Throughout the previous couple of years, we’ve seen a plethora of news articles about the way virtual reality was about to conserve the timeless arcade. The idea goes that the VR gear is too expensive for home users, so it creates an opportunity for operators to pony up the big bucks to buy it and make their money back by charging per match to play with it.
“While many high-end headsets were released last year that may bring virtual-reality experiences to your living space, adoption of the technology is still in its earliest days to get a bunch of reasons–it is still bulky, expensive, and there isn’t all that far to do once 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, yet this figure pales compared to the prevalence of, say, video game consoles (sales of the top one, Sony’s PS4, topped six million throughout the 2016 holiday season alone). Consumer virtual reality will likely catch on as prices come down and headsets improve. Meanwhile, however, a number of businesses are betting that consumers may be happy to pay a much smaller amount to try out the tech with their buddies at, say, an arcade, theme park, or even bowling alley.”
It’s tempting to dive into this snare, but from an operator’s standpoint VR is a terrible deal. Other than buying a brand new vehicle and driving it a mile, I can’t think of a way that you could lose money faster between what you pay and what you’ll have the ability to get down the road.
Another limit for most operators is that while you may be able to provide a room for VR people to wander around in today, as new VR tech is introduced, we are likely to find the stage expanded from 100 square feet into the entire world. Instead of viewing just the matches in your headset, you will see the real world with game play overlayed. As the technology allows more real world places to be explored, it’s going to make a cramped arcade seem fairly lame in comparison.
VR is already heading for mass market acceptance, however it is demand isn’t being pushed by gamers who wish to pay big buck to play with video games, but like the BETAMAX that came before it, by individuals who want to watch pornography in their homes.
Even when an operator can make a bit of money for the next few decades, after VR achieves critical mass, then it will crush whatever revenue stream that operators’re dreaming of. Don’t believe me? Just check out what is going on in China.
This past year, an eye popping 35,000 virtual reality arcades opened in China. A year later 22,000 of them have closed.
That is an unbelievable failure rate over this brief period of time and one which should function as a sharp warning to anyone considering investing in the VR games. Perhaps Dave and Busters is able to take losses over the matches more than Chinese startup arcades, however I doubt that most North American operators are going to fare far better using the technology in their match rooms and will only wind up in debt in the end of the day.
The issue essentially boils down to consumers not being prepared to pay a premium for the experience. Tech In Asia, describes the problem perfectly in their article, on that the Chinese VR boom and bust.
“Enterprising store owners jumped into VR are finding it impossible to bill fees comparable to cinemas or bowling alleys to get 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 everyone vanished when it rose to US$5. By that sort of revenue it’s not possible to cover the rent.”
Even if the game was sold out all day, at $1.50 per half hour they are just earning $30 per day.
The real world information streaming in from China must serve as a canary in the quarter mines of North America. Operators who invest considerable amounts of money on fancy VR setups will soon find their little VR rooms being replaced by the entire world as a stage. Since the installations get more expensive, smaller and more mobile, the virtual arcades will look more expensive, bulky and limited.
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