Pinball wizard Stern sees growth worldwide, makes village its new hub

Editor's note: This story originally ran in the March 5, 2015 issue of the Daily Herald Business Ledger.

When Stern Pinball Inc. moves from Melrose Park to Elk Grove Village next month, it will make the suburb a global hub for manufacturing the next generation of iconic pinball games.

Believed to be the oldest and largest pinball company in the world, Stern is expanding to a 40,000-square-foot building in April consolidating its Melrose Park headquarters and a warehouse near O'Hare International Airport. With about 250 employees, the company plans to hire workers, roll out new technology and pursue additional worldwide markets, including China and India, executives said.

The company has earned the high score when it comes to making the silver-ball-bumping games.

"Stern has been the king of production," said Mark Steinman, director of operations for the Professional and Amateur Pinball Association, based in Pittsburgh, Pennsylvania.

"Stern has been No. 1 in putting out new games. So what it does and says goes a long way. It defines the industry."

Once a staple of American bowling alleys, bars and arcades, the machines have given way over the past two decades to the multibillion-dollar video-gaming industry that now dominates arcades and home entertainment.

The company has changed over the years as much as the style of the games.

While Stern Pinball dates back to the 1930s, it hit its heyday during the 1950s through the 1990s. The dot-com bust, massive waves of layoffs, foreclosures and the Great Recession then hampered the industry. It was at this time when President Gary Stern put together an investment team, partnering with Barrington-based Hagerty Peterson & Co. LLC and a small group of investors led by Dave Peterson of Barrington. They infused an undisclosed amount of resources to keep the company moving ahead.

Both Stern and Peterson said their investment plan is paying off. Making thousands of machines every year, revenues and profits are up and the move into Elk Grove Village will herald a new era.

Their success was evident in January when the company showed off its latest games at the Consumer Electronics Show in Las Vegas. Among a number of new games, Stern introduced WWE WrestleMania pinball as wrestling legend Hulk Hogan autographed the limited editions. Stern and Ford Motor Co. also teamed up to create a Mustang pinball machine as part of the Mustang's 50th Anniversary celebrations next year.

"We are definitely experiencing a resurgence and there's growth in the game. And we anticipate even more," Stern said.

Over the years, the game play experience has been improved with the help of technology. For example, computer chip memory allows the game to remember where a player left off during a play. Digital electronics provides animation. Even the bells and chimes have been replaced with digital audio recordings. The "Rolling Stones" game, for example, features the music of the iconic rock band, and the "Family Guy" game has more than two hours of dialogue recorded by the show's creator.

New operating systems run the machines and, for the last 18 months, new LED lighting was added to enhance the experience.

Pinball machines continue to be a staple at arcades and entertainment centers. The machines also have a presence in bar-cades, where the over-21 crowd can drink beer and play games. Sales are also increasing in the market where individual enthusiasts and collectors buy the games for their homes.

"We've now found our place in entertainment," Stern said.

New players

The customer base is expanding.

"We're finding more younger people are discovering pinball," Stern said. "We have been keeping the core players and experts and they're introducing the game to the more casual players."

Prices can be steep. Many Stern pinball games have three versions: the pro, the limited edition and the premier. Prices range from $6,000 to $8,000, depending on the features and accessories, said Stern, 69.

Stern, a retired lawyer, grew up in the family business and started working at the company at the age of 16. He was a toddler when his father started in the game manufacturing industry. As the coin-op market evolved, other companies acquired many of the existing pinball companies. In 1986, after the death of his father, Gary founded Data East Pinball, which was then purchased by Sega and became Sega Pinball. Gary eventually bought the business back from Sega and renamed it Stern Pinball Inc.

Stern says his heart and soul remain with the company, despite the economic waves it has encountered.

"I like to play. In fact, you must play at least 15 minutes a day in our company," Stern said. "If you don't like to play, you shouldn't be working at a pinball company."

Meanwhile, Dave Peterson, 57, wasn't so enthusiastic when first approached about investing in Stern Pinball. A mutual friend of both Peterson and Stern arranged for the two to meet and talk about investing in the company. Their talks in 2008 led to a deal in late 2009.

"We were just concerned that this was going to be another 'buggy whip' company and wasn't going to last long," Peterson said. "Or it could have all the attributes of Harley Davidson and come back and survive."

He used the term "buggy whip" to refer to when Ford introduced the first automobile and those who made buggy whips were afraid they'd go out of business altogether. Surprisingly, several buggy whip companies still exist, Peterson said.

"There is a passionate group of people around the world who love pinball and that's why we went ahead with this," Peterson said.

Just like Harley Davidson, a core group of enthusiasts just wouldn't let pinball die. So Peterson put together his own group of investors who partnered with Stern's group, Peterson said.

Since 2009, the company has grown and now the partners are focusing on the next generation of pinball.

"We plan to evolve pinball and take advantage of new technology to enhance the experience," Peterson said.

And while Stern Pinball has hit the right levers to maintain its business course, others have entered the field to boost competition, Steinman said.

Stern sells the games globally and more than half of the inventory is exported, he has said. Their customer base is threefold: operators and distributors who place the games in entertainment venues; pinball enthusiasts and collectors; and the home entertainment market.

Stern said the home entertainment market is fairly new as boomers who grew up with pinball buy the machines for the family. Stern pinball games are primarily sold to consumers through high-end home entertainment stores, although they can also be found online through retail sites like Amazon.com.

But it's that very market, Stern adds, that's creating a new generation of pinball wizards.

"Stern is in better shape now than in a long time," Steinman said.

Even Elk Grove Village Mayor Craig Johnson sees more growth for the pinball enthusiast as it settles into its new facility and buys parts from dozens of other local companies.

"I used to play pinball as a kid, so this is all kind of nostalgic," Johnson said.

Pinning down pinball

Company: Stern Pinball

CEO: Gary Stern

Current location: 2020 Janice Ave., Melrose Park

New location in April: 2001 Lunt Ave., Elk Grove Village

Number of employees: About 250

When company started: Lineage to the early 1930s

Number of parts in a pinball machine: About 3,500

Weight of a pinball machine: 300 pounds

Web address:<a href="http://www.sternpinball.com">www.sternpinball.com</a>

TakeAways

•Two groups of investors, including President Gary Stern, invested in Stern Pinball to keep it viable and they were able to introduce the iconic arcade game to a new generation of users.

•Just because pinball was popular back in the day doesn't mean it can't be popular again. In fact, it has experienced a resurgence worldwide and now can be found in theaters, bar-cades that offer the over-21 crowd a beer and a game, and even in the family game room.

•Stern Pinball's resurgence, along with the industry, has led to its plan to move into larger facilities in Elk Grove Village, where it will expand its workforce. It also aims to expand its reach worldwide and focus more heavily on China and India.

•While pinball is nostalgic, it's also new due to technology. The machines have new operating systems and new LED lighting to make it more exciting.