As virtual reality continues to gain traction within the entertainment space, the question of what people are willing to pay for is being asked with increased regularity. And while headsets remain the gateway drug for VR adopters, a focus on location-based experiences could be extremely beneficial.
Presented as a standalone event within the recent annual Greenlight Insights Virtual Reality Strategy Conference in San Francisco, the VR Arcade Summit provided attendees with a series of panels and discussions. When you consider that location-based virtual reality entertainment had been a topic of conversation during the panels on both days of VRS 2017, then the event was a great opportunity to get deeper into the weeds of LBVRE.
The VR Arcade Summit 2017 was designed to give attendees up-to-date information regarding content strategy, revenue opportunities, commercial solutions and best practices for owning and operating a VR Arcade. The summit also debuted APE-X—a next generation LBVRE published by Starbreeze Studios and developed as an original IP by Montreal-based LuckyHammers. As an added bonus, people could also try out games provided by the Virtual World Arcade, a multi-player experience based in San Jose.
How LBVRE Will Take VR To The Next Level
As you would expect from an event that attracted some of the VR and AR industry’s rock stars and thought leaders, many of the talking points focused on not only how crucial LBVRE would be in terms of increased consumer awareness but also how it would affect the holy grail of monetization.
A recurring theme throughout the dedicated sessions was a so-called “sweet spot” of profitability, especially when it comes to providing consumers with the optimal time for a virtual reality experience. According to Greenlight Insights CEO Clifton Dawson, the VR Arcade sector will play a significant role in making virtual reality a profitable destination point.
During his opening remarks at the VR Arcade Summit, Dawson stressed that the out-of-home market was a billion dollar industry in itself, citing the results of a recent Greenlight survey that revealed an increased level of consumer interest in LBVRE experiences. LBVRE should be considered as a distinct sub-category or channel of virtual reality, he said, albeit one with a defined consumer-facing focus.
According to Greenlight’s 2017 Location-Based VR Entertainment Market Report, spending on virtual reality hardware, content and related services at venues will reach $1.2 billion globally in 2021, a significant chunk of change that could be the spark for mass adoption. Way back in the early 1980’s, home video gaming consoles were blamed (in part) for the death of video arcades but there is a growing belief that out-of-home experiences will encourage more people to invest in virtual reality devices.
The caveat is that location-based VR experiences are unlikely to be replicated in the home, a scenario that puts the onus on developers, device manufacturers and VR content creators to provide consumers with experiences that they will never forget.
“Content must be made for this channel,” Dawson said. “What works for out-of-home does not work for in-home. One of the things we do at Greenlight is track the growth of physical locations in different territories, a labor-intensive job that is essentially a snapshot in time.”
Content Will Make The Difference
Dawson’s time-based viewpoint was echoed by many of the panel sessions throughout the summit.
Content was a key differentiator when it came to providing people with the sort of VR experience that they would expect from a variety of price points. For example, a seven minute original IP such as APE-X is an entirely different proposition to the multi-player arena experiences that you would find at, say, various Zero Latency-branded global venues.
The LBVRE sector is not a channel but a market for those with the right approach, said Comcast’s managing director Michael Yang. A fireplace chat between Yang and VR startup Spaces CEO Shiraz Akmal talked in depth about virtual reality will impact the theme parks of the future, especially when it comes to monetization. The recurring problem that many operators faced was, in Akmal's opinion, that the public needs to be educated as to what virtual reality is.
VR Arcades are not the same as VR Theme Parks, Akmal said, citing the extremes between the small operators that only have a limited number of experiences and headsets and the real-estate that can be utilized by, for example, mass traffic theme parks like Six Flags or Disney. A VR Arcade can often provide a solitary immersive experience, which is not always the best way to showcase the technology or derive revenue.
“We believe that the best way to bring virtual reality to the masses is through location-based entertainment,” said Akmal. “Even today, it’s a pain to actually set up anything in any location with whatever hardware is out there … whether you make it yourself or use third-party off-the-shelf stuff.”
Expanding the spaces available (no pun intended) would be critical in taking LBVRE to the next level, noted Akmal. The cost of operation and installation increase in line with consumer expectations, with scalability playing a role in both how people interact with the experience and, importantly, whether a person returns to the experience again, he said.
On a very basic level, the experience has to not only be something that somebody is willing to leave their house for but also worth the time spent to get to. When you consider how the Disney Corporation have turned location-based entertainment into an art form, this is a business model that could easily be replicated within the VR sector.
According to Akmal, around 99 percent of people have never actually tried virtual reality. If that is indeed true, it is not a stretch to say that LBVRE becomes an ideal conduit to turn evangelism into mass adoption.
During a panel led by Zero Latency’s head of global business development Bob Cooney, attendees were asked how many of them had a headset. Unsurprisingly, the majority of people put their hand up. Ask the same question to 100 persons walking down the street and it is extremely likely that the ratio of headset owners would be significantly reduced.
As you would expect, the issue of consumer awareness was raised many times throughout the VR Arcade Summit.
A panel moderated by VentureBeat’s Dean Takahashi noted that the public perception of virtual reality centers around games as opposed to story-based narrative experiences, a thorn-in the-side for any operator that wants to provide customers with more than just the chance to shoot zombies. The Catch-22 is that a return on initial investment is more likely to be derived by these sorts of experiences rather than more immersive forms of content.
“Quality of content is going to be critical. It’s what you remember when you go away that makes you come back,” said VRX Networks’ chief creative officer Nick Cooper, VentureBeat reported. “If you have a great social experience or a singular experience where you’ve bonded with the characters or the game, that’s what’s going to keep people coming back. You go to old-school arcades, and you crank your dollars through, but it’s about how much fun you have with your son playing whack-a-mole or something like that. Emotional connection through customer experience, through the content in the games, all of that.”
LBVRE Can Alleviate Potential Roadblocks
As we noted above, most people have not tried virtual reality in any form.
The act of putting a headset on is deemed to be a bridge to far for the average person, even more so when you take into account that potential nausea is still a defining factor for some experiences. Even the people who have tried virtual reality are likely to have done so via mobile devices—Google Cardboard, Samsung Gear VR, for example—rather than the high-end (and more immersive, naturally) experiences available.
LBVRE can, in theory, help alleviate the roadblocks that the virtual reality sector is having to negotiate on a regular basis.
The key will be get people to be more than just curiosity seekers. Finding out what people respond to is the first step. For example, a ten-foot-squared virtual reality “cube” such as those produced by AiSolve by can provide consumers with a number of different experiences that can be used as raw data when it comes to developing content in the future. At the same time, location-based virtual reality entertainment can be exactly that … entertainment.
In an interview with Greenlight, Brooks Brown, global director for VR at Starbreeze Studios, said that the sweet spot is often hard to find.
"It also has to be an experience worthy of the price point. And you can play around with that," said Brown. "It’s one of those things where if you have a mediocre experience, you can get away with charging eight or 10 bucks right now, there’s not a ton of price sensitivity in the market in general, from what we’ve seen. But our goal from the beginning (and our first experience was John Wick) was really pushing that and seeing how far can we go, what can we do?"
The nature of virtual reality lends itself perfectly to these kinds of questions.
Location-based experiences are by essence controlled environments that are only limited by the imaginations of their creators. Conversely, this puts added pressure on the people or companies who own or operate LBVRE installations.
If you are charging people to, say, walk through a virtual reality version of The Walking Dead, Ghostbusters or the upcoming Jumanji, then that experience must match both the expectations of the consumer and the branded-IP itself. A bad experience reduces the chances of not only replayability but the increased traffic that comes with word-of-mouth recommendations. Factor into the mix the need to have employees who have some level of VR knowledge, then the table stakes are inevitably raised.
The majority of people who walk past a VR Arcade may be curious enough to try it out, especially if they see a bunch of individuals running around with, as Virtual World Arcade CEO Jeremy Lam remarked, the “goofy helmets,” but the hook is to make these potential customers see what the players are seeing.
“This is VR, it’s as if you are actually inside a video game,” said Lam, during a panel devoted to the best practices for launching a successful VR business. “We tell people that you can walk in the game, when you high-five your buddy you are actually high-fiving them. And when they go into the game, they put on a headset and go, “oh, this is what it is” … and then they work it out.”
With that in mind, the consensus from the VR Arcade Summit was that consumer engagement will be largely dependent on both how people react to the experiences themselves and the point being charged for that content. APE-X, for example, is not really geared to people who may have a fear of heights, while the number of experiences that rely on shooting things mirrors the popularity of these types of “games” in the video game or home console sector.
Revenue Will Be Driven By Actual Experiences
The $1.2 billion dollar question is whether LBVRE can be profitable. The short answer is yes.
But that profitability is dependent on operators realizing that a location-based VR experience is—to all intents and purposes—as much a real-estate business as a form of immersive entertainment. People who want to enter the market will need to take into account how many people they can drive per hour through a square-footage experience, the target market and, importantly, what is the aforementioned sweet spot of profitability.
In the coming weeks, Greenlight will be publishing an update to the Location-Based VR Entertainment Market Report that we released in July. The update will take a deeper dive into many of the topics that were discussed during the recent VR Arcade Summit, coupled with contributions from through leaders and forecasts for the future.
Anyone who attended the LBVRE sessions in San Francisco at the end of October will be more than aware that there is tremendous potential for growth in this distinct market segment … provided that the experiences meet the expectations of everybody involved.
“I’d love to just see a quality experience,” said Baobab Studios corporate vice president Jonathan Flesher, during the panel on winning development strategies. “That’s the thing that’s going to differentiate, aside from just your business model. Making sure we’re making money so we can all sustain this growth in the future. The other key is to just have a great customer experience, so people aren’t turned off by VR. That helps consumer adoption. It’ll help raise the whole industry up.”
The future of virtual reality does not depend on location-based experiences, but there is little doubt that people’s curiosity will transcend the media hype. After all, we all need to leave the house on a regular basis and an immersive out-of-home experience is just one good reason to do exactly that.
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