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FECs and LBEs now facing new competition

Our company has been conducting extensive research about how digital entertainment and social media are shrinking FEC and location-based entertainment (LBE) venues’ market share of both leisure time and discretionary spending. We have been reporting our findings in both our Leisure eNewsletter and in presentations. Now along comes another form of competition to LBEs.

The other day I had a chance to visit the new Scheels 220,000-square-foot sporting goods store that recently opened in the Overland Park, Kansas area of the Kansas City metro. You might call the store a mega-big box sporting goods store at its 5-acre size. It is the latest addition to Scheels’ 25-store chain located in 10 states.

Unlike a typical sporting goods store or department store, Scheels has a collection of entertainment venues in addition to its sports and sportswear. And the entertainment is FREE!

The free entertainment includes a huge 16,000 gallon aquarium, a 65-foot operating Ferris Wheel, photo opportunities, a wildlife mountain, shooting galleries, a soft-containment play unit for children, mini-bowling, laser shot shooting and sport simulators for golf, soccer, hockey, baseball, football and basketball. There are also two fully animated, talking US Presidents.

Scheels free entertainment copy

And in addition to the free entertainment, there is a deli and fudge shop serving gourmet soups and sandwiches, Starbucks coffee and specialty drinks, 24 flavors of homemade fudge and 18 flavors of gelato (these you have to pay for).

So just think about it. You have a 5-year old girl and a 10-year-old boy and you’re looking for somewhere to go with them one night or on the weekend. Go to a family entertainment center or go to Scheels? I have a feeling both mom and dad would pick Scheels where the kids can be entertained at no cost, the parents can get their Starbucks fix (I’m still suspicious that Starbucks adds some special additive substance to their coffee) and maybe do a little shopping as well.

Scheels is not alone in non-entertainment businesses attracting people with entertainment. It’s a major trend in retail called retail-tainment or experiential retail. Today to get buyers away from their screens and online retail and out of their homes, you need to offer more than just stuff to buy. You need to offer them an experience. Just think about places like Build-a-Bear, the Disney Store or the Apple store. It’s an experience to go there. Scheels has just raised the bar higher with their pure free entertainment offerings.

It’s not just retailers who are becoming experiential. The major mall and lifestyle center developers understand that to drive traffic past their stores, they need to also offer an experience and entertainment. And many are now programming FREE entertainment into their projects, whether it’s a free children’s play area or movies on the lawn at night as just two examples.

This is raising the bar for FECs and LBEs of all types. With expanding free attractive options for entertainment and experiences, FECs and LBEs now need to offer something even better, something with Higher Fidelity in terms of the overall experience, if they expect people to show up and actually pay for it.

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Daily fantasy sports coming to family entertainment centers

Fantasy sports is not exactly something you would associate with a family entertainment center (FEC). That is about to change in the near future with the acquisition of Major League Fantasy (MLF) by Latitude 360, a multi-restaurant-bar-attraction FEC. MLF is a rapidly growing player in the daily fantasy sports industry. Latitude 360 will let players use iPads to conduct their daily fantasy gaming on MLF’s platform, with the chance to win real money while watching their players play in real-time in their HD Sports Theater. This will make Latitude 360 the first restaurant-tainment chain to offer live in-venue fantasy sports books. MLF’s fantasy sports will also be available online when players are not visiting Latitude 360.

latitude-360-HD sports-theater-fantasy sports 

The acquisition of MLF puts Latitude 360 in the unique position to grab a significant piece of what is expected to be a $6 to $10 billion-dollar market by the end of 2016.

Fantasy sports is a game where participants act as owners to build a team that competes against other fantasy owners’ teams based on the statistics generated by the real professional sport individual players or teams. The Fantasy Sports Trade Association estimates that in 2015, fourteen percent, or over 36 million Americans age 12 and over play fantasy sports.

When most people think of fantasy sports players, they typically think of out of shape, math-centric men with plenty of free time and below average on the social-scale. However, fantasy sports players are just the opposite. Fantasy sports players are younger, better educated, with higher household incomes and more likely to have fulltime employment:

  • 66% male
  • Average age: 37
  • College degree or More: 57%
  • Have a household income of $75k+: 47%
  • Have full-time employment: 66%
  • Average annual spending per fantasy player: $465 of which $257 is spent on daily sports fantasy

Latitude 360 includes everything from a Dave & Buster’s-style arcade, an upscale bowling center, comedy room, dance floor, cigar room, dine-in movie theatre and an upscale bar and restaurant. With centers in Indianapolis, Jacksonville and Pittsburgh, the company plans to open locations in Albany, Boston, Chicago, Minneapolis and New York City. Existing and new locations range between 36,000 and 67,000 square feet.

In-person MLS traffic should not only drive up food and drink revenue, but could result in more brand awareness and loyalty for Latitude 360. “We’re just giving them an added experience they can take home or on a trip with them and stay connected with us,” said Brent Brown, CEO of Latitude 360. “This is another way to be connected to our customers’ lifestyle.

With the potential acquisition of Major League Fantasy, we’re excited to incorporate the best fantasy sports experience into Latitude 360’s unmatched entertainment and dining experience. We at Latitude 360 see it as something our sports fan patrons will definitely enjoy when they come to visit our locations. They’ll know we’re giving them the best daily fantasy sports experience available anywhere, and our HD Sports Theaters are a perfect venue for the ‘360 Fantasy LIVE’ daily fantasy sports experience.”

The Unlawful Internet Gambling Enforcement Act of 2006 included “carve out” language that clarified the legality of fantasy sports gambling. The act makes transactions from banks or similar institutions to online gambling sites illegal, with the notable exceptions of fantasy sports, online lotteries and horse/harness racing.

The bill specifically exempts fantasy sports games, educational games, and other online contests that meet certain conditions. A participant’s team (if any) must not be “based on the current membership of an actual team.” Outcomes must “reflect the relative knowledge and skill of the participants and [be] determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events.” All prizing must be determined in advance of the competition and cannot be influenced by the fees or number of participants. Players pay a fee to enter a contest, draft a team and compete with friends or strangers.

Offering live fantasy sports is a really smart move by Latitude 360. It offers guests another anchor attraction in the new form of electronic entertainment that can be very social, adds another revenue source as well as drives additional food and beverage sales, which currently accounting for over 60% of Latitude 360’s revenues.

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Mother Facebookers high in FoMO

In our company’s May Leisure eNewsletter, we had an article on harnessing the power of FoMO (fear of missing out). Now along comes some data that indicates that FoMO may be strongest among mothers with children under 18. Nearly 9 in 10 (86%) of these mothers will be Facebook users this year according to eMarketer. And these mothers are heavier users of Facebook than the general population, checking the social network on average 7.4 times a day vs. 5.9 times for all Facebook users. And perhaps due to FoMO, those mother daily check-ins increased by 57% from just 4.7 in 2012.

Mothers have also gone mobile. In 2015, 67% logged onto the social network via a mobile phone, up from just 43% in 2013.

Mothers don’t want to miss out. Their more frequent Facebook usage means LBEs and FECs that target families need to have their social presence up to par to capture mothers and keep them and their families as customers.

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Americans still stuck in no-vacation land

Each year Skift, a travel research company, surveys Americans on their upcoming summer vacation plans. The first question they asked this year was “Are you planning on taking a vacation this summer?” The overwhelming answer this year was almost exactly the same as the one they got last year – about
62% of Americans said they wouldn’t be taking a vacation this summer at all. More than half said they couldn’t afford a vacation. Only about 16% said they are taking a long summer vacation, while about 23% said they are taking short breaks on weekends throughout the summer.

Summer vacations plans 2015 1

In addition, this year Skift also asked the question in a slightly different way: “How many days of vacation are you planning to take this summer?” And the answer was that 45% said none, and another 15% said less than one week. The number of Americans taking a long summer vacation was the same as with the first question – 15%.

Summer vacations plans 2015 2

The results from this survey of Americans’ vacation plans is consistent with Skift’s early 2015 survey that found that 41% of Americans said they didn’t take a single vacation day during the entire 2014 year.

The good news is that more Millennials are planning on taking (short or long) summer vacations this year than any other age group. Middle-aged Americans (35-60 year olds), mired in the overworked economy, are amongst the least likely to take vacations this summer.

Affluent Americans (those above $100K incomes a year) are the most likely to take summer vacations this year, while those in the lower income bracket ($50K and below) are the least likely to. Parents and their families are trying to take a lot more summer vacations than the non-parents according to the survey results.

Although it might seem logical that those taking fewer vacations would spend more on staycation out-of-home entertainment in their local communities, our company’s research finds just the opposite. Average household location-based entertainment spending on trips has been on the decline for years while there has not been any offsetting increase in non-trip location-based entertainment spending. The reason is probably two-fold. First, lots of families can no longer afford out-of-home entertainment. Secondly, entertainment spending is shifting to at-home and mobile screen digital entertainment. So people are now getting a larger share of their entertainment fix on digital screens with no need to leave their homes, what is called digital hiving.

For additional information about digital, read The rise of super Digital Hiving.

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Changes to the importance of work and leisure

The Worlds Values Survey is periodically conducted in almost 100 countries containing almost 90% of the world’s population. It is used by political scientists, sociologists, social psychologists, anthropologists and economists to analyze many topics including the importance of different life activities and subjective well-being.

We dug into the survey data to see if the Great Recession had any impact on how people in the U.S. value work and leisure. The following graph shows the percent of adults who consider work and consider leisure as rather important or very important in their lives.

Importance of work and leisure

As the graph clearly shows, there was a dramatic drop in the importance of work around the time of the Great Recession that has stayed low through last year. The importance of leisure went up.

When we looked at the ratings based on adults’ education levels, in the 2010-2014 survey, there was little difference based on educational attainment for the importance of work. But more adults with college degrees rated leisure as rather/very important (94.0%) than adults with lower levels for education (89.5%).

We will be taking a look at other countries in the future to see how adults there compare.

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Where does pizza at FECs and Chuck E. Cheese’s fall in the four pizza groups?

Chuck E. Cheese’s new owners, Apollo Global Management, aim to grow sales by pleasing grown-ups’ palates. They want the place where a kid can be a kid also to be the place where mom can get a cappuccino and dad can chow down on an artisan-style like pizza.

The chain’s push toward an adult-pleasing menu, including new pizza, comes as the pizza industry nationwide is raising the bar.

For example, this last November, Pizza Hut, the nation’s largest pizza chain, announced the most expansive brand update in the company’s half-century history including menu additions that mirror items seen at artisan pizza shops and at the new fast-casual players.

Michigan-based consultant Big Dave Ostrander says the pizza market is dividing into four distinct groups.

“I think that there’s going to be three big winners when it’s all said and done,” said Ostrander, a frequent pizza contest judge and presenter at Pizza Expos. “No. 1 will be the very highest quality providers, (restaurateurs) that just make a fantastic pizza. No. 2 is going to be the lowest cost provider, and we all know who they are.

“The third ones are the fast-casual types. Some of it is above average to very good,” he added. “The rest are going to be slugging it out for the same customers.”

That means more competition in the middle of the pack, where many consumers now place Chuck E. Cheese’s and most FEC pizza.

“I eat pizza a lot,” Ostrander added. “I haven’t eaten their [CEC’s] pizza in a long time. I don’t think they’d win gold, silver or bronze in the competitions I’ve judged.”

Of course, Ostrander hasn’t tried CEC’s new pizza. We’ll have to give it some time to find out whether Chuck E. Cheese’s has successfully repositioned their pizza to a competitive positive.

Most family entertainment centers are as far behind pizza trends as CEC was until their new menu. The new fast-casual pizza chains that are rapidly expanding into every market are quickly raising consumers’ expectation levels for pizza. These chains are assembling fresh-made, fresh-dough (choices typically include regular, thin-crust, whole-wheat thin crust and gluten-free), customizable pizzas right in front of customers in the same style as Chipotle’s front line, often delivering the final product in five minutes.

Fast casual pizza chains FECs

The preassembled frozen pizzas and par-baked pizza crust pizzas that many FECs continue to offer have now fallen to the bottom of the barrel in terms of quality in the minds most consumers. In fact, many of the frozen pizzas you can now buy in the supermarket are better. Consumers today also now expect pizzas to be prepared in plain sight, often in stone-hearth ovens for the gourmet pizzas, not behind closed kitchen doors (CEC is still behind the eight ball on this).

Most FECs need to wake up and get with it, or they will see drastic revenue declines no different than Chuck E. Cheese’s has seen over the years due to their behind the times, non-adult appealing pizza. In today’s out-of-home entertainment market, the food and beverage has become as important of an anchor attraction as the entertainment. Offering subpar food, including pizza, based on new contemporary expectations is now a detriment to success.

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Digital video & media increasingly consuming our leisure time

In this blog and in our company’s Leisure eNewsletters we have been documenting how at-home and mobile screen digital entertainment is increasingly taking both leisure time and expenditure market share away from location-based entertainment, including from family entertainment center venues. In that context, here’s some of the latest data on the growth of digital video viewing and changes to the use of other types media.

Adults in the US now spend five and one-half hours watching video each day. Total viewing time has grown by more than half an hour from 2011 to 2015 (4:56 to 5:31). While daily television time has declined by 20 minutes, time spent watching videos on digital devices—PCs, mobile devices, game consoles, over-the-top (OTT) and other Internet connected devices—has grown by almost one hour over the five years (0:21 to 1:16).

TIme spent with video media

The greatest growth in digital video has been on mobile devices, growing from 3 minutes a day in 2011 to 39 minutes in 2015, accounting for almost 2/3s (65%) of all digital video growth. With the launch of Meerkat on Twitter and Periscope, mobile is predicted to grow even more in the future.

Time spent with digital media video

Overall, US adults now spend 12 hours (12:04) each day with major media. That is almost a one-hour (0:53) increase since 2011. Digital media now consumes almost half of that total media time (5:38).

Time spent with video digital media

With the exception of mobile and other connected devices excluding PCs, time spend on all other types of media has declined. Mobile and other connected devices now account for 45% of all time spent on major media.

For an overview of the disruptive impact of digital media and entertainment on location-based entertainment and FECs, check out our company’s December 2014 white paper The Perfect Storm, LBE Disruption & Opportunity.

 

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Parents pan Chuck E. Cheese’s food and experience

Each year National Restaurant News and WD Partners conduct a national Consumer Picks survey of restaurant customers’ top brands. This year’s survey included 42,196 consumer responses on 172 brands, ranking 10 attributes of the dining out experience—atmosphere, cleanliness, craveability, food quality, likely to recommend, likely to return, menu variety, reputation, service and value. The scores for the 10 attributes were then combined to create an overall score for each chain.

This year’s survey rated 111 limited-service restaurant chains and Chuck E. Cheese’s came in dead last among them. CEC had a score of 35.9 compared with the 71.9 score for the category winner, In-N-Out Burger. CEC’s last place rating is consistent with previous year’s ratings.

For years Chuck E. Cheese’s has seen declining same store sales, totally attributable to their declining food and beverage sales. Their average store inflation-adjusted food and beverage sales declined by almost one-half (46%) between 2003 and 2012. A major factor has been the quality and selection of their adult food offerings (or lack thereof). To turn around this decades-long decline, the company’s new owners, Apollo Global Management, recently introduced an “all-new menu for grown-up tastes,” aiming to grow sales by pleasing grown-ups’ palates. They want to become the place where mom can get a cappuccino and dad can chow down on an artisan-like pizza.

The point according to Tom Leverton, chief executive of the parent company, CEC Entertainment Inc., is to recognize that while children drive the desire to visit, it’s the parents who hold the car keys. “We want to make sure the adults are as excited about the visit as the children. The menu was a great opportunity to really do that.,” said Leverton.

Nationwide, CEC rolled out the new menu that includes Cali Alfredo pizza along with an update to its BBQ chicken pizza, now with a smoky barbecue sauce and fried onions. Any pizza on the menu now comes in a “thin and crispy” option. It also has introduced whole-wheat tortilla wraps such as chicken Caesar and a club wrap as well as adding churros with dipping sauces.

We’ll have to wait until next year to learn whether the new menu selections result in Chuck E. Cheese’s gaining favor with adults and winning a higher rating in the Consumer Picks survey and turning around CEC’s long declining food sales.

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Update on location-based entertainment spending trend

Our company has been tracking the long-term trend in location-based entertainment spending that has shown a decline started around the turn of the century. We now have new, more current data thru June 2014 and it appears that trend is continuing.

The U.S. Bureau of Labor Statistic’s Consumer Expenditure Survey is an incredible resource for analyzing consumer spending and participation trends. It has been published on a calendar year basis. However, starting in 2012, BLS also started publishing a midyear update. They have just released the midyear update for July 2013 thru June 2014. So we now have three consecutive midyears of reports to look for trends.

The midyear reports don’t break spending into the finer segments that the annual data allows. They only report entertainment in a very broad category of fees and admissions that includes all recreation expenses; social, recreation and health club memberships; fees for participant sports; admissions to cinemas, theaters, amusement parks, museums, sporting events and other similar venues; and recreational lessons. Nevertheless, the broad category is still a good indication of out-of-home entertainment and recreation spending.

Since 2000, we have seen an overall decline in location-based entertainment, sports, recreation and club spending. Inflation-adjusted, it is down by 21% from 2000 spending and down by nearly one-quarter (23%) from its high point right before the start of the Great Recession.

Average household spending on entertainment fees admissions copy

The new midyear report confirms the downward spending trend is continuing. Average inflation-adjusted household spending for this broad category of entertainment declined by 9% between the July-June midyear ending in 2012 and the most current one ending June 2014.

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More Proof that High Fidelity is the Winning Formula

Today the entertainment landscape is highly competitive and is only growing more so. Location-based entertainment venues (LBEs), including all types of family entertainment centers (FECs), are now competing for consumers’ discretionary dollars and leisure time with the expanding options of at-home and mobile digital entertainment as well as an increasing selection of other out-of-home entertainment experiences including retail-tainment and many free options. Both on this blog and in our Leisure eNewsletter we have featured a number of articles discussing that in order for LBEs to win today and into the future, they need to offer High Fidelity.

High Fidelity quote copy

When it comes to spending on fees and admissions for entertainment on trips and vacations, since 2004 we have seen a 20% decline in household participation and a 28% decline in average household spending (inflation-adjusted). That’s a tough market to compete in and one you would think would be very price sensitive.

Spending & participation entertainment on trips 04-13 copy

Well, just the opposite appears to be the case. The High Fidelity venues are winning and are even able to raise their prices faster than inflation.

There’s probably no Higher Fidelity entertainment experience than The Magic Kingdom at Disney World in Orlando, Florida. And it isn’t cheap when you consider not only the admission price, but also adding the cost of travel, hotels and meals for a family to go there.

Guess what? Despite a shrinking market for entertainment on trips and vacations, between 2006 and 2013, The Magic Kingdom grew its attendance by 13%, 2.5 times the rate of growth of the US population. That’s an 8% increase in their US market penetration rate. And most amazing, between 2006 and 2015, they raised their admission price from $63 to $105, 44% faster than inflation. If they had only grown their admission price by inflation, today it would only be $73, $32 less than what it currently is.
Magic Kingdom price increase & attendance 2006-2015This clearly demonstrates that in today’s increasingly competitive entertainment marketplace, High Fidelity plays an important role in the formula for success. Even with the mindful frugality of spending brought on by the Great Recession, if people are going to visit an LBE, they are opting for the High Fidelity choices and are more than willing to pay a premium price for the experience. It’s not about the price, but rather the value you get for what it costs. People no longer are willing to waste their precious leisure time for a mediocre experience. If they are going to leave the comfort of their homes and the convenience of their digital screens, it needs to be a really great, High Fidelity experience.

Additional reading:

To win today, it’s all about offering a High Fidelity experience

More High Fidelity proof

Proof that moving to a High Fidelity customer experience is a winning formula

More proof that High Fidelity wins

 

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