Episode 1032: "The Tip of the Iceberg"

Kaneda's Pinball Podcast (Patreon feed)·podcast_episode·23m 17s·held·Dec 10, 2024

Analysis

claude-haiku-4-5-20251001 · $0.036

TL;DR

Pinball market facing collapse due to oversaturation and unsold inventory at distributors.

Summary

Kaneda discusses severe oversaturation in the pinball market after visiting Automated Pinball and observing hundreds of unsold new-in-box games. He argues that restrictive MAP pricing prevents distributors from clearing inventory, leading to a potential market collapse. Kaneda predicts King Kong will be Stern's next release over D&D, citing the need for a high-demand IP to move stagnant stock.

Key Claims

Automated Pinball is holding hundreds of unsold new-in-box games from multiple manufacturers with zero demand at MSRP, sitting on millions of dollars in frozen inventory.
high confidence · Kaneda, first-hand observation at Automated Pinball distributor; described seeing rows of games including John Wick (Premium/LE), Pulp Fiction, Labyrinth, and others.
Labyrinth demand has collapsed—new-in-box units are sitting unsold at Automated Pinball despite positive gameplay, indicating the game likely undersold expectations.
high confidence · Kaneda, direct observation: 'They haven't even made 750 labyrinth games and they're sitting in boxes at automated, which means there's not even demand for 750.'
Stern Pinball is allocating limited edition games to new online dealers using drop-shipping models instead of supporting legacy distributors with showrooms like Automated Pinball.
medium confidence · Kaneda, opinion/analysis based on observation of Automated's overstocking: 'Stern has invited so many new dealers into the fold... they're basically drop shipping the games to customers.'
MAP pricing restrictions should expire after one year to allow distributors to move surplus inventory at market rates, currently preventing price reductions on games worth 20-30% less than retail.
high confidence · Kaneda, policy recommendation: 'The map pricing thing needs to go away after a game's been out for a year.'
King Kong will be Stern's next major release, not Dungeons & Dragons, because D&D is a niche theme lacking the mass-market appeal needed to clear current inventory backlog.
medium confidence · Kaneda, prediction: 'I think King Kong needs to be next... Stern Pinball needs a hit. They need a hit.' Contrasts with Jason Knapp's prediction of D&D.
The pinball industry is manufacturing 30-50% more machines than market demand can sustain, leading to inevitable market collapse.
medium confidence · Kaneda, analysis: 'This industry is cranking out way more items than there is demand. That is how a market collapses.'
Jim Henson's Labyrinth games are selling for $3,000-$5,000 less than new-in-box retail, indicating severe demand decline after production ramped up.

Notable Quotes

“The collapse is coming if there's that much unsold inventory. Who is going to be left holding the bag?”
Kaneda @ ~09:30 — Core thesis: unsustainable oversaturation threatens distributor viability and market stability
“Every single game I walked by at Automated those manufacturers got paid. They got paid top dollar on each one of those games. So Mike has forked over what is easily a few million dollars on inventory.”
Kaneda @ ~11:45 — Highlights asymmetric risk: manufacturers insulated from inventory burden while distributors absorb losses
“The map pricing thing needs to go away after a game's been out for a year. There's no way around it. Last year's model needs to be able to be sold new in box for whatever the damn distro wants for it.”
Kaneda @ ~13:20 — Proposes structural market reform to alleviate distributor pressure; signals industry-wide concern about pricing restrictions
“If it was Karate Kid, those games are gone day one. They're not sitting in a box at automated. If it was Die Hard, they're gone. If it was Fifth Element, they're gone. If it was Big Trouble, they're gone.”
Kaneda @ ~20:15 — Identifies IP requirements for breakout commercial success; suggests niche licenses (Labyrinth, Evil Dead) insufficient for large production runs
“D&D is a B to C theme at best. It is not a take my money now theme for most people.”
Kaneda @ ~18:30 — Opinion on upcoming Stern D&D potential; argues it lacks mass-market appeal needed to clear inventory
“Stern Pinball needs a hit. They need a hit. They need to give the distros and the dealers something that is going to fly off of the shelf.”
Kaneda @ ~16:45 — Assessment of Stern's commercial desperation and need for blockbuster IP to stabilize market
“It's just the prices of these things... the whole row of games is worth over $150,000. It just doesn't feel right.”
Kaneda @ ~12:00 — Visceral reaction to market valuation disconnect; questions sustainability of current pricing tiers

Entities

Kanedaperson MikepersonAutomated PinballcompanyStern PinballcompanyChristopher Franchiperson George Gomezperson

Signals

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market_signal: Direct observation of hundreds of unsold new-in-box pinball machines at major distributor Automated Pinball, indicating systemic oversupply across Stern, Jersey Jack, Spooky, and other manufacturers. Kaneda estimates thousands of games in similar warehouse conditions nationwide.
high · Kaneda's first-hand tour of Automated Pinball: 'walking through hundreds of games just sitting there, new in box... There are thousands of new in-box games sitting in boxes right now in America.'
$
market_signal: Secondary market valuations 20-30% below MSRP for recently released games. John Wick LE $13,000 retail selling used for ~$10,000; Venom Pro predicted to command $3,000-$3,500 (50% depreciation).
high · Kaneda: 'John Wick Ellie... on the used market, it's now going for about $10,000... the cardboard box is now worth $3,000.'
?
regulatory_signal: Manufacturer MAP (Minimum Advertised Price) restrictions prevent distributors from reducing prices on unsold inventory, creating frozen assets. Kaneda argues restrictions should expire after 12 months to allow market-rate clearance.
high · Kaneda: 'Mike can't sell those games for the market value because the market value is less money than the map pricing deal... the map pricing thing needs to go away after a game's been out for a year.'
?
business_signal: Legacy distributors like Automated Pinball facing margin compression and inventory burden as manufacturers allocate LEs to new online dealers using drop-shipping model. Distributors with showrooms and service infrastructure disadvantaged relative to e-commerce competitors.
high · Kaneda: 'Stern has invited so many new dealers into the fold... they're basically drop shipping the games to customers... Mike should have given him like 50 Metallica LEs, not 15.'

Transcript

groq_whisper · $0.070

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We are living in a material world, and I am a material girl. You know that we are living in a material world, and I am a material girl. Sitter, sitter, sitter, sitter, sitter, sitter. Welcome everybody to the Canadas Pinball Podcast. Happy Monday. I've been thinking a lot about this show, and what I want to say on this episode is going to be inspired by my trip over to automated pinball because I got to see firsthand the reality of what some of these distros and dealers are up against in a world in which if you want to get your allotment of Stern LE games, you also have to commit to buying a bunch of premiums and pros. And for many, many years, that was like a win-win situation for distros and for consumers and for Stern Pinball. But now, as you saw in that video, what did it feel like walking through Automated and seeing hundreds of games just sitting there, new in box, and Mike can't sell those games for the market value because the market value is less money than the map pricing deal. And so how does he get rid of all of that inventory? We're going to talk about that. We're going to talk about what's next from Stern Pinball. I know Jason Knapp is now saying it is Dungeons and Dragons. It is either D&D or King Kong. I'm going to give you my rationale for why I think it's going to be King Kong. And then we'll just talk about some other stuff going on in the pinball hobby. Let's start out by saying there was a great interview with Mr. Franchi and George Gomez that went up this weekend, in which I think finally, finally people can start realizing that it was not Kaneda's fault. I'm not the reason why Mr. Franchi is no longer at Stern. They had a really good conversation about their relationship together. I think the thing that sticks out the most is simply this. When you make artwork for a company and for a game, you don't own the artwork. Stern doesn't even own the artwork. It is the IP holder that owns the artwork. Now, in the world of art, I know it's sort of like a gray area where artists will bring stuff to shows and sell it. And as long as it's not that many items and it's not that expensive, it's sort of not frowned upon within the artistic community. But you're still making money off of IP that you don't own. We've seen Franchi make beautiful translights for stuff like Superman, stuff like Jaws, stuff like Wonder Woman. And yeah, it's nice stuff to hang on the wall in your house, but it might not be stuff that he has permission to sell. I'm a hypocrite here. Everybody knows I'm a hypocrite because I use an image as well from the anime Akira. And I use Kaneda as the image for my show. Am I selling that? Not really. I kind of took down my merchandise. But I've always used Kaneda as my avatar. But again, there's always that line of like, it's very much within a company's wheelhouse to send you a cease and desist. I think in the end, what Gomez was really saying to Christopher Franchi is, look, the people who work here, the company and the team is more important than any one individual's credit or fame. And I think what happened, Franchi is a big personality. He likes to stand in front of everything. He likes to go in front of the crowds. He likes to be on the stage. And it's just the kind of personality he has. and I think Stern wants people to be a little bit more subdued. I think they want people to be a little bit more reserved and I think it was just more of a personality clash than anything else. That's just the way business works. Every company out there sometimes lets very talented people go simply because the chemistry and the personalities don't sync up. So look, I think everyone's happy he's over at Spooky. I think he crushed it on Evil Dead and I think outside of Zombie Yeti, right? Think about it. Like who's the great artist they have outside of Zombie Yeti over at Stern Pinball? They really don't have like an amazing, amazing artist. Randy Martinez does good stuff, but I don't think it's better than Franchi's work on Stern Machines. And I think overall, like all these companies, there's a lot of really talented artists out there. They should constantly be thinking about who's the best artist to put on this game. Now the challenge in pinball art is really understanding how to make it work on a pinball machine. If we look at the artist for the new Metallica game, he's an amazing Metallica artist. Like look at the art on the Metallica posters he's made. But when I look at his play field, when I look at his play field artwork on the new Metallica, it 100% shows me he doesn't really know yet how to make a pinball machine versus like a poster. And that's why the cabinet looks really good. The trans light looks good. But the play field itself and doing the artwork and designing the art around inserts and whatnot, not really the best effort from Stern Pinball. All right. So there's that. It was really great to see Todd Tuckey this weekend. Todd, we're always thinking about you, especially now. But it was a lot of fun just hanging out with Todd. I think Todd, Tuckey, and Kaneda have such a good back and forth with each other. I think our personalities go so well together. And it was so awesome doing a tour of automated pinball with Todd Tucky and seeing all of those games. I want to talk about this and what it means walking through that place and seeing hundreds of unsold new in box games That just one distributor Do you think other distributors out there have a lot of inventory They must. And here's the crazy thing. Either Mike is just over buying everything or the pinball hobby over the last few years has become really soft when it comes to new in box sales. And as I was walking through automated and I was seeing every game from the last three to four years. There weren't many LEs there, but so many premiums, so many pros over and over and over again. Yeah, there were a bunch of John Wick LEs, but it wasn't just Stern Pinball. You got all these Jersey Jack machines. He had a whole row of Pulp Fiction SEs just sitting there. So the demand for these games that are just sitting there is like zero. He even had like an Oktoberfest new in box and he had a bunch of barrels of fun games there as well. And here's the thing I thought about when I was walking through there and I got to play Labyrinth for the first time and then I'm walking through automated and I see these Labyrinth games new in a box just sitting there. They're not going out the door. And what that telegraphs to me is one simple thing. The demand for this game right now is zero. There's no demand for a new in box labyrinth game because it's sitting right here. If anybody out there in America wanted one new in box, they could have it tomorrow, but it's just sitting there. And so now what? Everyone's waiting to pick up a used version of the game. And what do you do now if you're Mike and you're sitting on all those games and the companies don't want you to list those games for the market price. Let's take a game like John Wick Ellie, a $13,000 game. It's sitting there. And on the used market, it's now going for about $10,000. So the cardboard box is now worth $3,000. How do you sell that game if you're Mike? So the only way he can sell it is if he unboxes it, puts it on the floor as a used game, and then he can charge whatever he wants for it. Why? Why is this the practice of pinball? Why can't a brand new game in a box after being out for a certain amount of time, why can't a distributor that bought that game with their money, why are they not allowed to set the price on the game? He's not even setting the price on the game. The damn market is setting the price on the game. And here's what I think has happened. I think Stern Pinball has screwed over all these guys. The old guard of pinball distributors, they're all getting screwed over because what Stern has done recently is they've invited so many new dealers into the fold. And a lot of these new dealers, they don't have showrooms like Mike. They're not going to show up and help you fix your game if you have issues. They are simply selling the games. They're basically drop shipping the games to customers. And that's it. They're not going to do anything else for you. and Stern is allocating games to those individuals. They're allocating LEs to those individuals. When I saw the number of games Mike has, Stern should have given him like 50 Metallica LEs, not 15. So he's sitting on all these games. And to go back to Labyrinth, as I see those games just sitting there with zero demand at MSRP, you know what that told me? They might as well just stop making them. Why would they make more? It's over. Once your demand is zero on a new in-box version of your game, how are you walking into your factory every day and making more? It makes no sense. You're pumping more supply into a zero demand market. And I think something needs to give. And I think here's the reality. And I've been thinking about this all weekend, people. When I walked through there and I saw all those games, and I know that's just the tip of the iceberg. There are thousands of new in-box games sitting in boxes right now in America. And the new reality is this. These games are worth a lot less than people think. A lot less. Because if the real supply ever hit the market, these things would collapse in price. And I think we're living in a world now, I'm just going to say this. When you have a game like a Venom Pro, that game is worth like 50% less than it is brand new. You're going to start having to take like $3,500 on the table. $3,000 is what these games are going to be worth. Especially used. especially because there's so many games. We're not just talking like one or two titles. We're talking like thousands of games and we're talking these are all spread across all these different IPs. Where are those games gonna go? Think about it for a minute. Where are those games gonna go? And what, they're just gonna sit in these warehouses forever and these companies are not gonna allow these like sellers to set the price accordingly. And that is why I say it's like the tip of the iceberg. The collapse is coming if there's that much unsold inventory. Who is going to be left holding the bag? Now, you could argue, you could say, Chris, look, the person who's going to be left holding the bag on all of this are going to be people like Mike and Stern and JJP. They're not going to care. They're just going to go and find new people to sell their product. They might think about selling their product directly one day. They're not really going to care. Mike represents the old way of doing business. And it makes me kind of sad because Mike has been very loyal to these manufacturers. And I think they did a disservice to this guy because the way they sell games to him in this bundled fashion, and then they didn't make great games. They made games that lost so much value Then Mike gets left holding the bag Every single game I walked by at Automated those manufacturers got paid They got paid top dollar on each one of those games. So Mike has forked over what is easily a few million dollars on inventory. All the manufacturers got the money they wanted. He can't go get the money he wants. And now he's stuck with these frozen assets. it's absolutely bonkers and it's insane and the fire sale is coming people you know it's got to happen so what's going to happen right what's the way out for a guy like mike what's the way out for all the other distros that are sitting on all this inventory when the market value of the games is like 30 less than the map pricing restriction on them how are you going to move those john wick lees how are you going to move all those venom premiums how are you going to move all those games how are you going to move all those pulp fictions how are you going to move all of these games. And when you walk through that environment, you're like, wow, this industry is making way more product than people want. I mean, just think about that for a minute. This industry is cranking out way more items than there is demand. That is how a market collapses. It becomes oversaturated. It's not a sign of good things to come. And then you add into that how expensive all these games are. Prices are about to go up. I had a moment to at Automated. I'm going to be completely candid here. I was standing over three Jersey Jacks CEs. They were right next to each other. There was a Toy Story, there was a Godfather, and there was an Elton John. And I was just walking across those three games. And I had a moment after looking at all three of them, I could just stand back and look at all three of them, it didn't feel like I was looking at $45,000 in product. How the heck did we get here? $45,000 for these three games. And then you look at what the market value is on those $45,000 games and you've lost about $10,000 to $15,000 in value. And I went to the other side, I saw all the Stern machines as well. And look, as pretty as Blood Red Kiss Edition is of Elvira, you don't feel like you're standing over a $13,000 item. You just don't. And then I looked at Godzilla 70th. It doesn't feel like a $9,500 item. It's just the prices of these things. And when you have them all lined up like Mike does, it was a little bit of like, I had a little bit of an epiphany. Like, oh my gosh. Like this whole row of games is worth over $150,000. Like the whole row of games there. It just doesn't feel right. Here's what I think needs to happen. The map pricing thing needs to go away after a game's been out for a year. There's no way around it. Last year's model needs to be able to be sold new in box for whatever the damn distro wants for it. I don't care if you've got a Venom LE and the distro wants $8,500 on the table for a new in-box game. You got to get rid of the restrictions on these games. The more games they allow to pile up like this, the weight of that is going to collapse this market because eventually aren't those games going to somehow make their way into the market? So the oversaturation of pinball is being hidden from us, right? It's just being hidden. It's there. There are thousands of games in boxes in Chicago in a warehouse that have no homes. So what are we going to do? Let's make more games. Let's keep making more games. Let's release D&D. Let's make 888 Evil Deads. Let's make more Cuphead. Let's make this. Let's make that. Let's just keep pumping thousands of new pinball machines into the world as thousands of old machines are sitting there with nowhere to go. I don't know how long this can last. It just seems like it can't last much longer. So that is why I think King Kong needs to be next. I'm going to segue to that because there's just no way with all of these games. There's no way that Dungeons and Dragons can be the follow-up game to John Wick and X-Men. Stern Pinball needs a hit. They need a hit. They need to give the distros and the dealers something that is going to fly off of the shelf. If they give them D&D, think about it for a minute. why would there be any urgency in a million years to buy dnd le if they make a thousand units why would there be any urgency ever to buy dnd premium edition i think the premium is absolutely like the weirdest buy right now because what does it mean they can make it forever it's so overpriced to begin with and i'm starting to think that the 600 price increase is going to be on the pro unit alone. I do think that because when I spoke to Seth, he said, I think we're underpricing the Pro and we're overpricing the LE a little bit. And if you look at a game like X-Men, I think that's true. It's like crazy that an X-Men LE is twice the price of an X-Men Pro. And if you paid another 600 bucks for the X-Men Pro, you still are getting a lot of game. But if you try to take that $13,000 LE up to $13.6. I mean it. I think people are already done. And I think that would symbolize such a high level of greed that more and more people are just going to say, enough, we're not doing it anymore. So as I've been reporting a $600 price increase, I think it might only be on the pro edition The reason why I think King Kong needs to be next as well is if you release D and by the way we hearing now that the big mechanism that was in the future game is now not in the game anymore So maybe that D If you release D next and it's supposed to be on Spike 2, who's going in on that game knowing that Spike 3 is right around the corner, and it's going to be a Keith Elwin game, and Keith Elwin's team is so much better than the team that Brian Eddy gets. So good luck. Good luck trying to find sales, especially when, again, there's not enough demand to justify any of these $13,000 LEs, and then they're going to make the premiums forever. So where's the FOMO? Where's the sense of urgency? There's no urgency in a title like D&D. Gang, you need to realize D&D is a B to C theme at best. It is not. It is not a take my money now theme for most people, nor is Evil Dead. Evil Dead is still not sold out. It's not sold out. Look at everything they put into that game. Look at how beautiful it is. It's still not sold out. It's like when I played Labyrinth 2, I enjoyed playing Labyrinth, but the whole time I was playing it, I'm just like, you know, if you love Labyrinth, you're gonna love this game. But if you don't love Labyrinth, it's easy not to get one. There wasn't enough there in that game if you don't love that movie to pull the trigger on one. And the reason I know that is upstairs, they're just sitting there new in box. If that was Karate Kid, those games are gone day one. They're not sitting in a box at automated. If it was Die Hard, they're gone. If it was Fifth Element, they're gone. If it was Big Trouble, they're gone. I mean this when I say it. If it was Beetlejuice, it's gone. The days of these niche subculture themes, it's fine if you want to sell like 500, 750 at most. But if you're trying to get more than that, you're not going to find anybody. You're not going to find buyers once you start making over like 700 of these games. And I think that's probably how many Labyrinth games they sold. And they said they wanted to make 1100. Now think about that. Their estimations about how many they wanted to make were probably about 400 more than the world wants. They haven't even made 750 labyrinth games and they're sitting in boxes at automated, which means there's not even demand for 750. And again, it's why more than ever, market research matters. You can't just make games you want to make for yourselves. But man, that's not the real issue, right? The real enemy is that there's too many games out there with no home. Everyone's out of space and those games need to go somewhere. And what happens, right? What happens? What happens tomorrow if Mike is like, I'm done. I'm closing up my shop. Is he then not allowed to sell his game? Just think about that for a minute. Imagine if Mike wants to retire and he's got 600 games new in box and he just wants to get out. Is someone gonna buy his business? How could anyone even afford to buy his business? How do you even value what each of those games is worth? And I mean it when I say it. Some of those pros are now like $3,000 to $4,000 at most. And you're losing money on most of those games. Stern's going to end up getting more money from Mike than a lot of those games are worth. Now, the one thing I want to give advice to everybody out there is you got to find some ways to break the rules a little bit or at least take advantage of things. Mike had an open house and the games on the floor, the prices on them, there was no sale price. Nothing was offered for less money than new. You walk up to like an Elton John CE and you want $15,000 for the floor model. It's just not going to work, you know, especially when you can go on pin side and an Elton John CE is now like 13. So I know it's hard and I know it's tough, but it's not a business I would want to get into right now. And I think every dealer and every distro, if they're looking at what the next five years looks like and all this inventory is piling up and these companies are going to keep raising prices and we've got like 10 pinball companies flooding the market every year, I don't know how you think that this is going to be a good business to be in for a lot longer. Am I right? Am I wrong? I don't know. It just feels like there's going to be a revolt once these distributors and dealers realize they've been set up to fail by the system that forces them to buy in bulk just to get these LEs that don't even have the value anymore that they used to have. I think it's all going to come crashing down like a house of cards soon. Only you super rich guys are not going to care because you will have made money elsewhere in the world. But for everybody else who put way too much money into this hobby, I think you're going to see a disastrous return on something that you thought would be much more stable. Hit me up at canadapinball at gmail.com. Happy Monday, everybody. We'll be back. Is Cuphead on the line or not? It's clearly not on the line. Come on, everybody. We know the story there. They have to sell all the existing inventory until Mukesh will let them make Cuphead. That's what's happening there. And we shall see if it is King Kong or D&D. I say it's King Kong. Jason Knapp says it's Dungeons and Dragons. So we'll see who's right. It's going to happen in just a few weeks. Everybody, happy Monday. We'll talk to you soon.