How-to Series: Starting a Video Game LAN Center

Painting/Construction of the very first eBash location. We learned the hard way!

This is a post series that I started 2 years ago on my old blog that hasn’t made it over to this new site.  I have taken about a dozen inquiries in the last few weeks from prospective LAN Centers and it really brought me back to this series.  I will start by reposting the original few blogs and then pick-up where I left off on the series.  Hopefully I can categorize all of this into a nice little section of the blog for reference.

Originally written 8/27/2009

Lately I have been talking to tons people who are thinking about opening a game center as well as those who have recently opened and are still trying to find the magical solution. eBash currently has 3 centers open and we still push the limits of the industry and constantly try new ideas and concepts in the stores.   A recent conversation with David from Virtual Arena (2010 NOTE: R.I.P. Virtual Arena) made me realize that there are stages we go through in this business.

However there are some core things that have happened over the years with our growth that I have divided into “Phases” of being in business as a game center owner. I thought that I would dive into each of these phases to dig out more of the problems and solutions that seem to continually come up in discussions.

The individuals who are in this first phase, which I call “The Idea” phase, drive me crazy most of the time. I am going to try and keep as many things as vague as possible to protect the identities of the individuals. However some of the situations continue to remind me how far we have come and the milestones we have hit along the way.

Usually there is a pretty good chance that the person wanting to start a game center is a gamer. In fact I can’t recall meeting a single person who was not a gamer that wanted to start a game center unless their son/nephew/brother is a gamer. The problem with that is that from what I have seen gamers make terrible businessmen.

Gamers get it in their mind that the LOVE of video games = money. This is not true. Just because players love to play does NOT mean that they will show up at a game center to pay to play. In fact the most diehard gamers usually make for terrible customers. They are always “too good” for the systems and players at a game center. My own opinion is that the diehard gamers are socially handicapped and cannot interact with other humans very well.

So these gamers decide they want to start a game center and of course they know EXACTLY what will work to make TONS of money. Here are a few of my favorite things they come up with right out of the gate:

– Big Screens for Consoles. In fact the bigger, the better they say. I have seen centers open up with all rear-projection 50” screens or ONLY projectors with big screens on the walls.
– The diehard PC guy: We will run 16-20 computers and then maybe 1 or 2 Xbox stations. I mean seriously, just buy more computers. I love it when they then say the Xbox isn’t popular and no one ever plays it. DUH!
– I have the perfect location. This is usually followed up by the “its right across the street from a big college” or “the rent is only $300/month”.
– I only need 12 stations to make a profit. This is usually followed up by a comment about how their marketing is going to be so awesome that all 12 stations will be filled up all of the time.
– Pricing. There are way too many different pricing errors made to list just a few here, but usually the best are either: Too High (ex: $10/hour), Too Low (ex: $1/hour), Bad Products (Long Passes: Month or Year)
– “I will be able to get all of my games for free”. Somehow those who are not actually in the industry yet have this idea that all gaming centers get everything for free. They just assume that since “Game Centers are so Awesome that Microsoft, Sony and Nintendo will give us everything for FREE to promote themselves”.
– Do I really need a business plan?
– I am going to go to a bank and get a commercial loan.

There are plenty more examples of bad idea in the first phase of “The Idea”. However what it all boils down to is one thing I now know:

Experience > Intelligence

I don’t care how smart you are, how many people you know, how big your checkbook is or what your background has been the fact is you will probably fail in this industry if you don’t have help to get started.

Those of us that have been open for more than 5 years have only done so because they have all of those things + luck + the ability to adapt quickly on the fly.

Most of us as independent business owners are proud individuals and it is hard for us to admit when we are wrong. That is the first thing that we have to do ESPECIALLY in an industry where there are no proven models yet. Even today the top game centers have yet to establish a long term history of profitability and expansion.

None of us have all of the answers. But learn from those who have gone before to keep from making the same mistakes.

I might actually stop answering the question from people who call me about franchising: “Why would I franchise with eBash instead of doing this myself?”

End of Original Blog

Before I post the second part of this series I will spend the next few days breaking down the 8 statements above and give more information WHY those ideas just don’t work and will push new centers to failure.

21 thoughts on “How-to Series: Starting a Video Game LAN Center

  1. Pingback: Tweets that mention How-to Series: Starting a Video Game LAN Center « BoZack's Blog -- Topsy.com

  2. Greetings,

    I would really appreciate if you could get in touch with me via email, you have almost the exact business model I was going for and I would very much appreciate being able to talk to one of the only largely successful Lan Centers out there.

    Thanks in advance.

    ClarkLegault@gmail.com

    • I get quite a few questions but I will try to answer as best I can. I sent you an email saying something similar. Just keep in mind that the worst thing to do would be to ask me “Tell me everything you know about running a game center”. Instead pick 3-5 of your top questions and I will be able to answer those without too much trouble.

      • ebashbozack im on a verge of opening a gaming centre but o have questions so how do i get in contact with you via email

      • I am super busy, so I usually only try to answer a few generic questions to help as much as I can. Please understand that it might be a week or two before I can reply, but you can send me an email which is my first name, zack, at my company domain name, @eBash.com

  3. my only question would be is a lan center profitable if you did like a 20-25 computer setup with a cafe and computer repair on the side … that would be my only question to you. Im in the researching stage right now

    • Steve – Obviously with a secondary income of any kind to help with overhead you could make a smaller center work with 20-25 systems. When I started in 2004 I had an eBay consignment store running already so I the game center side didn’t have to pay rent, employees, utilities and other basic expenses. I had 14 xbox stations and 12 computers, but we quickly started adding more and within 6 months I had 20 xbox stations and 28 computers.

      After 7 years now the only way that I feel you can be successful is to make sure and max out the number of stations. Even in the SMALLEST community you should have no problem attracting a body for every seat in your store on a Friday and Saturday. The WORST thing you can do is have customers walk in the door, not have a seat, get the impression that you are small and then never come back.

  4. Mr. Ebash,

    I’m looking and hoping to get into the business. I’m stuck at one point in my business plan. How do I navigate past the “non-commercial use” and “only for personal use” clauses in the user agreements. I’m trying to avoid litigation and being sued for using xbox, playstation, and nintendo products for making money. Any suggestions or advice?

    Thanks for your time

    Reggie

    • Actually Reggie this isn’t as big of a sticking point as it was 5+ years ago. When we first opened there were publishers sending out mean letters to game centers threatening to come after them legally. Since then everyone has really loosened up as long as you have either:

      A – Purchased all of the games for every simultaneous running station. If you have 50 computers, and there are 22 people running a game at once you need to have purchased 22 total keys/licenses for the game.

      B – Join their game center program if they offer one. This one is mainly for Steam games through Valve. Although Blizzard offers a crazy program that is outdated for their older games.

      Also I would recommend joining iGames (www.lancenters.com) which is not very expensive and they have the licensing packages for almost all of the major publishers already completed. You will end up with a folder full of approval documentation to run the games in a commercial environment.

      Hope that helps!

      • You are the man!!! That helps a lot sir…. Of course I have more questions to ask :-). My next question is, what are the most noticeable peak and down times I should look for when in business. What are the seasonal characteristics of a LAN Gaming Center that you can remember? I’m asking so I can better plan for employment hours and wages.

        Thanks again

      • Well, customers are generally not college age. Even though college kids play tons of games, they get the social experience of group gaming at school and they spend most of their budget on drinking and late night Taco Bell.

        Customers are middle and high school kids spending their parents money and also older players out of college. The business does not fluctuate with the older crowd. However with the younger ones the slowest months are May and September. In May the weather is getting warm and they are finishing school, going to prom, taking finals, etc. In September they are going back to school, think they are going to study all of the time, buying back-to-school stuff and it is always our worst month.

        The best month by far is December. Cold so everyone is inside, holiday spirit has everyone spending money, $5k or more in gift certificates. Our monthly average over the years is right around $25k, but December is always above $30k. September is almost under $20k. You can’t count on those same numbers in your situation obviously, but that should give you the same ratios to use.

  5. Is there any research that shows that a “gamer” is willing to play at LAN gaming center outside of their own gaming setup at home?

    • 8 years of sales data at our store? 🙂 I always ask the “doubters” if they prefer to buy a 6 pack of beer and drink at home alone, or if they would rather pay triple for one beer at their favorite club or sports bar with a group of their friends?

      • That’s very close to the same analogy that I use when trying to convince potential investors how this is viable. Great minds think alike homie 🙂

  6. Do you charge by the hour for pc and system use? How do you charge for system play? Do you have contracts with drink and snack vendors for machines? What else can I sell to compensate?Do you host tournaments?How do you sell monthly passes and gift certificates?

  7. Scott – Lots of questions! It looks like you are just getting started in researching the business idea. I will try to answer the questions briefly.

    Yes, we charge by the hour. We also offer passes for an entire day, night or both. It works the same for both consoles and computer usage.

    There are no contracts with the beverage vendors, however most of them will supply free equipment if you purchase product from them, so if you stop ordering you will loose that equipment.

    We sell items in a pro-shop to go along with our business (controllers, keyboards, etc) and we sell used console games. We also recently added some miniatures (model army stuff).

    Tournaments are big for us. We have always ran tons of tournaments. They don’t make money directly, but we see TONS of new customers that start with one of our tournaments and stay with us long term.

    Monthly passes are a NO NO! Customers spend upward of $400-$500 per month at our store EACH. If they knew they were spending that much in $20 increments they might stop coming as much.

    Gift Certificates are easy and around 15% of them never get redeemed. Each year around the holiday season we sell $2-3k in gift certificates.

    If you get farther along and would like more information just contact me directly. We have a program to give you access to ALL of our financial data and daily reports from our store sales to help potential new owners learn more about our business.

    • Thank you so much, I have a business plan, and a location, but want to make sure I get everything at the lowest prices before starting. Just a couple more questions please.
      How much do you charge by the hour. I am border of California and Mexico. I will be catering to over 8000 school students in this little town and hundreds of thousands of border crossing from Mexicali, mexico as well. What should I charge for each hour? and each pass? Do the free computer programs that time each pc session work? Are the gift certifcates for a number of hours? Do you reward cash prizes for tournament winners?

      • How do you have a business plan already with so many of these basic questions you are asking?

        The answers to your questions have taken me years of trial-and-error to answer and I don’t just give out detailed information for free. If you are interested, I can give you access to all of our financial records, customer sales records, parental consent forms, tournament brackets, marketing programs and many more useful documents. I have just been charging $199 for 90 days of access including being put on our daily sales report mailing lists.

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