Given the market saturation we are seeing in the pinball world lately, I have to wonder if the traditional distributor model is going to eventually go by the wayside in the coming years. I know there are a lot of distributors on this site, and I am not lobbing flaming arrows your way. However, I think market forces are going to cause a change to come sooner or later when it comes to the way pinball machines are sold.

Deeproot has been rumored to be planning to disrupt the marketplace pricing in some way. Lets say they do this, and sell machines for less than Stern Pro pricing. Stern, in an attempt to compete, could severely disrupt the pinball marketplace by going to a direct distribution model. We have recently come to know that wholesale pricing on Stern Pro machines is right around $4,000. Distributors have a MAP price of $5,800 on new machines. That is ~$1800 profit per machine (before overhead). If Stern decided to pull back and distribute on their own, they could split the difference and sell machines for $4,800-$4,900 and decimate the boutique market. That additional $800-$900 per machine over what they are selling at wholesale now could easily cover the services a distributor offers over the 30/60 day warranty period at the volume Stern does business. There will still be room for independent service people to offer the services a distributor offers for an additional fee if they choose.

Distributors have traditionally been a sort of marketing arm of the manufacturer. This was especially true in the time before the internet came around. With the internet offering Twitch and Youtube streams, Pinside, Papa TV, etc, is the distributor still needed by the manufacturer?

Before everyone thinks I am crazy, something very similar to this has already happened several years ago in another couple of disposable income hobbies- HO/N scale Model Railroading and entry level Model Airplanes. Horizon Hobby bought up a couple of the major brands in these subjects, and then created their own in-house distributor network. They pulled their products out of the big traditional distributors like Walthers and Tower Hobbies, and went to their own distribution model to maximize profits previously lost to the middle man. They have a team that hits all the major shows with their display booth full of new products. So far, it has been working for them. So much so that smaller companies have formed since this time, and now are only selling direct to consumer.

What are your thoughts?

When it comes to limited run items like premiums and LE's...I get this to an extent. But Stern has shown they can keep 6-8 titles going concurrently on the line with their ability to make small runs on the fly. Wouldn't this preclude the need to hold inventory? That seems to be every MBA's wet dream in this age- building to order just in time/lean/anorexic manufacturing principles.

The whole other side of the $4,000 Pro wholesale price coin is how much longer can the market sustain $9k retail LE models that obviously do not have thousands in extra value parts in them. Can this saturated market really sustain LE pricing with just some artwork changes and a fancy number plate on them?

This would definitely make more sense. Also, I am assuming that $1600 would include shipping, which averages $300 or so most of the time. It sounds like as long as the final price paid including shipping and tax doesn't dip below MAP, that is all that matters.

This is kind of what I was getting at with my original post. If I was a distributor, and distribution of Stern pinball machines was my only gig...I would be looking to diversify as much as possible. Not only is it better for long term stability, but you also will gain share by being a 1-stop shop. That seems to be a big catch phrase among the non-pinball retail distribution giants I am involved with.

What about botique manufacturers? Could their pricing become more competitive by selling direct only?

If the Pinball Company can pay Levi in NYC to set up a machine for a customer as a contracted service, why couldn't a manufacturer do the same thing with a network of installation/repair contractors? A company like American Pinball has a rigid 90 day warranty...the manufacturer is off the hook after 3 months. The owner of the machine would be responsible for repair after that date. Are all the Jersey Jack distributors making home visits to fix all the POTC bugs, or are the machine owners calling Jersey Jack and fixing the machines themselves using phone tech support? I am asking because I actually do not know the answer to that one.

What about some shrewd company stepping up and setting up accessible financing and leasing programs for pinball machines? I see tons of 4-wheelers and motorcycles out there getting financed to the hilt. While I would never recommend financing luxury toys...it would definitely bring pinball into the hands of more people if the entry point became more affordable.

A good pinaball tech knows they can make far more money working for themselves than working for a small business owner for $X an hour. That is the problem with trying to find someone that is willing to work and make you money. Good, Fast, Cheap. Pick any two. You can't have all 3.

Nic Parks of The Pinball Company spilled the beans on a podcast last week that has now been deleted due to upsetting Stern.

Price fixing would require agreements among competitors to keep the price at or above a certain amount. Here is the FTC page on Manufacturer Imposed Price Requirements, which is what Stern legally does now.

https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/dealings-supply-chain/manufacturer-imposed

"Reasonable price, territory, and customer restrictions on dealers are legal. Manufacturer-imposed requirements can benefit consumers by increasing competition among different brands (interbrand competition) even while reducing competition among dealers in the same brand (intrabrand competition). For instance, an agreement between a manufacturer and dealer to set maximum (or "ceiling") prices prevents dealers from charging a non-competitive price. Or an agreement to set minimum (or "floor") prices or to limit territories may encourage dealers to provide a level of service that the manufacturer wants to offer to consumers when they buy the product. These benefits must be weighed against any reduction in competition from the restrictions."

This is a very well reasoned post...thank you!

Bingo. I'd like to hear some pros and cons to Stern themselves for allowing dealers to drop prices after a certain amount of time.

Stern has a hard floor, which also serves as a MAP. A large, popular distributor near me wouldn't sell me a GB pro below the price floor (out the door)...in person, with a stack of cash. Violating the hard floor rule would be at the distributors own peril.

Dear edge lord,
Unnecessary. This has been a good discussion so far, and nobody made you click on the thread.