The Decline of the LAN Center January 7, 2014

The first time I ever walked into a LAN Center was well over ten years ago.  A friend of mine heard a new business was opening about a half hour from where we lived and wanted to check it out.  Counter Strike: Source had just started a closed beta testing phase, and Valve was making it available to LAN Centers a week before they brought it to home users for wider testing.  As I stepped into the door of the newest business on the block I was surrounded by rows of computers, a bar that served the latest energy drinks, and great people.  For the first time in my life, I felt like I was where I belonged.

In a world where gamers don’t have a place where they can interact in person with each other, my local LAN Center gave me the chance to have that place.  Sadly, despite their benefits, it is my experience that LAN Centers have not had a very good track record as a business, particularly in my neck of the woods.  In fact, the LAN Center I just spoke of only lasted for a brief six months, and closed suddenly just before a New Year’s Eve event.  From the research that I have done, it seems like they are doing far better internationally, but even LAN Centers running abroad have noticed declining revenue recently.  So if the business is so good and competition is small at best, why have we seen a plummet in the availability of LAN Centers over the past few years?  Well, LAN Centers are expensive to operate and the income they generate in a lot of cases cannot offset the cost to keep them operating.  There are a few success stories, particularly the ones near college campuses, but from where I live if a LAN Center even opens at all it is short-lived, and it is quite a shame.

As I spoke of in my tips for how to host a great LAN Party, there are a ton of benefits to playing games on a LAN instead of through the internet.  Console users don’t need a Playstation Plus or Xbox Live Gold account to play a game locally, it is easier for teams to communicate as your other players will be right next to you, and finally the connection speed is much faster to play on a local network than if you were to play online.  There are other benefits for playing in a LAN Center.  You have the chance to rent time playing games you don’t yet own to see how you like playing them on PCs that can provide a much better gaming experience than the one you have at home.  The biggest reason for me to like LAN Centers was that it gave me the chance to interact with the other players in my area.  Having no technically literate family members and only a few technically literate friends, short of online social networking or crowded conventions, there really isn’t really a place for gamers to hang out and meet other like-minded people in a real life social environment.  A LAN Center became that place for me.

In order to figure out why LAN Centers are declining we need to take a look at each of a LAN Center’s issues step by step.  First off, the cost of setting up a LAN Center and operating it are pretty high.  Power, equipment, rent, and high-speed internet all cost money which have to be paid on a regular basis.  Obviously you will have monthly bills to pay as you would for any business, but given the high cost of power usage by all the equipment you would be running and the air conditioning costs to keep all this heat generating equipment cool, your bills may be higher than your neighbor running the local coffee shop.  High-end computers capable of producing better graphics than most home PCs are expensive, even if they were all custom-built at cost,  individual game prices for new games are also quite expensive when you need to factor them over an entire fleet of PCs or have to pay monthly licenses per system for Steam access, and lets be honest even if you buy top of the line PCs at the time you launch, you’re going to have to replace all those PCs every couple of years.  The income to offset all of these costs come from the fees paid to rent use of the equipment, or from the sales of beverages, food, or paraphernalia a player can purchase while playing.  A player can come in, rent time on a PC or console, and play whichever game the LAN Center offers during the duration of the time they rented.

In theory this can seem like a great deal for both the business and the potential customers.  So if a LAN Center is unable to fill such an uncontested niche market, why are they in decline?  Who are they actually competing against?  Well, they’re competing against homes.  Just like the arcade had to compete with the home market by the mid 80s, LAN Centers now have to compete against homes that in a lot of cases can be just as well equipped for individual gamer as they are.  People have computers at home, and even high-end computers are not as expensive as they used to be.  What could previously only be afforded by major companies and cutting edge colleges, home high-speed networks are also very common now.  I remember arguing with all the ISPs in my area for years to bring support to where I lived, but even I had high-speed internet access by 2004.  Since installing high-speed internet, I personally have upgraded my home network three times to account for improved network speeds and with the equipment I have running right now, I could run a decent LAN from my own home without much issue.

So costs are high and income is difficult, surely there must be a better way to make this work?  There are a few success stories about business owners who have been able to make this work.  A guy in Canada who previously ran a video game store was able to open up a successful chain of LAN Centers in his home country.  So how do you subsidize all of these expenses and generate more income for your business?  Well, you mobilize your market and make them aware that you exist, and sometimes that can be an expensive proposition as well.  You will probably need to advertise.  Location is important.  You want to have your business located in a safe area people don’t have an issue visiting on the fly.  Close proximity to other popular business, like a coffee shop or video game store can help there.  Long hours also help.  People have jobs or have to go to school, and gaming hours are precious for many.  The Canadian business owner I mentioned earlier operated his LAN Center 24 hours a day, but sadly many shared business parks in my neck of the woods have fixed business hours that renters are not allowed to operate past, cutting them out of potential income from what could be considered later than usual peak hours.

Sadly, the future does not look good for LAN Centers.  A cursory glance of the local businesses in my area which have STEAM Cyber Café licenses was not promising.  I know for a fact that at least one of the businesses listed on their official website no longer existed.  The majority of the other businesses I was not aware of no longer had functioning websites, even though they were still listed on STEAM’s Cyber Café list.  However, I did see one glimmer of hope, a new LAN Center opened up not too long ago near a college campus I used to work at every summer.  The new LAN Center was more than just a cyber café, it also sold board games, energy drinks and collectibles.  Being across the street from a major college will hopefully help them get regular customers, but it was not without a few drawbacks.  The players using the computers they hosted mostly were playing MMOGs, which gain no benefits from LAN play.  Heck, they couldn’t even stock Bawls.

The original point of creating a LAN Center or Cyber Café was to offer people internet access while on the go and providing access to some of the latest PC games, that need is becoming smaller and smaller with every passing day.  Everyone nowadays has either an internet equipped smart phone or tablet on them which if connected to a cellular data plan can provide internet access at all times while on the go, and can play a lot of the latest mobile games to boot.  Any coffee shop can provide free wireless access to their customers’ personal electronic devices while they enjoy their beverage or baked good without the need to provide computers.  In fact, I’ve learned from personal experience that the need to provide internet accessible PCs is not really a market anymore for US consumers, even in major cities.  After talking to some friends I know who happen to run businesses in the city, the only demand for internet equipped PC access on the go is from foreign tourists!

With the always online requirement hanging over PC game purchases like a Sword of Damocles since 2004, and new game titles shipping without any LAN or System Link options at all there doesn’t seem like there’s much room for LAN play in today’s modern gaming industry.  Not only have these decisions been bad for consumers it has made it more difficult for LAN Centers to operate as well.  We already live in a time when the costs to operate these businesses can outpace its potential earnings.  Perhaps we have hit a time when this once great business opportunity is no longer viable.  Quite a shame as it was the only place I ever truly felt like I belonged.