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Timezone planning massive expansion as shopping malls seek to entertain

Lucy Battersby
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Once dubbed "crimezone", Timezone used to be the kind of place parents warned their children against visiting. Amusement arcades were noisy dark places where bored teenagers wasted time and were sitting ducks for nefarious types. Melbourne City Council even requested a ban on parlours in the late 1990s.

Then the internet came and arcades started closing down as teenagers and gamers found Xboxs, Playstations and then smartphones delivered the same thrills without the need for gold coins. 

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Timezone set to expand

It's been around since 1978, is in six countries and has 182 stores, and now it's set to get bigger.

Now, shopping mall owners are actively seeking out arcades as they revamp the malls as leisure destinations. And Timezone wants to get the bonus points as its customers of the 80s and 90s look for something to do with their own kids. 

"It is a complete turnaround of what we are perceived as," Timezone's chief executive, Scott Blume, told Fairfax Media. 

He says parents get nostalgic when they play games they used to enjoy, and even see amusement parlours as a more sociable and physical alternative to their children playing on phones and tablets. 

Game on

After watching their annual revenue grow at double digit rates in existing stores, Timezone opened five new stores in 2016. 

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In late January the board signed off on a massive expansion program.  

Under the new plan Timezone will double its stores across Australia and Asia. It currently has 186 stores, including eight in New Zealand, eight in Singapore, 25 in India, 50 in the Philippines and 70 stores in Indonesia. 

Chairman and part-owner, Adam Steinberg, said Timezone is seeing "incredible resurgence in demand for out of home entertainment".

"Look at the '70s and '80s when Timezone had a heyday as a gamers paradise,"  he told Fairfax Media. 

"It was all about where to play the latest and greatest games. Now Timezone has positioned itself as the place to go with your friends and family."

Timezone has always been privately owned by the Steinberg family of Perth. It once had around 50 stores in Australia but started closing them  in the 1990s. It voluntarily pulled out of Melbourne CBD in 2003, six years after the Lord Mayor requested a ban.

However, at the same time they were closing stores here the Steinbergs were expanding into Asia. Today just 25 per cent of its revenue comes from Australia.

Winner

The company needs to raise money for the expansion because modern customers demand more than just air hockey, pinball and whack-a-mole.

A new 1200 square metre concept store at Pacific Werribee shopping mall cost $2 million to build and includes mini bowling and laser tag.  

Timezone is currently debt-free but will soon start tapping debt markets for funding. Mr Steinberg ruled out floating the company on the share market. 

"It is unlikely that we would float at this point of time. A couple of years down the track it is a possibility," he said. 

All the new stores will be owned by the family company. 

"We are not going to grow any further through franchising," Mr Steinberg said, adding there were still six franchises in the existing network. 

"Frankly, we would probably look at options to bring that back to the company-owned network should the opportunity arrive".  

The business enjoys annual revenues of about $125 million and is "very, very profitable", according to Mr Blume. 

Enter Player 2

Another big player in indoor entertainment is Playtime, which is owned by AMF Bowling, part of the Ardent Leisure empire. AMF's centres contributed revenues of $130.5 million in 2015-16, similar to Timezone's revenue. From this Ardent received pre-tax earnings of $18.2 million, a 30 per cent year on year increase. 

Ardent owns 48 bowling centres and six amusement arcades in Australia and New Zealand, including three new centres opened in 2016. It told shareholders it plans to "build or acquire new Playtime amusement centres in prime shopping mall locations, targeting [earnings] return on investment greater than 25 per cent" at last year's full year results and will spend $6 million on capital expenditure. 

Roy Morgan has published research showing the spending on leisure and entertainment reached $137 billion in 2015-16, up from $109 billion in 2009. Of this $77 billion is spent on "going out", $43.5 billion on entertainment at home and $17 billion on gambling. 

Centre manager at Pacific Werribee, Jonathan Codman, said providing families with food and entertainment options "eliminates the need for locals to travel distances for a day of fun with the family". Werribe is a growing urban area about 40 kilometres west of Melbourne city. 

"At Pacific Werribee, we're committed to being the go-to destination for families in the inner west," Mr Codman told Fairfax Media, adding young families make up more than half the  residents. 

"Our recent $400m redevelopment has evolved the centre into a one-stop fashion, lifestyle and entertainment destination and Timezone has been a key addition to achieving this ... for mall owners, Timezone provides additional activity options in the centre's entertainment precinct meaning customers have the option to play during the day or after centre trading hours."

Mr Blume said Timezone receives enough requests from shopping centres to believe it can double its business in three years. 

Get with the times

There are some key differences to the Timezone of your youth.

The new stores are bigger, brighter and have more variety. While older stores were about 400 square metres - a bit bigger than a basketball court - the new stores need up to 2000 sqm to accommodate bowling alleys, laser tag, electric cars and rides.

And arcades now use swipe cards to collect exact information about customers and games. 

"Swipe cards are nice and consumer friendly, but the real reason we use them is to get the data on what the machines contribute and what the best mix of them is to maximise revenue," Mr Blume said. 

When machines were coin-operated Timezone knew some games collected more coins, but now it knows exactly how many times a game is played and when. It offers a VIP program to encourage people to sign up so it can collect demographic information.

Mr Steinberg says today's Timezone is not competing against at-home gaming or phone games. He is competing against cinemas and bowling alleys.

And he believes the game you are playing is not as important as who you are playing with.

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