>I have to assume that in the 30+ years they've been operating, they've
>managed to pay off their mortgages and own their equipment outright.
>If not, then Gary Stern is nowhere near as competent a businessman as
>I would expect.
Well, assuming doesn't always end us up in the right spot. The
building that houses Stern pinball is owned by an IL LLC named Summit
Warehouse. The principals in that LLC include the former head of Braun
and his daughter. So, based on that, I am going to assume that Stern
rents from them. :) Summit bought the property in 2001 from Duke
Realty.
>As far as the venture capital guys.. I'd sure be interested to know
>what that was needed for? It's not like Stern did any major changes
>to their process that I can see. Was Gary slowly running the company
>into the ground or was the market diminishing to the point where he
>couldn't sell enough games to cover his expenses? In any case, unless
>he took out mortgages on his property I'd expect him to be sitting on
>top of some decent assets.
As a former CFO of a billion-dollar telecom co, here's what I can tell
you about venture capital. Money from them is usually needed for one
of two reasons...to grow a company or to save a company. In either
case, they are usually the last source of capital...when the Amex is
maxed out and there is no more bank financing available. In a private
company like Stern, they become a partner. They just don't stroke the
check and tell Gary "Let us know how things are going from time to
time". They usually assume a disproportionate amount of control in the
firm relative to their equity ownership in the firm.
Does Gary Stern strike you as someone who would like a partner?
Not suggesting that Gary "ran the company into the ground" at all. I
am suggesting that there was probably a need for capital at Stern that
couldn't be fulfilled elsewhere. But 2008 and 2009 were not economic
times that were favorable to businesses like coin op and Stern. In
addition, they did have a four-game run in there with Batman, CSI,
NBA, and 24, just before the investment. And with respect to changes
at Stern since then...they did bring in a lot of new talent. They
adopted a new business model that focused much less attention on
operators and much more on collectors. They made a run at mass-
distribution retail....Sears, Best Buy, Costco. They adopted a new
strategy of "levels" of product...good/better/best, with margins
designed to do the same: low/medium/high, starting with LOTR as the
first LE, designed to create demand (and extra margin) for an
improved, artificially scarce product.
So all in all, to me, it seems like a lot has changed for Stern since
09.