Hwa Yeon Lee with husband James and daughter Vivian, 2, with FunXcess enjoy a turn on the Nerf Raw Thrills game during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Attendees shoot baskets in a Connect 4 Hoops game during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Bob Souza with Peek-A-Boo Toys shows off his stuffed animals during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Evva Fortier with Gamepath Arcade plays air hockey with a friend during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)The showroom floor is packed with games and other merchandise to test out during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Attendees view some of the many game prizes for sale during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Some of the many gumball designs on display to be purchased during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Michael Alvarado with XERO steps forward wearing penguin socks while paying Pump It Up during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)A pile of spent game tickets fills a trash can during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Attendees take a turn defending themselves on the Holgate game by Creative Works during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Adelle Evans of Reno, Nevada, tries out a VR Maze game by Triotech during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Attendees play pinball during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)The Fusion Barrel Edition music player by TouchTunes on display during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Lazlo Baranyai with Lorincz & Baranyai LTD races a car during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Bob Burnham with Paradise Pinball and Amusement LLC wears his Pacman suit while playing a giant Pacman game during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Sung Min Youn with Coastal Amusements Inc., plays a mini basketball game during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Aiden Fortier with Gamepath Arcade plays a baseball game during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)Kyle Pulsifer with Fiddlers Fun Center tests out an ATV driving game during the the Amusement Expo at the Las Vegas Convention Center on Wednesday, March 27, 2019. (L.E. Baskow/Las Vegas Review-Journal)

Tucked away on the first floor of downtown Las Vegas’ Neonopolis is the Fremont Arcade. The 2,500-square-foot space doesn’t give owner Larry Galbraith much to work with, so almost every inch is covered with claw machines, stuffed prizes and — of course — dozens of arcade games vying for attention with colorful, blinking lights.

Galbraith said he played many of the same games as a child, when the market for brick-and-mortar arcades was larger.

“It’s a much smaller industry,” he said. “It’s much more consolidated, and it requires a lot more investment.”

Many view arcades as a dying industry, especially when compared to their heyday in the 1980s. But industry experts believe the market has a chance to revitalize. Data from market research firm IBISWorld shows the arcade, food and entertainment complexes in the U.S. have an annual growth rate of 3.3 percent and earned $2 billion in revenue last year.

Changes over time

According to Play Meter Magazine, there were just over 2,500 arcades in the country in 2015. It’s a far cry from the 24,000 facilities in 1981.

Peter Gustafson, executive vice president of the American Amusement Machine Association, said advancing technology in video game consoles and smart phones changed everything and gave consumers an excuse to play at home.

The AAMA is one of the sponsors of the Arcade Expo International convention, which began Tuesday at the Westgate. Exhibits are held through Thursday at the Las Vegas Convention Center, and the Las Vegas Convention and Visitors Authority expected about 3,000 to attend.

“Going back to those early days, we introduced people to technology,” Gustafson said. “Tech was our greatest asset, it gave us enormous growth. But it was also our worst enemy.”

Gustafson believes the industry is once again returning to a point where technology complements its business model.

Rohit Joshi, the owner of Neonopolis downtown, believes virtual reality’s immersive technology is the next big thing for the arcade industry.

“You’re going to feel as if you’re inside the games. … It’s something that gets all the senses excited,” he said. “People will come back (to arcades) because of VR.”

According to research firm Markets and Markets, the virtual reality market — valued at $8 billion last year — will grow to nearly $45 billion within the next five years.

Gustafson said VR gives gamers a fun opportunity they can’t find at home.

“We have the perfect venue for that technology to be introduced to the public,” he said. “It’s social. I think that’s one of the reasons it works in our space. … The integration of all these things under one roof gets people off the couch.”

New attractions

There may be fewer than 3,000 arcades in the U.S., but Play Meter Magazine found more than 166,700 locations that contain or operate arcade equipment.

Rohit said arcade machines can be found in bars, restaurants, museums and bowling alleys across America, providing another attraction and revenue source for business owners.

Bar-arcades are one tactic to draw in a gaming crowd with a diverse revenue model.

“If (arcade owners don’t offer) beer and wine, they’re missing huge crowds of people,” he said. “You’re probably looking 20 to 30 percent in sales.”

Jonathan Borchetta, the co-owner of The Nerd, a downtown bar, said its arcade machines contribute to the facility’s atmosphere.

“It’s a paradigm shift where folks are putting (video games) into social atmospheres,” he said.

The Hi Scores bar arcades in Las Vegas don’t bother charging customers for arcade game use; Director of Operations Ali Razavi said the business makes up for revenue in alcohol and food sales.

The two Hi Scores bars, located in Henderson and Spring Valley, offer vintage games like Ms. Pac-Man, Tetris and Street Fighter. Razavi said the nostalgia from these games tends to draw in crowds, especially for Generation X — those between the ages of 39 and 54 customers.

“What sets the arcades apart is the whole adventure of going to a place and then finding this little gem that was popular 25, 30 years ago,” he said. “If you incorporate food and beer as part of your experience, you’re supporting the draw.”

But that sense of nostalgia comes at a price. Older arcade machines can be finicky and difficult to repair; Razavi said fixing a joystick alone can cost up to $100.

“Some are pushing 40 years old,” he said. “You need the right technician to come and fix it. … These machines break left and right.”

The upfront costs aren’t much better. Galbraith said he pays on average between $10,000 to $30,000 for a new machine for the Fremont Arcade, and the costly, all-immersive games that are trending now often only fit one player at a time.

“Every purchase is a risk,” he said. But “there is a demand for location-based entertainment, and the bigger the better.”

Even with high maintenance costs, Gustafson is optimistic about the industry’s future as younger generations mature.

“I think we’re perfectly positioned with millennials (those aged 23 to 38) and Gen-Zers (those aged 7 to 22) who are tired of stuff,” he said. “They want a shared experience, they want to do things. They don’t want stuff, they want to interact with people.”

Bailey Schulz at or. Follow on Twitter.

Recession’s effects

The industry isn’t what it used to be 30 years ago, but Pete Gustafson, executive vice president of the American Amusement Machine Association, said he’s seeing a shift as the recession’s effects continue to dissipate.

When the Great Recession hit, Gustafson said even fewer families were looking to spend money on recreational activities like arcades. But it led to a number of brick-and-mortar retail companies going out of business, leaving open cheap real estate for arcades to take over.

“There’s space to fill,” he said. “We come in, and communities are really supportive of our industry. We’re moving into space that’s provided, we employ the local community and we’re giving the community something to do. The recession benefited us to a certain degree.”