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Defense subcontractor diversifies and profits in servicing arcade games

by Anne Straub
Brevard Technical Journal

For Amertron of West Melbourne, the arcade industry is more than fun and games.

The company is looking to that business to provide a diverse income stream for the defense subcontractor. After experiencing some success servicing coin-operated arcade games, the company has formed a division, AmerGames, to investigate more opportunities in the sector.

They've found plenty. "We are overwhelmed right now with opportunities," said James Harhi, director of business development. Harhi also oversees contracts on the military side of the company, which remains the bulk of its business.

Coming up with a balance of commercial and military work was Harhi's top priority when he joined the company two and a half years ago. Amertron had recently sold its personal computer accessories arm, making it extremely dependent on the defense industry. About 80 percent of its business, in fact, came from one customer: local defense contractor Harris Corp.

A five-year contract servicing arcade games for an Orlando theme park went a long way to solving that problem. "That provided instant diversification," Harhi said. Amertron employs 22 people in Orlando to support the contract, and another 23 at its headquarters and production facility on Technology Drive in West Melbourne.

Taking the business a step further, Amertron started producing the after-market parts it needs to repair the machines. Now, the company is working on a route-management system to help arcade operators track revenue, prizes and downtime on their machines. AmerGames is taking the product on the trade-show circuit.

The company has built its commercial business to about 40 percent of its revenue. The company doesn't release revenue figures, but Harhi said he expects the double-digit growth of the past three years to continue.

Getting into the arcade business opens the door to a $6.4 billion industry, according to Play Meter, a trade magazine for the coin-operated entertainment industry. That figure includes categories like video games, jukeboxes, kiddie rides, video poker and cigarette vending machines.

Its direction is taking Amertron a little against the flow of military subcontractors. After years of trying to build up commercial divisions, many defense companies found the competition too fierce and their efforts unprofitable. Military business is booming right now, but Amertron is looking ahead. "It will cycle again," Harhi said. "We're trying to be a step ahead of everybody else. When military slows down, we won't hurt right away."

The arcade business was a natural direction for Harhi.

Harhi had worked for the Walt Disney Co. as a lifeguard while attending the University of Central Florida. After graduating in 1997, he joined Disney as a recreation manager, in charge of life guards at Blizzard Beach. Harhi had focused on mathematics while earning his liberal studies degree, and he discovered an interest in finance. That helped him stand out among other recreation managers, most of whom preferred the active sporting side of the job.

Disney moved Harhi to different positions where he used and developed his business sense, such as by negotiating contracts with major companies that provided recreation services at Disney resorts. He ended up managing the purchase, service and operations of Disney's arcade businesses, including machines on its cruise ships and resorts.

After two years of that, he reached the end of what he thought he could accomplish in corporate America and yearned for the atmosphere and challenges of a small business. "I've seen people at Disney who stay in the same place for 20 years," said Harhi. He preferred to have what he calls more control over his destiny.

The answer came when he learned that Amertron, which is owned by the parents of a college friend of Harhi's, was looking to develop new business. Harhi took the job.

"At this stage of the game, we look like we were pretty smart. We actually we more hopeful," Amertron vice president Carl Mixon said of hiring Harhi. Mixon's wife, Sally, owns the business, which was started by a former Harris engineer in 1972. The Mixons invested in the company in 1979, and Sally Mixon became full owner 10 years ago.

Mixon knew the company needed new blood and fresh ideas when Harhi was being recruited. "We felt he had a dynamic approach to do things," he said, as well as business contacts that could lead to future business.

In addition to arcade servicing and parts, AmerGames has high hopes for a web-based software program that will offer arcade operators information such as how long a machine is down, what prizes go fastest and what days produce the most revenue. The program has potential in other businesses, as well. "Vending is the next level for us," Harhi said.

On the military side, Amertron is primarily a cable ho use, specializing in products for harsh environments. It also has capability in high-frequency RF cabling, used by Harris. Products include a breakout box kit for the M1A1 Abrams Tank, part of the guidance system for the Tomahawk Cruise Missile and the master control indicator panel for the Chaparral Fire Unit.