Over the previous few years, we have seen an array of news articles about how virtual reality was about to conserve the classic arcade. The theory goes that the VR gear is too expensive for home users, so it creates an opportunity for operators to pony up the big dollars to buy it and make their money back by charging per match to play it. Much Nolan Bushnell, the inventor of Pong, is trying to hype the technology since the industry’s savior.
“While many high-end cans were released last year that may bring virtual-reality experiences to your living space, adoption of the technology is still in its first days to get a bunch of reasons–it is still bulky, expensive, and there is not all that far to do as soon as you’ve got it on your face. More than two million headsets were shipped globally in 2016, according to a quote from market researcher Canalys, but this figure pales compared to the prevalence of, say, video game consoles (sales of their top one, Sony’s PS4, topped six million during the 2016 holiday season alone). Consumer virtual reality will probably catch on as costs come down and headsets improve. In the meantime, though, a number of companies are betting that consumers may be pleased to pay a much smaller amount to try out the tech with their friends at, say, an arcade, theme park, or even bowling alley”
It’s tempting to fall into this snare, but in the operator’s perspective VR is a terrible deal. Aside from purchasing a brand new vehicle and driving it a time, I can’t think of a way that you could eliminate money faster between what you pay and what you will be able to get for it down the street.
Another limitation for operators is that while you may be able to supply a space for VR individuals to roam around in now, as fresh VR technology is unveiled, we’re going to find the point expanded from 100 square feet to the whole world. Rather than viewing just the matches from your headset, you’ll see the true world with sport play overlayed. As the technology allows more actual world places to be explored, it’s going to make a cramped arcade look pretty lame in comparison.
VR is heading for mass market acceptance, but it’s demand is not being pushed by players who want to pay big buck to play video games, but such as the BETAMAX that came before it, by individuals who want to watch porn in their houses.
Even if an operator can make just a bit of money for the upcoming few years, once VR achieves critical mass, then it is going to crush whatever revenue stream that operators are dreaming of. Don’t believe me? Just check out what’s going on in China.
A year later 22,000 of these have closed.
This is an unbelievable failure rate over this brief time period and one which should serve as a sharp warning to anyone considering investing in the VR games. Perhaps Dave and Busters is able to take losses on the games longer than Chinese startup arcades, but I doubt that most North American operators are going to fare much better with the technology in their game rooms and will only end up in debt in the close of the day.
The problem essentially boils down to customers not being prepared to pay a premium to the encounter. Tech In Asia, describes the problem perfectly in their own article, on the Chinese VR boom and bust.
“Enterprising shop owners leaping into VR are finding it impossible to bill fees akin to cinemas or bowling alleys for a VR experience. One VR arcade proprietor told iHeima he saw eager queues when charging US$1.50 to get a 30-minute session, but everybody disappeared as it rose to US$5. By that sort of revenue it’s impossible to cover the rent.”
Even if the match was sold out daily, at $1.50 a half hour they’re only earning $30 a day.
The actual world data streaming in from China should serve as a canary in the quarter plantations of North America. Operators who invest large amounts of money on elaborate VR setups will soon find their little VR rooms being replaced by the whole world as a stage. As the setups get cheaper, smaller and more portable, the virtual arcades will look more expensive, bulky and restricted.