE.  Stern's 40,000-square-foot
facility houses the entire operation under one roof --
from assembly of the machines' large wooden cabinets
to a specialty design shop, complete with 3D computer
models. 

A walk around the factory floor reveals an
increasingly rare sight in America: In an age when
outsourcing has become the norm and automation takes
care of the rest, pinball machines are still made much
the same way they were 70 years ago -- by hand. Each
contains about 3,500 parts and takes more than three
days to construct. "It's a complex game," Stern says. 

Stern claims it would be impossible for him to move
his assembly plant overseas because "the nature of the
product requires it to be near our engineering," and a
shift to, say, China would actually increase the cost
of making the $4,000 machines. Watching his
manufacturing process in action, it starts to make
sense. In seconds, specially trained game engineers
can walk to the factory floor and examine how their
designs look and work in practice -- and make
modifications. 

The staff is divided about equally between factory
employees and front-office staff. In addition, up to
150 temporary factory workers are employed at a given
time to meet demand. About 35% of Stern's sales now
come from overseas -- primarily in Western Europe but
also in growing markets such as Russia and China. 

GAME OF SKILL.  Pinball has changed a lot over the
years. It was banned for decades in cities such as New
York, Chicago, and Los Angeles for being a game of
chance -- and, thus, a gambling device. 

"In Chicago it was banned, amazingly, from 1941 to
1976, and Chicago is where all the manufacturers
were," says Sharpe, who testified to the New York City
Council in 1976 in a successful attempt to overturn
the city's anti-pinball law. "You have, over three
decades, these three major metropolitan areas in the
United States not having pinball machines." 

The advent of flippers in 1947 (before then, players
manipulated the ball by "tilting" the machine) placed
a new level of control in the player's hands -- a
development that would eventually, after years of
political wrangling, convince lawmakers that it was a
game of skill and therefore should be legal. 

BRANDED PROPERTIES.  Like the flippers of generations
ago, Stern views his company's newest developments --
games that feature Spanish and other foreign-language
announcements and dot-matrix animation displays -- as
potential milestones. "We think Spanish is important
in America," Stern says. "We need to broaden our
market." 

Every Stern Pinball machine is now a licensed product.
Recent models include Elvis, Playboy, and Monopoly.
"People are already starting to buy The Sopranos,"
says Jolly Backer, head of sales at Stern Pinball.
That, of course, refers to the newest model, which
debuted in the U.S. in February and is based on the
HBO mobster series. 

"The licensing also gives the game designers a
framework within which to develop the game," Stern
says. "When we made Jurassic Park, it had a
ball-eating dinosaur. Why did it have a dinosaur?
Because it was Jurassic Park! It tells you to do
that!" 

NOSTALGIC HOME BUYERS.  Licensed products also allow
the small company to tap the expertise of "other
creative people," as Stern puts it. "It adds a whole
new dimension to it," he says. "Arnold Schwarzenegger
did all the speech himself for our Terminator 3 game.
All the artwork for The Simpsons was done by the
Simpsons people. For Lord of the Rings, the movie
company was very involved in telling us which aspects
they thought should be in the game." 

Even though his outfit has had a virtual monopoly for
five years, Stern is quick to point out that he still
faces competition. "We compete with all different
kinds of games, we compete with movies," he says. "Our
market is not pinball machines -- our market is
entertainment." 

Although sales have remained stable at about 10,000
units a year, the coin-op business has been on a
downward trajectory for years. As recently as the
early 1990s, the industry churned out more than
100,000 machines annually. 

As a result of the decline, Stern Pinball has
diversified its operations. Among the additions:
"redemption games," in which winners receive tickets
exchangeable for trinkets at video arcades. Stern
credits the stable sales of traditional pinball
machines to increases in nostalgic home buyers, which
now account for roughly 20% of total sales -- and the
number keeps growing. Retailers include Sharper Image
(SHRP ). Stern Pinball doesn't sell machines directly
to consumers, instead relying on a network of 33
distributors throughout North America, Europe, and
Asia. 

LABOR OF LOVE.  And what if another company tried to
enter the pinball market? "One of two things would
happen," Stern says. "One is they would lose all of
their money. The second is they might kill us because
there's room for one. We're striving towards 10,000
machines a year, our breakeven is 65% or 70% of that.
If somebody else came in, they would bring us to
breakeven or below -- and maybe kill us both." 

"I don't think he's making zillions of dollars," says
Jim Schelberg, editor and publisher of Detroit-based
PinGame Journal. "But he's making a living and
employing a lot of people. He's producing a game that
a lot of people enjoy. We all in the pinball hobby are
rooting for him." 

Stern is the first to admit he's enjoying it. "They
teach you in business school that you're supposed to
be in love with business, not in love with your
business," he says. "But we're in love with our
business." Looks like it's not so lonely at the top
after all.


-Brian in Atlanta
The Who This Month!
http://www.thewhothismonth.com


		
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