Economics of the rise and fall of pinball
TEXT OF INTERVIEW
Kai Ryssdal: If you were a teenager in the early 80s, and this is probably more true of men than of women, chances are you spent a lot of time in the arcade becoming familiar with the sound of this:
PINBALL MACHINE: Launch of ball. Ping, ping, ping, ping.
Pinball machines. Used to be they were everywhere. Arcades, movie theaters, bars, but not so much anymore. It turns out that what made the machines such a hit at one point is actually what did them in.
Jeff Ely is a professor of economics at Northwestern University. He wrote about economics of pinball the other day on the blog "Cheap Talk," so we called him up. Good to have you here.
JEFF ELY: Hi.
Ryssdal: I have to tell you I read a fair number of economics blogs, but this is the first one I've seen, posting, about the economics of pinball. Where did this come from?
ELY: Well, I was a pinball player in high school. At some point I noticed that pinball had disappeared. And I had questions about why, ideas about why. I sort of used my training as an economist to think about what were the reasons. And just as a miracle, the other day, I was at a party, and I met this guy who was involved in the design of all these classic pinball machines. And the moment I found that out I just unleashed all these economist questions to them to find out what was going on in their head. And it turns out exactly what was going on in my head was going on in their's, too.
Ryssdal: In this post that you wrote about this, you actually point out two games: A game called "Black Knight" and then something called "High Speed" that are pivotal moments in the history and decline of pinball. Explain.
ELY: OK, so I was 12 when "Black Knight" appeared, in 1980. What I can tell you, my memory of "Black Knight" was that I was at a mall, and I saw these old-style Fenway-Park-scoreboard, analog-buzzing-and-beeping pinball machines pushed to the side to make way for this gleaming thing called "Black Knight" that had this digital voice saying, "Will you play the Black Knight?" And it had multi-mall features, and multimedia, and all of this. And you know, I was only 12, so I couldn't play the game for very long. But it was hard. It basically changed the economics of pinball. Because now with the digital features you could program the high-score threshold -- what you needed to get to get a free game -- on the fly. OK, so you could figure out how many people were playing the game, what their scores were, what the average score was. You could act like a textbook monopolist plotting a demand curve using sort of on-the-fly data generated by these pinball players, and figure out was the high score that would maximize whatever. You know, how many people were plunking quarters into the machine.
Ryssdal: So this machine was adaptive, right? It changed score based on who was playing and their skill levels.
ELY: Exactly. Now the other thing that they did, which was really cute.... You know, there was this old thing called "Match." OK, so for these analog pinball machines, there was this little thing that spun around and if it matched the last two digits of your score, you got a free game. Now with the digital scoring the computer basically just picked it in funny ways to try to get people to play when it needed people to play, and not to play when it didn't. So, for example, if you and your girlfriend had just played a game -- you put two quarters in the machine and neither of you got a free game -- it would very often give one of you a match, so that the other would put in another quarter and keep you playing. There was kinda some basic price theory at work here, and then pure behavioral economics behind the match.
Ryssdal: And then a couple of years later this thing called "High Speed." Where did that come in?
ELY: OK, so "High Speed" was kinda the next generation, taking advantage of these digital features. It was at that point that the game was really, really advanced to the point where beginning pinball players were really discouraged from playing -- if they didn't have those skills that they had learned on these gateway machines like "Black Knight."
Ryssdal: Does this apply with other video games, like, I don't know, like "Pac Man" as an arcade game. Did they do the same thing?
ELY: Video games are purely digital, so you could change the level of difficulty on the fly, as a player was playing. So you had very easy levels that drew in the easy players, and then the level of difficulty increased. Pinball, once you design the machine, it's designed, you can't change it in the play of a given player, and so you either had to target the hardcore players or the beginners. And they took the hardcore route, and that was great for pinball early on, and it eventually spelled its demise.
Ryssdal: Jeff Ely. He teaches economics at Northwestern University. He blogs at a blog called "Cheap Talk." Jeff, thanks a lot.