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How Arcades Actually Make Money
Running a profitable arcade takes more than filling a room with popular games. The real economics of an arcade are created by the way money moves through the entire operation.
Beyond the Game: Understanding Arcade Profitability is a practical series built around the real-world operating experience of LAI Games’ David Pascoe. Drawing on more than 15 years in attractions and arcade operations, David shares the strategies, benchmarks and lessons he has used in actual venues—from ticket value and payout to game mix, guest flow and attraction strategy.
Running a profitable arcade takes more than filling a room with popular games. The real economics of an arcade are created by the way money moves through the entire operation—from the moment a guest loads a game card to the games they play, the tickets they win, the prizes they redeem and, ultimately, whether the experience gives them a reason to come back.
That is a subject David Pascoe has spent years working through in real operating environments.
Before joining LAI Games, David spent more than 15 years in attractions and arcade operations, including roles with Disney, Andretti Indoor Karting & Games and Redemption Plus. One of the first things he often discusses with operators is deceptively simple:
What happens to a guest’s dollar after it enters the arcade?
Understanding that answer is the foundation of arcade profitability.
At the simplest level, an arcade earns revenue when guests pay to play games and attractions.
But gross revenue only tells part of the story.
In a cashless arcade, a guest might load $20 onto a game card. That transaction puts $20 into the system, but the guest now has $20 worth of play available to them.
David describes the economic journey this way:
For amusement games and attractions, the cycle may stop at gameplay. For redemption games, another layer of cost is introduced through ticket payout and merchandise.
That distinction matters when evaluating game profitability.
A game that generates high revenue may also return a significant percentage of that revenue to guests through tickets or physical prizes. Another game may generate less gross revenue but carry a different cost structure entirely. That is why operators need to look beyond the amount collected by each machine.
One of the most important numbers in a redemption arcade is also one that many operators do not immediately know:
What is one ticket worth?
David uses a simple example when explaining this to operators.
Imagine a game costs $1 to play. If the game awards an average of 25 tickets and the operator has established a ticket value of one cent, the game has effectively returned 25 cents of value to the guest. That leaves 75 cents before accounting for the other costs associated with running the business.
$1.00 game price – $0.25 ticket value = $0.75 remaining revenue
That remaining revenue still has to contribute toward equipment ROI, labor, repairs, maintenance and other operating expenses. The exact ticket value and payout target will vary from one location to another. There is no universal number that works for every arcade.
The important thing is that the operator knows the number and understands why it was chosen.
David has seen situations where the ticket value was simply entered during setup by a cashless provider, distributor, consultant or supplier. His point is not that those recommendations are necessarily wrong. It is that the operator should understand and ultimately own the economics behind the number.
Ticket Payout Percentage Matters
Once ticket value is established, operators can begin looking at ticket payout percentage.
In David’s own operating experience, payout percentages in the range of roughly 18% to 25% often provided a healthy balance. He is careful to frame that as a best-practice range, not a universal standard. Different locations, pricing models and prize programs may require different economics.
The broader principle is more important:
Payout should be intentional.
If payout is too low, the guest experience can suffer. If payout is too high, the economics of the arcade can become difficult to sustain. A healthy redemption program has to do both: create a rewarding guest experience and leave enough revenue to support the operation.
This is where game reports can sometimes be misleading. It is natural to rank games by gross revenue and assume the machine at the top is the most profitable one in the room.
That may be true.
But not necessarily.
A machine can generate substantial gross revenue while also carrying substantial payout costs. Those costs may include tickets, merchandise, collectible cards, tokens, physical prizes, consumables or additional labor needed to manage them. Some of those expenses may not be obvious on a basic earnings report.
David’s advice is to look past the revenue number and ask a second question:
What did it cost me to earn that revenue?
That becomes especially important with games that include manual payout elements or physical items that may not be fully reflected in the reporting system.
Different Arcade Games Have Different Jobs
A well-designed arcade is an ecosystem. Not every game needs to contribute in exactly the same way. A traditional redemption game may primarily be responsible for generating play while contributing to the guest’s ticket balance and eventual prize experience. A premium racing game can serve another role.
For example, Asphalt 9 DX Plus and Moto Blitz DX Plus can be configured with a redemption option, allowing operators to combine a premium racing experience with ticket payout when that fits their game-room strategy. At the same time, those games contribute beyond their payout structure through multiplayer competition, visual impact and variety.
A title such as Lost Pirate or Galaxy Hunter may fill a more traditional redemption role, while an attraction such as HYPERGRID can serve as a larger shared experience for groups.
The important question is not simply:
Which game earns more?
It is:
What role is this game supposed to play in my room, and is it doing that job profitably?
A Game Does Not Have to Be the #1 Earner to Be Valuable
David also encourages operators to think in terms of the entire room, not just individual machines.
Consider a bowling center or FEC where a party has 15 or 20 minutes before its next scheduled activity. The arcade has a job to do during that time. Games entertain the group, create additional spending opportunities and make waiting feel like part of the experience rather than dead time. That makes factors such as player capacity and game variety important alongside individual machine earnings.
A two-player game provides two entertainment positions. A four-player game provides four. A larger attraction provides another type of capacity entirely. When operators begin viewing the arcade this way, equipment becomes part of the flow of the venue rather than a collection of independent revenue boxes.
The financial side of arcade profitability is only half the equation. The other half is the guest experience. David often approaches that side of the business by starting at the end of the visit:
How do you want the guest to leave?
Maybe a child is carrying a plush prize. Maybe a family is talking about the game they want to play again next time. Maybe a group has discovered an attraction they had never tried before.
From there, work backward.
What game mix creates that outcome? What ticket value supports it? What prize assortment makes redemption feel rewarding? What attractions create memorable moments?
The goal is to align the financial mechanics of the arcade with the experience the guest remembers when they leave.
A productive review of an arcade should go beyond asking which games earned the most last week.
Operators should also know:
What is one ticket worth?
What is the actual payout percentage?
What costs are associated with each game?
Are those costs accurately represented in the reporting?
What role is each game intended to play?
How many guests can the room entertain at once?
Is the game mix supporting the broader guest experience?
These are the questions that turn raw game reports into useful operating information.
The objective is not maximum revenue from every single machine. It is a profitable game room. One game may contribute through strong redemption revenue. Another may add capacity. Another may appeal to a different type of guest. A larger attraction may help differentiate the entire venue. Each piece still needs to justify the space it occupies, but that justification should reflect the role it plays in the larger business. That is why understanding arcade profitability starts with more than asking what a machine earned.
Follow the guest’s dollar through the system. Understand what you are paying back. Know the costs behind the revenue. And look at how each game contributes to the experience that keeps guests playing and gives them a reason to return.
Because the strongest arcade operations are not simply collections of high-earning machines. They are systems in which profitability and guest experience work together.
Next in the series: We’ll take a closer look at one of the most important numbers in any redemption arcade: ticket value—what it means, how it affects profitability, and why every operator should know exactly what their tickets are worth.
