Throughout the last couple of years, we’ve seen a plethora of news articles about the way virtual reality was going to save the timeless arcade. The theory goes that the VR indoor playground equipment (http://kayhillier7176.wikidot.com/) is too expensive for home users, therefore it creates an chance for operators to pony up the big dollars to buy it and then make their money back by charging per game to play it. Much Nolan Bushnell, the inventor of Pong, is attempting to hype the technology as the industry’s savior.

“While many high-end cans were released last year which can bring virtual-reality adventures to your living room, adoption of this technology remains in its earliest days to get a bunch of reasons–it’s still bulky, expensive, and there is not all that far to do once you’ve got it on your face. Over two million cans were sent worldwide in 2016, according to an estimate from market researcher Canalys, but this figure pales in comparison to the prevalence of, say, video game consoles (earnings of their leading one, Sony’s PS4, topped six million throughout the 2016 holiday season alone). Consumer virtual reality will likely catch on as costs come down and headsets improve. Meanwhile, however, a variety of companies are betting that customers could possibly be happy to cover a much smaller sum to try out the tech with their buddies at, say, an arcade, theme park, or bowling alley”

It is tempting to fall into this snare, but in the operator’s perspective VR is a terrible deal. Other than buying a brand new car and driving it a mile, I can not think about a way you could eliminate money faster between what you pay and what you will be able to get down the road.

Another limit for most operators is that while you might have the ability to supply a space for VR people to wander around in today, as fresh VR tech is introduced, we’re likely to see the stage expanded from 100 square feet to the whole world. Rather than viewing just the matches in your headset, you’ll see the true world with game play overlayed. Since the technology allows more actual world places to be researched, it is going to make a cramped arcade look fairly feeble in comparison.

VR is heading for mass market acceptance, however it is demand isn’t being driven 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 pornography in their houses.

Even when an operator can make just a bit of money for the next few years, after VR achieves critical mass, it will crush whatever earnings stream that operators are dreaming of. Do not believe me? Just check out what’s happening in China.

A year after 22,000 of these have closed.

This is an incredible failure rate over such a short time period and one that should serve as a sharp warning to anyone contemplating investing in the VR games. Perhaps Dave and Busters can afford to take losses over the games longer than Chinese startup arcades, but I doubt that most North American operators will fare much better with the technology in their match rooms and will only wind up in debt at the end of the day.

The problem essentially boils down to consumers not being willing to pay a premium for the encounter. Tech In Asia, clarifies the issue perfectly in their article, on the Chinese VR boom and bust.

“Enterprising shop 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 owner told iHeima that he saw excited queues when charging US$1.50 for a 30-minute session, but everyone vanished when it rose to US$5. By that sort of revenue it is impossible to pay the lease.”

Even if the match was sold out daily, at $1.50 per half hour they are only earning $30 a day.

The actual world data streaming in from China must serve as a canary in the quarter plantations of North America. Operators who spend considerable amounts of money on elaborate VR setups will soon find their small VR rooms being replaced by the entire world for a stage. As the installations get more expensive, smaller and more portable, the digital arcades will seem more costly, bulky and limited.