Portrait of a Pinball Wizard
Gary Stern entered the business early. Now, as the owner of the sole surviving machine manufacturer, he's the only game in town
Most entrepreneurs dream of building a successful company and one day eliminating the competition. For Gary Stern, that dream became a reality. As president and owner of Stern Pinball, he presides over the planet's sole surviving pinball-machine manufacturer.
In 1932, there were an estimated 150 pinball-machine makers worldwide. Today, Stern Pinball stands alone. Based in Melrose Park, Ill., about 10 miles west of Chicago, Stern has been the only game in town since its remaining competition folded in 1999, making Gary Stern -- its silver-haired, pinball-tie-wearing Willy Wonka of sorts -- the only person keeping this piece of Americana from extinction. "If we ever quit," he says, "that will be the end of pinball."
The game, developed in Chicago around the time of the Great Depression, has come down to this: A single privately held company with 56 full-time employees and revenue of just over $30 million that puts out three or four new models a year. The entire world's supply of new coin-operated pinball machines is limited to the roughly 10,000 that roll off the Stern assembly line each year.
"IT'S KISMET." Stern has been around bumpers and flippers nearly his entire life. In 1961, at age 16, he began working as a stock boy for Williams Electronics Games, a Chicago-based pinball manufacturer. His father, who got his own start in the 1930s as a game operator, ultimately founded Stern Electronics in 1976, and father and son ran the business together, after Gary's stint as an attorney.
In 1986, not long after his dad's company folded, he branched out on his own, selling a business plan for Data East Pinball, and was hired as general manager of the newly incorporated concern. Japanese video-game giant Sega purchased Data East in 1994, rechristening it Sega Pinball. Five years later, Stern bought it himself and put his own name on the shingle. Right around the same time, Williams -- the only other surviving manufacturer and, ironically, the place Stern got his start as a teenager -- was shuttered by its parent company, slot-machine maker WMS Gaming, giving the market solely to Stern.
"For Gary, pinball is absolutely something that's near and dear to his heart," says Roger Sharpe, an industry veteran still employed by WMS and author of Pinball!, which chronicles the game's history. "It's something he believes in wholeheartedly, it's something he has been around his whole life. It's kismet."
HARD TO OUTSOURCE. Stern's 40,000-square-foot facility houses the entire operation under one roof -- from assembly of the machines' large wooden cabinets to a specialty design shop, complete with 3D computer models.
A walk around the factory floor reveals an increasingly rare sight in America: In an age when outsourcing has become the norm and automation takes care of the rest, pinball machines are still made much the same way they were 70 years ago -- by hand. Each contains about 3,500 parts and takes more than three days to construct. "It's a complex game," Stern says.
Stern claims it would be impossible for him to move his assembly plant overseas because "the nature of the product requires it to be near our engineering," and a shift to, say, China would actually increase the cost of making the $4,000 machines. Watching his manufacturing process in action, it starts to make sense. In seconds, specially trained game engineers can walk to the factory floor and examine how their designs look and work in practice -- and make modifications.
The staff is divided about equally between factory employees and front-office staff. In addition, up to 150 temporary factory workers are employed at a given time to meet demand. About 35% of Stern's sales now come from overseas -- primarily in Western Europe but also in growing markets such as Russia and China.
GAME OF SKILL. Pinball has changed a lot over the years. It was banned for decades in cities such as New York, Chicago, and Los Angeles for being a game of chance -- and, thus, a gambling device.
"In Chicago it was banned, amazingly, from 1941 to 1976, and Chicago is where all the manufacturers were," says Sharpe, who testified to the New York City Council in 1976 in a successful attempt to overturn the city's anti-pinball law. "You have, over three decades, these three major metropolitan areas in the United States not having pinball machines."
The advent of flippers in 1947 (before then, players manipulated the ball by "tilting" the machine) placed a new level of control in the player's hands -- a development that would eventually, after years of political wrangling, convince lawmakers that it was a game of skill and therefore should be legal.
BRANDED PROPERTIES. Like the flippers of generations ago, Stern views his company's newest developments -- games that feature Spanish and other foreign-language announcements and dot-matrix animation displays -- as potential milestones. "We think Spanish is important in America," Stern says. "We need to broaden our market."
Every Stern Pinball machine is now a licensed product. Recent models include Elvis, Playboy, and Monopoly. "People are already starting to buy The Sopranos," says Jolly Backer, head of sales at Stern Pinball. That, of course, refers to the newest model, which debuted in the U.S. in February and is based on the HBO mobster series.
"The licensing also gives the game designers a framework within which to develop the game," Stern says. "When we made Jurassic Park, it had a ball-eating dinosaur. Why did it have a dinosaur? Because it was Jurassic Park! It tells you to do that!"
NOSTALGIC HOME BUYERS. Licensed products also allow the small company to tap the expertise of "other creative people," as Stern puts it. "It adds a whole new dimension to it," he says. "Arnold Schwarzenegger did all the speech himself for our Terminator 3 game. All the artwork for The Simpsons was done by the Simpsons people. For Lord of the Rings, the movie company was very involved in telling us which aspects they thought should be in the game."
Even though his outfit has had a virtual monopoly for five years, Stern is quick to point out that he still faces competition. "We compete with all different kinds of games, we compete with movies," he says. "Our market is not pinball machines -- our market is entertainment."
Although sales have remained stable at about 10,000 units a year, the coin-op business has been on a downward trajectory for years. As recently as the early 1990s, the industry churned out more than 100,000 machines annually.
As a result of the decline, Stern Pinball has diversified its operations. Among the additions: "redemption games," in which winners receive tickets exchangeable for trinkets at video arcades. Stern credits the stable sales of traditional pinball machines to increases in nostalgic home buyers, which now account for roughly 20% of total sales -- and the number keeps growing. Stern Pinball doesn't sell machines directly to consumers, instead relying on a network of 33 distributors throughout North America, Europe, and Asia.
LABOR OF LOVE. And what if another company tried to enter the pinball market? "One of two things would happen," Stern says. "One is they would lose all of their money. The second is they might kill us because there's room for one. We're striving towards 10,000 machines a year, our breakeven is 65% or 70% of that. If somebody else came in, they would bring us to breakeven or below -- and maybe kill us both."
"I don't think he's making zillions of dollars," says Jim Schelberg, editor and publisher of Detroit-based PinGame Journal. "But he's making a living and employing a lot of people. He's producing a game that a lot of people enjoy. We all in the pinball hobby are rooting for him."
Stern is the first to admit he's enjoying it. "They teach you in business school that you're supposed to be in love with business, not in love with your business," he says. "But we're in love with our business." Looks like it's not so lonely at the top after all.