Game-maker jumped in the deep end of tech pool

(Fort Worth Star-Telegram; 01/26/98)

RICHLAND HILLS - Dynamo Ltd. was behind the eight ball in 1995.

The company's main business - coin-operated pool tables - wasn't growing fast, the competition was chipping at Dynamo's big lead in the market and pool players were getting older.

Dynamo's other products - air hockey tables, table soccer games, video game consoles - were big hits, especially in Japanese arcades, but the company needed a new shot to match its early growth rate.

Bill Rickett, Dynamo's president and founder, calls 1993 "our high-water mark. That was the apex of coin-op."

So the 25-year-old Richland Hills company tweaked some products, offering four-player air hockey and glow-in-the-dark pool tables.

Dynamo also quit making video game consoles in 1995, a painful decision that ended a 10-year run of making more than 200,000 cabinets on a contract basis.

"Sixty percent of our management effort was going toward 10 percent of our margin," Rickett says. And Dynamo started looking for new markets.

Last fall, it found its future in high tech, and Dynamo Interactive was born.

The new division is building video gambling terminals, automated teller machines, PC-based video game systems and public-access Internet kiosks.

"We picked a stable product early on, which gives us some staying power," Rickett says. "That product keeps us in business and pays the rent. Then we went and looked for an opportunity, and we'll build on that.

"We're out there looking for something new to do rather than looking for better ways to do things we already do."

Dynamo expects to post $20 million in sales this year - $10 million in its stable pool tables and other low-tech games, and $10 million in its Interactive products.

The company will sell more pool tables than ATMs, video games and Internet kiosks. A typical pool table sells for $2,000, compared with an ATM, which can cost as much as $8,000.

Dynamo Interactive's goal is to recraft the company in a more nimble industry. It's not a straight shot; it's more like banking the ball around a competitor's ball.

And everybody is swaggering around the table watching the shot.

"There's a joke that this entire industry is from Missouri," saus Mark Struhs, president of Dynamo Interactive. "It's filled with people who say `Show me.' "

Changing rules and new competitors are constantly reshaping Dynamo's business.

It got into the ATM business because of new rules that let independent companies, not just banks, operate the machines, while some coffee shops are installing machines that allow customers to connect to the Internet for a per- minute fee.

The new strategy was forced on Dynamo by Intel Corp.'s effort to encourage PC-style microprocessors in arcade games, says John Klayh, a vice president of the National Amusement Network, a division of Chicago-based Amusement and Music Operators Association.

Dynamo made the boxes that held dedicated video games manufactured by big Japanese game companies. The Japanese companies insisted that arcade managers buy the game - the software - and the wooden box, or the "firmware," as Klayh calls it.

When arcade managers wanted to replace a game, they had to buy a new box. That kept Dynamo and other companies busy making new boxes, Klayh says, but it also kept the prices of arcade games artificially high.

Last April, Intel announced that it is working with about 80 hardware, sofware, coin-operation and distribution companies to promote development of games written for the Pentium II microprocessor, the company's high-powered computer chip.

Previously, the graphics in a PC chip weren't as good as the graphics in a dedicated system in an arcade game. But Intel's Pentium II chip is fast enough to work well with the heavy graphics content in arcade games.

If developers switch to PC-based games, arcades wouldn't have to replace the box. The games would be loaded into a box that sits permanently in the arcade, Klayh says.

Intel wants arcade games to run on Pentium II chips because, with 1.2 million games, the arcades are a significant market.

But that's not the only, or even the most important, reason. If people like the game at the arcade, they'll want to upgrade their home computer, Intel spokeswoman Lynn Heinisch says.

For game writers, they'll get to sell home versions of their games faster. Five games were introduced last year, and more will be unveiled at a conference next week in Great Britain, Heinisch says.

For game players, PC-based games improve the ability to play against gamers in romote locations. The games in arcades in Fort Worth, Seattle or London can be linked on the Internet.

The PC initiative is shaking up the arcade business, and Dynamo, like many other companies, is trying to link with Intel to help them grow.

"We haven't figured out a way to get in their pocket," Struhs says jokingly.

But Dynamo officials are hoping they are taking the right shot.

"We are just looking for the trend, and we're trying to get in the way of it," Rickett says.