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(Topic ID: 102851)

Actual cost of a pinball machine = a lot more than I thought


By flashinstinct

6 years ago



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  • 126 posts
  • 58 Pinsiders participating
  • Latest reply 2 years ago by SPAMP
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There are 126 posts in this topic. You are on page 3 of 3.
#101 6 years ago

This thread was doomed from the start .... just sayin

#102 6 years ago

Well at least it's an eye opener to everything i didn't think about.

#103 6 years ago
Quoted from Skins:

I'm not sure what you do for a living but it's clear to me that you have never had to deal with indirect overhead (costs that can not be directly attributed to the cost of making a good or service yet is part of the overall operating expense of the company). What about utilities, executives salaries, workers comp, health and welfare payments, consumables (toiletries, pencils, paper, etc), on and on. In my company, my indirect is 46% of my costs. You also neglected payroll taxes, corporate/state/federal taxes.

Bingo, something a lot of employees never realize either. People think because they make 50k a year that the company only pays 50k for that employee, the reality is that its more like 80k a year. People who have never had to run a decent size company will never understand how much money is spent above and beyond someone's salary to employ them.

#104 6 years ago
Quoted from flashinstinct:

Well at least it's an eye opener to everything i didn't think about.

That's an excellent outcome.

People look at products and break down what they think things "should" cost and get frustrated when they come up with a number. They feel like people are just printing money with 50% profit margins. Most of the times these businesses are pretty tightly run. Only one or two really poor product launches away from doom.

#105 6 years ago
Quoted from flashinstinct:

Surprisingly I don't think you are that far off..... but I would put it at around $10. I will have to add that in there too.

WAYYYYYY OFFFFFFF

#106 6 years ago

Lots of speculation in here, but my personal guess would be that Stern operates somewhere around a 7-12% ebit.

#107 6 years ago

ok i just read a few but got were this is going? Cost is relative to what the buyer is willing to pay. When it cost near 5k to restore a dmd machine to perfect that is already twenty something years old. The price for a new pin doesnt look to bad. Every hobbie i have cost me money. I dont do this for the money i do it for enjoyment. A manufactuer needs to make a profit or no more new pins.

#108 6 years ago
Quoted from flashinstinct:

I did add the people's pay in there The only thing I didn't add was Gary's pay The guy can survive on Vodka anyways....

Gary doesn't even own the company anymore I was told

#109 6 years ago
Quoted from flashinstinct:

Well at least it's an eye opener to everything i didn't think about.

Great reply.

To be fair, for whatever reason in today's climate; company profit is demonized. The reality is, most doing the demonizing know squat about what it took to turn that profit. Making money is hard and is not getting any easier. Ask any small business owner.

#110 6 years ago

Gary isn't getting 6K. He's not even getting 5K. He sells them to the distributors for much less.

#111 6 years ago
Quoted from LTG:

I don't know if you are familiar with who runs that business. But let me assure you it's not the Boy Scouts.
LTG : )™

I don't, personally.
...but I am not completely understanding your comment...Are you saying there is zero waste? Are there not waste costs as a byproduct of all manufacturing, and the goal to reduce them as much as possible - but they are there, right? Our company is not new at this either, if that is what you are saying. Worldwide radio products for over several decades.

#112 6 years ago
Quoted from LTG:

I don't know if you are familiar with who runs that business. But let me assure you it's not the Boy Scouts.
LTG : )™

And if you're thinking about laying some cement, I'm sure the Teamsters would like to have a word with you.

#113 6 years ago

A good analogy to this argument is Tiffany's jewelry. Does the cost of materials and craftsmanship justify their high prices? No. Can they still sell them for outrageously high prices? Yes, because they have created demand for their little green boxes and many women have been brainwashed by De Beers over the past few centuries into thinking rare rocks should be worth tremendous amounts of money and hard work (if only they knew it rained diamonds on Saturn and Jupiter). They wouldn't pay that much for rings made of antimony set with meteorite stones.

As long as there is demand and people are willing to pay that much and they sell, this pricing model will continue. If they get stuck with hundreds of left-over high end 8k machines, then that answers their question and they will have to change their pricing. Plus it will only harm them in the end and enrage buyers who forked over the big bucks early on when they put them on a fire sale.

But just like when you are selling your own machine, you don't start with the lowest number you'll go. You probably put money into that machine above what you paid for it, cleaned it, spent time working on it, adjusted it. You want to get that back, maybe it even appreciated in value since you've had it. You wouldn't sell it for the same price you paid for it in that situation, so why is it bad when a company makes a healthy profit on something?

#114 6 years ago
Quoted from flashinstinct:

So I guess to conclude is just be happy Stern is making awesome machines...stop dwelling on the semantics and save your cash to buy the pins you want... .and if you can't afford them.....just have fun playing them on site if you can find them

Maybe you should start your pinball Co. And compete ! With your well thought out cost model, we all could by
great new pins from your company and save each of us thousands on every purchase. Life is good! What are
you waiting for? LOL

#115 6 years ago
Quoted from Banker:

What are you waiting for? LOL

#1...a raise...haven't gotten one in years
#2...a bank roll
#3...some lemmings to do my biding
LOL

#116 6 years ago

dummies.jpg.

#117 6 years ago

I'd say the guy on the cover of that book has already made a shitload of bad choices, lol.

#118 6 years ago
Quoted from flashinstinct:

Lets' add the big fat profit margin so 25% profit

25% gross margin is far too low for such a low-volume, high-risk product. I would be looking for at least 50% as an investor or owner. Which is why I wouldn't ever start my own pinball machine company. Hats off to Stern, do what you gotta do..

#119 6 years ago
Quoted from swampfire:

25% gross margin is far too low for such a low-volume, high-risk product. I would be looking for at least 50% as an investor or owner. Which is why I wouldn't ever start my own pinball machine company. Hats off to Stern, do what you gotta do..

Maybe 25-50% on materials cost vs. sale price, but if you factor in labor, development, etc... I seriously think their ebit might be single digit, or in the very low double digits. Anything higher would be pretty rare in manufacturing (at least from my experience).

#120 6 years ago
Quoted from Skins:

To be fair, for whatever reason in today's climate; company profit is demonized. The reality is, most doing the demonizing know squat about what it took to turn that profit. Making money is hard and is not getting any easier.

greed.jpg
#121 6 years ago

I have often speculated the actual cost for producing a game, just for the fun of it as well. I can tell you that the distributors aren't making a lot of money for each machine. The gross profit averages out to be around 10%. Nothing to write home about really.

#122 6 years ago
Quoted from NorCalRealtor:

@ FlashinstinctDude. For starters, nobody is paying $6k for TWD unless they're a dummy. Real cost seems to be <$5k. Secondly, you're just pulling numbers out of your patootie.
There is no flat profit per unit at this stage. Stern needs to sell a lot of these just to break even on their development costs. Beyond that there will be profit and good for them.
It stinks they raised price a couple hundred bucks since last year, and maybe $1000 in the last 10 years, but what can you do? What hasn't gone up?
Let's drop this "OMG $6k" nonsense.

Conservatively, the price increases are really reasonable compaired to other non-essential goods. The 1k in the last 10 years...true but look at what is saved on manufactoring/cost cutting as well. TSPP, WOF, POTC, RBION, and several more were packed playfields with lost of extras...compare that to todays minus the LEDs. Leaner means survival, and the ability to make more pinballs which is what we all want in the long run. It could have ended in 2007. I wish I could afford TWD but I can't. I can't bitch about price, because either way I couldn't afford either. I am glad that others can afford it. Or again no pinball. EFFING ENJOY!

#123 6 years ago

this was my understanding of Stern's business model...

Gnomes_plan.png

#124 6 years ago

It's a fun exercise. I don't see why people are getting their underwear in a twist. If you see something wrong, make a suggestion.

They do similar cost breakdowns with electronics (iPhones, XBOX, Playstation, etc.)

It's just interesting.

#125 6 years ago

I used to work for a large electronics company and for a brief time, we sold Stern pinball machines online or customers could place an order in the store and have it shipped to their home. Here were our dealer costs at the time. I assume that they are 20-25% higher than the actual machine cost.

AC/DC Pro: $4100
Avatar Pro: $3999
The Rolling Stones Limited: $5199

3 years later
#126 2 years ago
Quoted from kirkgun:

Ummm, some people don't seem to understand distribution.
Stern is a manufacturer, not a retailer (and they are not a distributor either, as is the case typically with pinball). Pinball would never have even remotely be considered a retail product, until very recently. And it still doesn't have a real retail distribution infrastructure either.
The old model was Stern would sell to a distributor and the distributor would sell to an operator (an operating company with numerous employees). The operator would most likely be buying several games at once (depending on the size of their operation). Price would be set according to a relationship to the volume of games moved, on both of those sales made during distribution (from Stern to the distributor and then again to the operator). The purpose of having models like that is to save Stern immense costs of staffing sales people, customer service, and real-estate (warehousing) costs. The one part that still exists from the old model, is that the cost from Stern to the distributor is still probably based on volume, to a degree (of course, more volume = lower cost).
Today since operators don't operate pinballs on location. (I guess some hobbyists are doing it for fun and for love of pinball, or barcades, etc, but those folks are not buying a dozen units of a single new model and putting them all over a town) So, the distributors have become the de-facto retailers direct to home users. Distributors need to pay staff to answer emails and phone calls for sales. They need folks to answer phone calls and emails for service. They need space to house games and parts inventory. They need office space. They need to stock inventory. They need folks to unload and unbox stuff. They need folks to box and ship. They need websites, and folks to update those websites. They need to pay accountants to do their payroll and taxes. They need insurance. They need phone lines and internet connections. Simply put... distributors have costs of operating their business. And after those costs are met, the distributor needs to profit, or they don't exist.
So, in your pricing... I don't see a single line-item about the costs of distribution. Every game has a cost of distribution. Where are all of those costs in this accounting?
And then, even with distribution handled by outside distribution companies, Stern still has to have a substantial facility to design, test, build, and store (store as little as possible) games before shipment. I don't see any real-estate costs listed. Every game has as associated real-estate cost to produce it (rent, taxes) that needs to be factored.
Every game has a an associated cost of marketing, that needs to be accounted.
As was said your lacking so many things on your list, it's hard even know where to begin. So, I just picked a couple of the expensive low-hanging fruit.

Stern states they are also an operator

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