The virtual reality (VR) market is at low expectations right now. Impulsive investments go down. It’s time for conscious decisions and realistic business plans. Some developers who have published games on Steam have realised that there is no money in VR home use. Now they offer licenses for commercial use to VRcades. Still, such arcades are like cybercafés which mostly disappeared when home internet access became more commonplace.
Free roam VR is totally different. There is no way for a customer to get this experience at home. But could warehouse scale VRcades pay for themselves – especially if they aren’t located in amusement parks?
- What items of expenses are critical to ROI?
- How can you build a sustainable VR business today?
- How can the escape room business model help VRcades?
- How can VRcades attract a broader audience?
- And what products will let VRcades be profitable in the future, independent of VR home use?
Let’s dive in.
What’s the current state of VR market?
Goldman & Sachs reported in 2016 that the forecasted outcome for VR/AR revenue in 2025 was $23 Billion (USD) which is a “delayed uptake” scenario. Hardware TAM will represent a market size similar to the current videogame console market. Now everyone is much more pessimistic about VR. Unity CEO John Riccitiello spoke about that gap of disappointment at VRLA 2017. And he appealed to developers who must focus on surviving.
The headsets are getting cheaper. But besides Google Cardboards are there many VR headsets sold? Not very much if you compare with iPhones. And do the customers use the headsets? Not very often.
VR products compete with consoles and PC titles as well, not just with each other. It’s sad to say, but the VR user spends much more time on PC/console. There are certainly worrying numbers on the Steam Charts. Arizona Sunshine has 186 players in a month as of December 2017. Just compare this with Getting Over It with Bennett Foddy – 1069 players in a month. That’s before you compare it to, say, something like The Witcher, Fallout 4 or even Factorio. Even the last has tens of times more.
So what about developers surviving? Some offer commercial licenses for cybercafés. Check Keep Talking and Nobody Explodes for an instance. Not to mention Raw Data’s commercial license cost, It’s totally different business model. And it’s good opportunity to earn money out of the videogame.
You can only guess did developers of these games return their expenses. And did they do it with Steam or commercial licenses? But the truth is there is no super-profit in home use these days for sure. To survive developers should raise investments, close big deals or search for alternative business models.
Types of location-based VR business
Digital Out-of-Home Entertainment (DOE) is the hope of VR industry right now. There are three different types of location-based VR in the world. They differ with the rent cost which is the biggest item on the list of monthly expenses. The ROI will depend on it in the first place. Initial investments could differ but sustainability is more important in the perspective.
When we speak about VRcades it’s The VOID that often keeps pop up. They call their project a hyper-reality. If a player takes a lantern in VR, he feels it in real-life. The walls, the ladders, the wind, the sounds are real. It’s like 7D cinema, but you don’t sit, you act.
To an entrepreneur, it’s like building a real-life escape game but a way more expensive. You should pour millions to open such venue. It’s pure magic, but it costs a lot. It’s no wonder it has good bookings in Disneyland parks, but what if you want to open such venue in your city? How many sessions a day will it be? Could you start such business without Disney investments and infrastructure?
How long does it take to return your investments? If you are not in the Disneyland it’s good to have 3 sessions a day. If the player pays $30-60 for a session and the average number of players is 4, it’s $194,400 in a year without regard for monthly expenses like rent, staff fees, etc. So it’s better to close the deal with Disney.
The bad news is this train went off already. The good news is it’s not necessarily to do something like The Void if you want to open location-based VRcade.
Free-roam VR is much more widespread across the globe. Players move and shoot zombies or other enemies. You don’t have to build walls, but you still need a lot of space. That’s the reason it’s also called warehouse scale VR.
If you have three sessions in a day, an average number of players is four and each player pays you $60 (USD) for a session, the monthly revenue would be about $21,600. But if you rent 3000 sq. ft, it will cost you $10,000 at least.
Don’t forget that there is no mass production of standard equipment for this. Zero Latency, for instance, use custom made markers, simulated weapon, and game controllers. Sometimes it’s hard to buy the right VR headset, and it goes without saying with custom-made equipment.
You’ll need to be sure about your marketing strategy to get all the sessions you can, so you’ll be satisfied with the profit.
Players don’t have to move around a lot if the game has other movement controls like teleportation or flying. In some games players seat all the time, in some they stand, step to and fro, rotate, duck and dodge.
In such case, you’ll need 50-70 sq. ft space. Lower rent allows you to charge $10 per player. If you have 3 sessions a day, an average number of players is four, the monthly revenue would be around $3,600 and you will pay $500 for rent. So, it seems room-scale VR has higher marginality.
This type of location-based VR is the closest to home use in terms of experience. Still, VR equipment is too expensive to have it at home ($450 for Oculus Rift, $600 for HTC Vive and $1500 for the VR ready PC). Actually, you’ll need a separate room for a room-scale VR system like HTC Vive. It’s not for everyone.
The problem with room-scale VRcades is that if they don’t offer some exclusive content, they will vanish anyway like cybercafés did.
The success of VRcade business depends on content a lot. Here are some crucial points of what content should VRcade provide.
Single-player games are basically useless for VRcades. The real-life escape game business model is a proof of concept.
- Team-based games are better for out-of-home entertainment.
- Cooperative gameplay is better for corporate parties which could take the big cut.
- A 1-hour long session is better than paying per minute. It is an event.
So VR games should be team-based by design. A player shouldn’t be able to make it without their pals. They must help each other.
Games should be simple enough for your grandmother to play. They appeal to a wide audience. VRcades customers are not geeks, they are companies of friends, colleagues or families.
What you can learn from escape games, that a team must beat a game in 60 minutes, and you have a clear goal in the end.
Action and horror seem to be obvious genres. But in fact, they are not for everyone. Adventure, on the other hand, are the best option for cooperative time-limited gameplay. Colourful fantasy is as good as breathtaking space odyssey.
Also, VR must give you a thrill. The key point is an experience you can’t get in real-life. Flying in the outer space, shooting fireballs with your own hands, that kind of stuff.
There is not so much VR cooperative adventures that are suitable for VRcades. So entrepreneur’s best option is to address to professional VR developer which is specialized in that kind of games.
If VRcade provides such games, it has better chances to keep going in the future. People watch movies at home, but going to a movie theatre is an event, something for you can do with other people.
What about motion sickness?
Not everyone likes amusement parks because rollercoaster can cause nausea. It’s the same with VR. Some individuals experience motion sickness in VR more or less. There are four solutions to minimize this issue.
The Controls: The common movement control in VR is teleportation. It’s 100% motion-sicknessless. If the game has no such option, there are a few workarounds. Players could use some vehicles to move – airplanes or mech robots for example. Or they can fly using controllers or hand tracker devices. Or they can walk around as long as a room-scale game allows.
No walking via pushing controller’s buttons or/and uncontrolled movement like sudden player’s body’s turn is allowed.
The Game Master: A game master should check if somebody feels sick and offer to turn less and/or put off the headset for a while. It’s a human factor, so pay attention to it.
The Game Master’s App: It’s great if the game master has an option to skip sequence for this player particularly. It means the developer should provide an application for the game master to watch the players’ actions and help them with puzzles and stuff.
Candies: You should have sour candies onboard (just like they do on airplanes). No joke.
Typically VR arcades just started have a common problem with marketing. They try to promote VR itself, show powerful headsets to the customers. And it works badly. Screenshots from VR game don’t work. People with headsets put on are anti-social.
As escape games owners you should know that the escape games should be promoted with photos captured players’ emotions. The recipe is the same. Shoot people. Shoot the players’ emotions after the game, when they put the headsets off.
If you have players’ photos it’s already enough. But some VR arcades make beautiful futuristic decorations or themed decorations based on the VR game setting. It’s a good ‘topping’ to the experience.
As for the marketing texts, you should sell emotions and experience as always. Flying in the space, shooting fireballs with your bare hands – is what you don’t have in your real-life. And it’s a great thing to try in VR.