How to Calculate the Total Cost of Ownership of Arcade Equipment

When buying commercial arcade equipment, many operators focus on the purchase price.

That is understandable. The machine price is usually the largest visible cost at the beginning of a project.

However, the purchase price does not represent the complete financial cost of operating an arcade machine.

A commercial claw machine, coin pusher, sports game, capsule machine, or other arcade equipment can generate costs throughout its operating life. These may include transportation, installation, electricity, prizes, maintenance, spare parts, payment-system fees, downtime, relocation, refurbishment, and eventual replacement.

This is why B2B buyers should consider arcade equipment total cost of ownership, or TCO.

Total cost of ownership provides a broader view of what a machine may cost throughout its useful operating period. It can help operators compare different equipment options, evaluate suppliers, plan budgets, and make better purchasing decisions.

This guide explains how to calculate arcade equipment TCO and which costs should be included.

1. What Is Total Cost of Ownership?

Total Cost of Ownership is an approach to calculating the complete cost of owning and operating an asset rather than looking only at its initial purchase price.

For commercial arcade equipment, a simplified TCO formula is:

TCO = Initial Acquisition Cost + Operating Costs + Maintenance Costs + Other Ownership Costs − Recoverable Value

The exact formula can vary by business.

For an arcade machine, initial acquisition may include the machine, customization, shipping, packaging, taxes, and installation.

Operating costs may include electricity, prizes, payment fees, and routine maintenance.

Other ownership costs may include relocation, refurbishment, storage, downtime-related costs, and eventual disposal or resale.

TCO is therefore a more complete financial measurement than the machine's factory price alone.

2. Initial Machine Purchase Cost

The first component is the actual equipment purchase price.

Depending on the order, this may include:

Base machine
Cabinet
Standard electronics
Claw mechanism
Control system
Lighting
Standard payment system
Standard software

If the machine is customized, additional costs may include:

Custom artwork
Logo
Special colors
Lighting modifications
Custom software
Special payment systems
Special cabinet designs
Other engineering requirements

When calculating TCO, record the actual final configuration rather than using the supplier's advertised starting price.

3. Shipping and Logistics Costs

For imported arcade equipment, transportation can be a significant part of the acquisition cost.

Possible costs include:

Factory handling
Export packaging
Inland transportation
Port handling
Ocean freight
Air freight
Destination charges
Local transportation
Final delivery

The exact costs depend on the shipment method, destination, order size, and trade terms.

For a meaningful TCO calculation, use the estimated delivered cost rather than comparing factory prices alone.

For example:

Machine price: $1,000

Shipping and related costs: $300

The equipment's initial acquisition cost is already closer to $1,300 before considering other expenses.

4. Installation Costs

Some arcade equipment can be installed relatively quickly, while larger or more complex machines may require additional labor.

Installation costs can include:

Unpacking
Positioning
Assembly
Electrical connection
Payment-system setup
Configuration
Testing
Staff training

If your team handles installation internally, you can still assign an estimated labor cost.

This makes comparisons between different equipment types more realistic.

5. Electricity Costs

Commercial arcade equipment operates repeatedly during business hours.

Electricity consumption may therefore become a recurring ownership cost.

A simple calculation is:

Annual Electricity Cost = Power Consumption × Operating Hours × Electricity Rate

For example, if a machine uses 0.15 kW and operates for 10 hours per day:

0.15 × 10 = 1.5 kWh per day

At 30 operating days per month:

1.5 × 30 = 45 kWh per month

The actual cost depends on the local electricity rate.

Lighting, displays, motors, cooling systems, and other components can affect the total consumption.

When comparing machines, consider both equipment performance and energy requirements.

6. Prize Costs for Claw Machines

Prize cost is one of the most important recurring expenses for claw machines.

Unlike a traditional arcade cabinet where the operator may mainly incur electricity and maintenance costs, a claw machine uses physical prizes as part of the business model.

Prize-related costs include:

Plush toys
Collectibles
Small gifts
Branded merchandise
Premium prizes
Seasonal products
Packaging
Storage

A simple monthly prize cost estimate can be calculated from the number of prizes won.

For example:

Prizes won per month × Average prize cost = Monthly prize cost

If customers win 500 prizes in a month and the average cost per prize is $2:

500 × $2 = $1,000

This is an operating expense that should be included in TCO calculations.

7. Payment-System Costs

Modern arcade equipment may use one or more payment methods.

Depending on the configuration, payment-related ownership costs can include:

Coin acceptor maintenance
Banknote acceptor maintenance
QR payment fees
Card transaction fees
Cashless system fees
Software or platform fees
Internet connectivity

Not every payment method has the same cost structure.

For example, a cashless payment system may improve customer convenience but involve transaction or service fees.

When calculating TCO, estimate the actual cost of the payment method used at your venue.

8. Routine Maintenance

Every commercial machine needs some level of maintenance.

Routine maintenance may include:

Cleaning
Inspection
Lubrication where applicable
Claw adjustment
Joystick inspection
Button replacement
Lighting replacement
Payment-system maintenance
Cabinet inspection
Electrical checks

Some maintenance can be handled by venue staff.

Other repairs may require technical support or replacement components.

Even if maintenance costs are relatively low, they should still be included in long-term budgeting.

9. Spare Parts

Spare parts represent another ownership cost.

Common arcade equipment parts may include:

Motors
Claw assemblies
Joysticks
Buttons
Control boards
Power supplies
Lighting components
Locks
Wiring components
Payment-system components

Not every machine will require every part during its operating life.

However, commercial operators should consider an estimated spare-parts budget.

For larger fleets, purchasing commonly used spare parts in advance may reduce downtime and simplify maintenance.

10. Downtime Has a Cost

Downtime is often overlooked when calculating arcade equipment ownership costs.

Suppose a machine normally generates revenue every day but remains unavailable for several days because a component needs to be replaced.

The direct repair cost may be relatively small.

The lost operating opportunity can be more significant.

A simple estimate is:

Estimated Downtime Cost = Average Daily Contribution × Downtime Days

The exact calculation depends on the business model.

For this reason, machine reliability and supplier support can have financial value even when they do not appear directly on the original quotation.

11. Technical Support

International buyers may need technical assistance during the machine's operating life.

Support can involve:

Installation questions
Payment-system setup
Gameplay settings
Troubleshooting
Replacement-part identification
Software configuration
Maintenance instructions

A supplier that provides clear manuals, setup videos, spare-parts support, and responsive technical assistance may reduce the operator's long-term maintenance burden.

Technical support should therefore be considered part of the ownership equation.

12. Warranty Coverage

Warranty can reduce certain unexpected ownership costs during the applicable period.

When evaluating suppliers, check:

Warranty duration
Covered components
Exclusions
Replacement-part policy
Technical support
Shipping responsibility
Repair procedures

Do not assume that two suppliers offering the same warranty duration provide identical coverage.

The actual terms matter.

A clear warranty can reduce financial uncertainty during the early operating period.

13. Store Space Is Also a Cost

Arcade equipment occupies valuable commercial floor space.

The cost of that space depends on the venue.

For example, a machine in a shopping mall may effectively consume part of a leased area or revenue-sharing arrangement.

For an independent arcade, each machine occupies floor space that could potentially be used by another machine or activity.

A useful approach is to calculate:

Floor-Space Cost = Allocated Floor Area × Effective Cost per Square Meter

This does not mean a larger machine is automatically a poor investment.

Large machines may have stronger visual impact or support more players.

The point is simply to evaluate the value of the space they occupy.

14. Maintenance Labor

Maintenance is not limited to spare parts.

Staff time also has value.

Consider the time required for:

Cleaning
Prize replenishment
Cash collection
Machine checks
Minor repairs
Configuration
Troubleshooting
Inventory management

For a single machine, these labor costs may be small.

For a fleet of dozens or hundreds of machines, they can become significant.

Estimating labor per machine can help operators compare equipment types more accurately.

15. Prize Inventory and Storage

Claw machine operators need inventory beyond the prizes currently inside the machines.

Additional space may be required for:

Bulk prize inventory
Seasonal prizes
Replacement prizes
Packaging
Sorting
Back-stock

Inventory has a financial cost because money is tied up in products before they are used.

Operators should consider:

Inventory turnover
Purchase quantities
Storage costs
Damaged inventory
Slow-moving prizes
Seasonal products

Good inventory management can reduce unnecessary ownership costs.

16. Software and Connectivity Costs

Some modern arcade equipment can use digital payment systems, network functions, remote monitoring, or management software.

Depending on the system, there may be:

Software fees
Subscription fees
Internet costs
Cloud service charges
Payment platform fees
Data connectivity costs

If the equipment operates entirely offline, these costs may not apply.

Before buying, identify which functions require recurring services.

17. Relocation Costs

Commercial arcade machines are sometimes moved.

An operator may:

Rearrange a venue
Move equipment to another branch
Replace an underperforming location
Open a new location
Close an existing location
Change the equipment mix

Relocation can involve:

Labor
Transportation
Packaging
Temporary storage
Installation
Electrical reconnection

For multi-location operators, relocation costs can become an important part of long-term equipment ownership.

18. Refurbishment Costs

After several years of operation, some equipment may benefit from refurbishment instead of replacement.

Potential refurbishment work includes:

Cabinet repair
Repainting
Artwork replacement
Glass replacement
Lighting replacement
Control replacement
Mechanical component replacement
Electrical component replacement

Refurbishment can extend useful operating life and delay the cost of purchasing a completely new machine.

However, the decision should be based on actual repair costs, machine condition, appearance, performance, and expected future use.

19. Replacement Cost

Every commercial equipment plan should eventually consider replacement.

Replacement may become necessary when:

Repair costs increase
Parts become difficult to source
Technology becomes outdated
The cabinet is heavily damaged
Customer interest declines
A new model performs significantly better
The machine no longer fits the venue concept

A machine's useful operating life is therefore an important TCO factor.

A low purchase price does not automatically produce a low TCO if the equipment needs replacement much sooner.

20. Resale or Residual Value

Some equipment may retain value after several years.

If a machine can be resold, transferred to another location, or traded as used equipment, its remaining value can reduce the effective ownership cost.

A simplified formula is:

Net TCO = Total Ownership Costs − Residual Value

Residual value varies considerably depending on:

Machine condition
Model popularity
Age
Availability of spare parts
Appearance
Market demand
Original manufacturer support

Do not assume a specific resale price unless you have reliable market evidence.

21. A Simple Five-Year TCO Example

Consider a hypothetical commercial claw machine.

Assume:

Machine purchase: $1,200
Customization: $100
Shipping and logistics: $300
Installation: $100
Five-year electricity cost: $300
Five-year maintenance and spare parts: $500
Other ownership costs: $200
Residual value after five years: $300

The simplified TCO would be:

$1,200 + $100 + $300 + $100 + $300 + $500 + $200 − $300 = $2,400

This example is only for demonstrating the calculation method.

Actual costs can be significantly different depending on the machine, venue, electricity rate, usage, maintenance requirements, shipping destination, and operating model.

For claw machines, prize costs should normally be analyzed separately as a recurring operating expense because they depend heavily on play volume and winning frequency.

22. TCO and ROI Are Different

TCO and ROI are related, but they answer different questions.

TCO asks:

How much does it cost to own and operate this equipment?

ROI asks:

How much financial return does the investment generate?

For example, a machine may have a higher purchase price but lower maintenance requirements.

Another machine may have a lower purchase price but higher operating costs.

TCO helps identify the long-term cost difference.

ROI then considers those costs together with revenue or profit.

Using both measurements gives a more complete picture of equipment performance.

23. Compare Machines Over the Same Period

When comparing two machines, use the same ownership period.

For example:

Machine A: 5-year TCO

versus

Machine B: 5-year TCO

Do not compare the purchase price of one machine against the lifetime operating cost of another.

A consistent time period makes the analysis more useful.

For equipment expected to operate for many years, a three-year or five-year model may provide more insight than a simple first-year comparison.

24. Compare Suppliers Using TCO

TCO can also be used to compare suppliers.

Suppose Supplier A offers a lower machine price but has:

Limited spare-parts availability
Longer repair communication
Fewer documentation resources
More expensive replacement components

Supplier B may have a higher initial quotation but provide:

Better spare-parts availability
Clear technical documentation
Stronger support
Better configuration consistency

The second supplier may have a higher acquisition cost but potentially lower long-term ownership costs.

This is why supplier selection and TCO analysis should be considered together.

25. How to Build a TCO Spreadsheet

A simple spreadsheet can make the process easier.

Create columns for:

Equipment model
Quantity
Purchase cost
Customization
Shipping
Installation
Electricity
Prizes
Maintenance
Spare parts
Payment fees
Software
Labor
Relocation
Refurbishment
Residual value
Estimated TCO

Then create a separate row for each machine model.

For a large arcade project, you can calculate TCO by machine category and then calculate the total equipment TCO for the venue.

This provides a much clearer financial picture than looking only at the original purchase invoice.

26. TCO for Different Arcade Equipment

The same concept can be applied to different equipment categories.

Claw machines

Important costs include:

Machine
Shipping
Prizes
Maintenance
Payment systems
Electricity
Spare parts

Gashapon machines

Important costs may include:

Machine
Capsules
Toys or products
Payment system
Maintenance
Inventory
Electricity

Coin pushers

Important costs may include:

Machine
Coins or tokens
Electricity
Maintenance
Mechanical parts
Payment components

Arcade cabinets

Important costs may include:

Machine
Software or game system
Electricity
Controls
Displays
Maintenance
Replacement components

Different machines have different cost structures, so TCO should be adapted to the equipment category.

27. How to Reduce Total Cost of Ownership

Operators can often reduce TCO through better planning.

Choose the correct machine size

Avoid paying for unnecessary capacity if the venue does not require it.

Standardize equipment

Using fewer machine models can simplify spare-parts management and staff training.

Maintain machines regularly

Preventive maintenance can help identify problems before they become larger repairs.

Manage prizes carefully

For claw machines, prize inventory and winning settings should be monitored to control recurring costs.

Keep critical spare parts available

Having essential parts available can reduce downtime.

Choose suitable payment systems

Use payment methods that match customer behavior and venue requirements.

Work with a reliable supplier

Clear technical support and spare-parts availability can reduce long-term operating difficulties.

28. Avoid Buying Based Only on the Lowest Price

A low purchase price can be attractive, especially when starting a new arcade business.

However, equipment should be evaluated based on its intended operating period.

Ask:

How long is the expected useful life?
What components may require replacement?
Are spare parts available?
What maintenance is required?
How much electricity does it use?
What payment fees apply?
How difficult is it to repair?
What happens if the machine stops operating?
Can the machine be refurbished?
Does the supplier provide technical support?

The answers can reveal the real cost of ownership.

29. TCO Checklist for Commercial Arcade Equipment

Before purchasing, estimate:

Acquisition

Operation

Maintenance

Long-Term

Using this checklist provides a much more realistic picture of equipment costs.

30. TCO Questions to Ask Your Arcade Equipment Supplier

Before purchasing, ask the supplier:

What is included in the machine price?
What customization options are available?
What packaging is included?
What shipping options are available?
What are the recommended maintenance procedures?
Which spare parts are commonly replaced?
How long are spare parts available?
What warranty coverage is provided?
What technical support is available?
What electrical configuration does the machine require?
What payment systems can be installed?
Are any payment or software systems subject to recurring fees?
What documentation is supplied?
Can replacement components be ordered later?
Can the machine be refurbished if required?

These questions can help buyers estimate long-term costs before committing to an equipment purchase.

31. TCO for Bulk and Multi-Location Operators

For distributors and operators with multiple locations, TCO analysis becomes even more useful.

A fleet of 50 machines may have very different ownership costs depending on how standardized the equipment is.

For example, using several models may increase:

Spare-parts variety
Staff training
Troubleshooting complexity
Inventory requirements
Maintenance procedures

Standardizing models where practical can simplify fleet management.

Operators can also compare TCO by location to identify which equipment types are most efficient in different environments.

32. How Fanhong Can Support Long-Term Equipment Planning

Fanhong supplies commercial claw machines and other arcade equipment for B2B customers, including entertainment venues, distributors, operators, and customized projects.

When planning an equipment order, buyers can discuss:

Machine models
Quantities
Customization
Payment systems
Electrical requirements
Packaging
Shipping
Spare parts
Warranty
Technical support

Fanhong can also support broader arcade equipment projects where customers need multiple machine categories rather than a single product type.

For long-term operators, discussing the expected application and equipment quantity at the beginning can help create a more practical purchasing plan.

Conclusion

The purchase price of an arcade machine is only the beginning of its financial lifecycle.

A complete arcade equipment total cost of ownership analysis should consider acquisition, transportation, installation, electricity, prizes, payment systems, maintenance, spare parts, labor, downtime, technical support, relocation, refurbishment, and eventual replacement.

For claw machines in particular, prize inventory is an important recurring operating expense and should be analyzed separately from the equipment's fixed ownership cost.

The most useful approach is to calculate TCO over a consistent period, such as three or five years, and compare equipment using the same assumptions.

Before purchasing commercial arcade equipment, ask not only:

“How much does this machine cost?”

Also ask:

“How much will this machine cost to own and operate over its useful life?”

That second question can lead to better equipment choices, more accurate budgets, and stronger long-term business planning.

A machine with the lowest initial price is not always the machine with the lowest total cost. For commercial operators, the better purchasing decision is usually the equipment that provides the right combination of acquisition cost, reliability, operating efficiency, maintenance support, and useful service life.