With home-based systems getting better and cheaper every day, can Virtual Reality Arcades keep the punters interested and turn a profit? We talk to some key players about what it takes to be successful in that space.
Teething problems are to be expected in any pioneering new industry, and many who have rushed to jump on the “VR Boom” bandwagon and invested heavily in opening VR arcades in the early days have since gone out of business. But talk to industry insiders and their enthusiasm doesn’t seem dampened. If anything, it seems that LBE (Location-Based Entertainment) VR is entering a 2.0 phase.
Take SpringboardVR , for example. The company has operators in 36 countries, and says that around 50 new VR arcades are signing up to their platform every month. In a recent survey they conducted with over 150 such arcades, it emerged that over two thirds were either breaking even or profitable, with many operators having opened multiple locations or planning to expand in the coming months.Teething problems are to be expected in any pioneering new industry, and VR is no exception Click To Tweet
Part of the problem in the early days, according to SpringboardVR’s Co-Founder and CMO Will Stackable, was that many Arcades signed expensive leases at malls and set their prices at up to a dollar a minute. At that rate they couldn’t compete with other out of home entertainment venues and mostly attracted one-time thrill seekers. Now that prices have dropped closer to the .50 a minute mark, however, customers can afford to come in on a weekly basis and arcades are able to build up repeat business, which accounts for around 20% of their revenue.HolodeckVR’s strategy is to sell into existing location verticals instead of trying to create new ones Click To Tweet
Stackable believes the interest and demand for VR has barely even begun to be tapped. “We had almost 4 million minutes on our platform last month and we’re seeing arcades with consistently high utilization numbers,” he says, adding that VR Arcades are also diversifying their income streams by acting almost like community centres and hosting tournaments, school field trips, STEM classes, and even nursing home visits.
That might seem a bit strange at first, but not when you consider that their survey data shows that 95% of VR arcade customers have never tried VR before, with the biggest demographic consisting of families with kids.
“For LBE VR to properly take off, it needs to be experienced, enjoyed and somewhat integrated into the local community,” agrees Barbara Lippe, Co-Founder and Head of content at HolodeckVR. She believes that the “Minecraft effect” of LBE is just around the corner, and that even as the novelty factor somewhat wears off for setups like The Void or Zero Latency, it will pave the way for a next phase of family-oriented interactive and social experiences.
HolodeckVR’s strategy is to sell into existing location verticals instead of trying to create new ones, since there are plenty of LBE venues out there such as cinemas, casinos, shopping malls and even waterparks. VR has the potential build on all those real-world places and experiences.
“Most people don’t realize how big in the U.S. trampoline parks, indoor skydiving, family entertainment centers, traditional arcades, bowling alleys, etc. STILL are,” agrees Stackable, who believes this paves the way for continued steady growth in VR arcade take-up with those consumers that already enjoy location-based social experiences and will pay for them.
“As you might expect, our stages/equipment, location and labor expense are the primary drivers of cost, but while specific economics will vary by location, our locations typically have a positive Net Operating Income from day one.” says Curtis Hickman Chief Creative Officer and Co-founder of The VOID.
For smaller venues, however, simplifying and optimizing equipment setup so that they are able to decrease the ratio of staff per user could make the difference between breaking even (or going bust) and profitability.
“VR experiences out there still require way too many staff for a relatively small number of customers, says Jeffrey Travis, Founder and CEO of Positron, makers of the Voyager Cinematic VR Chair which incorporates robotic motion and haptic feedback features. “We can put 20 people simultaneously into a premium motion VR theater with our Voyager chairs, with 1 or 2 operator staff. Much like the projectionist at a movie theater, one staffer can start the experience for a large group of people seating themselves,” he adds.
Positron developed a financial model around ticketed premium VR experiences which they’ve tested with motion VR theaters at locations like the Ace Hotel in Los Angeles and the MK2 VR center in Paris, France. “Our models show operators for VR LBE locations would expect to see a profit in the first month of operation, and recover capex costs within 24 months,” says Travis. “With only 50,000 Voyager chairs in the Positron network in the next 3 years, revenues would exceed $1 billion annually to operators worldwide.” Which might seem like a lot, but considering there are around 24 million cinema movie seats worldwide, it’s a relatively unambitious number and highlights just now new the industry still is.There is a massive audience out there, who will keep coming back for new experiences, when you get the content and the tech right Click To Tweet
The Content Sweet Spot
“There is a massive audience out there, who will keep coming back for new experiences, when you get the content and the tech right,” says Nick Bolton, CEO of Oxford Metrics, a company that developed tracking technology called Origin, specifically designed for LBVR. Bolton says the more generic tracking systems previously used in LBVR worked to some degree but weren’t really optimised for the task, so they would, for example, run into trouble when sensors were obscured by other players or even when the primary player’s own limbs got in the way.
But although logistics such as improving UX, making better and cheaper hardware, and having platforms that allow for scalability and higher cost efficiencies are all important to the industry’s long-term future, they aren’t top of the wish list for the people we spoke to. What will actually make or break LBE VR is, they believe, the availability of compelling, high-quality content that appeals to a wide demographic and makes people want to experience, share, and come back to these places over and over again.
What will make or break LBE VR is compelling, high-quality content Click To Tweet
“Nobody goes to the cinema to watch a projector run, we all go there for the movies – the unique experience,” says Lippe, adding that the most awesome moment for any technology comes when people don’t even realise it’s there.
The challenge for creatives in the immersive space is to create experiences that take advantage of the unique properties of VR Click To Tweet
“I think that the inflection point will happen when there is the equivalent of the original “Star Wars” movie that was released in theaters in 1977,” believes Travis “People will hear about this VR title and say “Have you heard about [VR Tittle]? You have to go check this out!” For that to happen, though, he believes we need to see richer stories in VR that fully take advantage of the medium. “We should be exploring stories that are about placing audiences in rich worlds, where we can take advantage of creating realistic immersive experiences, whether interactive or narrative, that bring us closer the action and characters.”
“At the end of the day technology is just a tool, and without compelling stories, and content, that tool won’t get you very far,” says Hickman, who says that although The VOID will continue to push the envelope with entertainment content, they’re also keen to expand into areas such as immersive educational experiences which offer a rich vein of engagement, specially family audiences.
Stackable believes that in the end the “out of home” VR space will help bring about mass consumer adoption as thousands of people experience VR for the first time in arcades every day. But that doesn’t mean they won’t continue to offer worthwhile experiences that go beyond what you could ever get with a home setup. The sweet spot for LBVRE content, he says, is a combination of Multiplayer-oriented (huge driver for repeat business) and making the experience frictionless with simpler menus, minimal tutorials, and quick onboarding that allows people to start having fun within the first few minutes, yet provides scope for holding their interest for longer too.The sweet spot for LBVRE content is a combination of Multiplayer-oriented - a huge driver for repeat business - and making the experience frictionless Click To Tweet
It all comes back to content again, and the challenge for creatives in the immersive space is to create experiences that take advantage not only of the unique properties of VR, but also leverage the fun and excitement that comes with going out someplace just to have a good time.
“People still love to go to Amusement Parks and the movies and to have a larger-than-life experience that they just cannot get in their own home and I think desire for those experiences is universal,” says Shiraz Akmal, CEO and Co-Founder of SPACES
For Akmal, if you’re not building an experience specifically tailored for VR in your attraction, then you are doing yourself, and your customers, a huge disservice. “Creating a world in VR is vastly different from anything we’ve seen on flat screens. Adapting popular content is easy, but it’s not as impactful as getting into the nuts and bolts, digging down and doing the challenging work of bringing that world to life. I also think that oftentimes a lot of experiences miss the super important point that you are putting someone INSIDE a story,” he says, giving the example of a functionality offered by SPACES to 3D-scan the faces of their users: “ Seeing the look of joy on someone’s face when they see their sister, dad, grandparents or best friend’s face on a terminators body is the stuff that memories are made of.”I think we're starting to see the emergence of a vibrant industry Click To Tweet
Stackable concludes that in five year’s time the LBE VR locations may well change almost beyond recognition, but he’s confident the business model is sticking around: ”These guys and girls will adapt and flow… they’ll buy expensive haptic rigs… they’ll setup free roaming warehouses… they’ll focus on group events… they’ll pivot to eSports. But I think we’re starting to see the emergence of a vibrant industry.
This article was originally published on UploadVR
VR arcades and attractions have changed considerably since the debut of PC-based consumer headsets in 2016. Location-based VR attractions still going today are zeroing in on prices, content and services that can make them sustainable long-term. https://t.co/B0JDuM6lm0
— UploadVR (@UploadVR) October 8, 2018
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Alice Bonasio is a VR and Digital Transformation Consultant and Tech Trends’ Editor in Chief. She also regularly writes for Fast Company, Ars Technica, Quartz, Wired and others. Connect with her on LinkedIn and follow @alicebonasio on Twitter.
Also published on Medium.