Stuart Entertainment Inc.

views updated

Stuart Entertainment Inc.

3211 Nebraska Avenue
Council Bluffs, Iowa 51501
U.S.A.
(712) 323-1488
Fax: (712) 323-3215

Public Company
Incorporated: 1948
Employees: 1,325
Sales: $109.9 million (1995)
Stock Exchanges: NASDAQ
SICs: 3944 Games, Toys & Children’s Vehicles; 3999 Manufacturing Industries; 3951 Pens and Mechanical Pencils

Stuart Entertainment Inc. is the world’s leading supplier of bingo products. The company’s two major subsidiaries, Bingo King and Bazaar & Novelty, distribute the majority of all bingo paraphernalia in the United States and Canada. Founded as Bingo King in 1949, Stuart Entertainment has grown from a small, mail-order supplier of fund raising equipment to a multinational company that distributes all types of bingo-related products, from the ink used to mark bingo cards to computerized electronic bingo games.

Company Origins in the 1940s

The game of bingo was introduced in the mid-1920s by a toy salesman named Edwin Lowe. Lowe had seen a version of the game of chance, then called “beano,” being played for small prizes at a local carnival and decided to try to market a home version of the game. After an enthusiastic but tongue-tied winner yelled out “bingo” instead of “beano,” Lowe realized that this was the perfect name for the simple but addictive game. Lowe never bothered to copyright the name and bingo became the generic name for the increasingly popular pastime. Although commercial bingo was prohibited by most state gambling laws, during the 1930s and 1940s the playing of bingo to raise money for churches had reached huge proportions. It is estimated that by 1934 there were 10,000 weekly public bingo games throughout the country. Under heavy pressure by anti-gambling forces, legislation was eventually passed in most states that either limited the size of prizes or outlawed bingo playing outright. By 1949 bingo in anything but a very limited form was legal in only four states. It was in this highly regulated atmosphere that Bingo King was founded in Colorado in 1948 as a small distributor of bingo cards to various fund raising organizations.

In the 1950s and 1960s, Bingo King was one of many small distributors of bingo products throughout the country. Most of these companies were limited by region because of varying regulations from state to state. Bingo King operated primarily on a mail-order basis and provided advice on how to organize and set up games in addition to selling the cards, markers, and “blowers” that randomized number selection. Through the building of a close relationship with many large charities Bingo King was able to extend the reach of its distribution system. By the late 1960s, with a 15 percent market share, Bingo King had become one of the top five distributors in the country and the only large distributor that did not operate out of the New York area.

During the 1970s anti-bingo legislation began to be repealed in many states. Under growing pressure from nonprofit organizations, for which more traditional sources of funding were drying up, as well as with an increased cultural tolerance for gambling in general, politicians started to cede ground to bingo enthusiasts. In addition, law enforcement agencies were finding it increasingly difficult to get convictions on bingo charges laid against institutions like the Elks Club or the March of Dimes. By 1979, bingo had been legalized in some form in all but 12 states. In most states, however, bingo was still restricted to charitable organizations, using volunteer labor. Only Nevada and Maryland permitted fully commercial bingo. It was in this atmosphere of increased liberalization of bingo laws that Bingo King was acquired in 1971 by a growing conglomerate, Standex International Corp.

New Parentage in the 1970s

Standex was a corporation with a long and profitable history of acquiring diverse companies. Standex Chairman Daniel Hogan sought for acquisition private companies that he felt were in a growth position, had a history of profitability, and were located away from business centers like New York. The nature of the company’s business was less important than these factors, although Standex tended to “stay pretty much with companies that manufacture useful articles and sell them,” Hogan said in a 1979 interview in Forbes. Bingo King was renamed the Norbro Corporation and incorporated into Standex’s mail-order division along with a mail-order grapefruit distributor and a mailorder colonial furniture manufacturer.

Under Standex, Bingo King, now operating as the Norbro Corporation, began to de-emphasize its connection to bingo products. Although bingo paraphernalia remained the backbone of the company’s business, Norbro began to distribute other products related to fund raising to nonprofit organizations, including churches, lodges, hospitals, and nursing homes. In 1974 the company moved its headquarters and main manufacturing plant into a new 30,000-square-foot plant in Littleton, Colorado, as well as opening a new plant in Mexico. Norbro soon became the star performer of Standex’s mail-order division and, by the mid-1970s, the company had opened distribution centers in Texas, Florida, and Nevada. In addition to distributing fund-raising supplies, Norbro also began offering seminars at their new headquarters for nonprofit organizations demonstrating the best methods of setting up large fund-raising activities like bingo that by law required a volunteer labor force. By 1980, in spite of a marked economic downturn, Norbro was turning in record performances and capturing a larger share of the growing bingo market.

The early 1980s were a difficult time for Standex. Faced with a deep recession and high interest rates, Standex’s earnings were at a record low and the pattern of acquisitions that had defined the conglomerate was put on hold. Instead, Standex management decided to divest by spinning off some of the company’s divisions to raise both capital and visibility. Norbro was the prime candidate for such a spin-off both because of its impressive performance even during poor economic times and because Standex was leery of the potential bad publicity entailed by the company’s affiliation with bingo. In 1979 a Forbes exposé of the bingo trade and its association with organized crime had cited Standex’s Norbro division as a leading supplier of bingo equipment. Although no wrongdoing was implied, Standex’s largest unit was a religious publishing company and management was ambivalent about being involved with the gaming industry. “Standex had mixed feelings about the industry,” Bingo King Chairman Robert Jacob said in a 1984 article in Forbes. In 1981, Norbro, now once again under the Bingo King name, was spun off to Standex shareholders.

A Public Company in the 1980s

As Bingo King became a fully independent public company the bingo industry was flourishing. By 1984, bingo was the fourth largest form of legal gambling in the country, with a total of about $4 million being spent on the game annually. In addition to the liberalization of bingo laws in many states, Native American-run bingo had become a major new factor in the industry. Court decisions that affirmed Native Americans’ rights to certain sovereign powers had allowed Native American tribes to circumvent state gambling laws that limited the size of bingo jackpots. With these “super” jackpots Native American-run bingo parlors attracted a new, more spendthrift clientele. Although nonprofit organizations still made up the bulk of Bingo King’s business, Native American bingo became a large and growing customer for the company’s products.

Freed from the constraints of corporate ownership and faced with an expanding market, Bingo King set out to grow its own market share through acquisitions. By 1984, Bingo King had acquired three small companies, Precision Games, Western Bingo, and Jack Frain Enterprises. Within three years of the spin-off the company’s market share had grown from 15 percent to 25 percent and revenues had doubled to almost $14 million. In addition to a program of acquisitions, Bingo King set out to revamp its distribution system. Under Standex, Bingo King had operated primarily on a mail-order basis, but this had allowed competitors to undercut listed catalog prices. The company now opened its own retail distributorships, permitting more flexible pricing and a quicker response to market demands.

In spite of a growing bingo market, Bingo King ran into trouble in the mid-1980s as the company was unable to manage the pace of growth that it had set for itself. In 1985, in what was expected to be a banner year for the firm, sales grew to an impressive $18 million but costs involved in opening new distributorships and merging the operations of acquisitions saw Bingo King ending the fiscal year with a net loss of more than $1 million. Enter Leonard Stuart. Stuart was the owner and president of Canada’s leading bingo equipment supplier, Bazaar & Novelty, which controlled well over 50 percent of the bingo market in that country. Bazaar & Novelty’s U.S. division was the leading supplier of disposable bingo cards to Bingo King, and when that company had trouble paying its bills Stuart moved in and assumed control of the floundering firm. In 1988, Bazaar’s U.S. division was merged with Bingo King, with Stuart retaining control of 53 percent of the merged company’s stock. In 1991 the combined operations of the two companies were officially renamed Stuart Entertainment Inc.

Company Perspectives

While many bingo players will say luck is at the heart of their game, the bingo industry recognizes that its luck is the product of hard work and good business practices. For Stuart that translates to attention to its market, outstanding relationships with its distributors, production savvy that enables it to be a low-cost producer, flexibility to keep the game fresh, the capability to remain a dependable, flexible, innovative bingo supplier, and the ability to deal with change in this fast-moving world.

Stuart’s success in Canada had been in large part due to his promotion of disposable bingo cards as a replacement for the traditional reusable boards that had been used since the game was introduced in the 1920s. With traditional bingo boards players marked called numbers using beans or plastic disks that required a certain, albeit limited, degree of dexterity to place on the boards. The new disposable cards were marked with specially designed inked markers, also sold by the bingo supply companies, that permitted players to play a much larger number of games at one time. This meant that players played more games in an evening and spent considerably more money doing so. Players were happy with the added convenience, bingo hall operators were happy with the added income, and Bazaar & Novelty was happy with the orders for thousands of bingo cards used in any one session. Stuart had managed to persuade almost 90 percent of Canadian bingo halls to switch to the disposable cards and was convinced that American operators would do likewise.

In addition to promoting disposable bingo cards and the markers that went with them, Stuart reorganized Bingo King’s distribution system, which had required a continual influx of capital to maintain. The bulk of U.S. bingo was still being run by amateurs, and maintaining a good relationship with these operators was critical to the company’s sales. Stuart felt that local independent distributors would do a better job serving this clientele than a centrally run network, in addition to relieving Bingo King of the burden of running a retail operation. By 1991, Bingo King, now named Stuart Entertainment, had sold all of its retail distributors to independent operators, although the company continued to nurture a close relationship with these dealers through seminars, workshops, and a variety of marketing services.

The 1990s and Beyond

By 1992 Stuart Entertainment’s share of the U.S. bingo market had climbed to more than 50 percent, with annual sales of $52 million and income of $1.7 million. Disposable cards had become the norm and Stuart was now exploring the possibilities of electronic video bingo terminals, opening a wholly owned subsidiary called Video King to promote these new electronic products. The early 1990s saw Stuart Entertainment making the first forays into the international market and, by 1993, the company had opened a manufacturing facility in Mexico and a manufacturing and marketing subsidiary in England. In addition, Stuart began an intensive marketing campaign to sell its electronic bingo products to casinos worldwide, striking deals with gaming organizations in South Africa, Peru, and Venezuela. The pace of international expansion was slowed when the company’s British subsidiary was unable to turn a profit. By 1994 this subsidiary was draining funds from its parent at an alarming rate, leading the company to a $1.6 million loss and forcing closure of Stuart’s manufacturing operations in England.

In spite of losses incurred by the company’s British subsidiary, Stuart Entertainment entered the last half of the 1990s with a growing market, increased sales, and a healthy income of $786,000. In 1995 the decision was made to merge Leonard Stuart’s privately held Canadian company, Bazaar & Novelty, with Stuart Entertainment, thereby creating the largest bingo supply company in the world. Operating out of a central office in Council Bluffs, Iowa, and with nine manufacturing facilities in the United States, Canada, and Mexico, the now multinational Stuart Entertainment seemed well poised to take advantage of a growing and seemingly insatiable appetite for playing bingo.

Principal Subsidiaries

Video King Gaming Systems Inc.; Bingo Press and Specialty Limited (Canada); Stuart Entertainment, S.A. de C.V. (Mexico); Stuart Entertainment Limited (England).