Throughout the previous couple of years, we've seen a plethora of news posts about how virtual reality was about to conserve the classic arcade. The theory goes that the VR gear is too expensive for home users, therefore it creates an opportunity for operators to pony up the big dollars to buy it and then make their money back by charging per match to play it. Much Nolan Bushnell, the inventor of Pong, is attempting to hype the tech since the industry's savior. From the MIT Technology Review.
"While several high-end headsets were released last year that can bring virtual-reality adventures to your living space, adoption of this technology remains in its earliest days to get a bunch of reasons--it's still bulky, pricey, and there is not all that much to do once you've got it on your face. Over two million cans were shipped globally in 2016, according to an estimate from market researcher Canalys, yet this figure pales compared to the popularity of, say, video game consoles (earnings of their top one, Sony's PS4, topped six million during the 2016 holiday season alone). Consumer virtual reality will likely catch on as prices come down and cans improve. Meanwhile, though, a number of businesses are betting that customers may be happy to cover a much smaller amount to try the tech with their buddies at, say, an arcade, theme park, or bowling alley"
It's tempting to fall into this snare, but from an operator's perspective VR is a terrible deal. Operators are being requested to pay top dollar for tech that is all but guaranteed to plummet in value within the very short term. Other than buying a brand new vehicle and driving it a time, I can not think about a way you could eliminate money quicker between what you pay and what you will be able to get for it down the road.
Another limit for most operators is that while you may have the ability to provide a room for VR people to wander around in today, as fresh VR technology is unveiled, we're likely to find the stage expanded from 100 square feet to the entire world. Instead of viewing just the matches in your headset, you'll see the real world with game play overlayed. Since the tech allows more actual world areas to be researched, it's going to make a cramped arcade look pretty feeble in comparison.
VR is heading for mass market acceptance, however it's demand indoor playground equipment
is not being pushed by gamers who wish to pay big buck to play video games, but such as the BETAMAX that came before it, by people who wish to watch pornography in their houses.
Even if an operator can create just a bit of money for the next few decades, once VR achieves critical mass, then it is going to crush whatever earnings stream that operators're dreaming of. Do not believe me? Just check out what is going on in China.
A year after 22,000 of them have closed.
That is an unbelievable failure rate over such a brief period of time and one which should function as a sharp warning to anyone contemplating investing in the VR games. Maybe Dave and Busters is able to take losses on the matches longer than Chinese startup arcades, however I doubt most North American operators are going to fare far better with the technology in their match rooms and will just wind up in debt in the end of the day.
The issue basically boils down to consumers not being willing to pay a premium for the encounter. Tech In Asia, describes the issue perfectly in their own article, on the Chinese VR boom and bust.
"Enterprising store owners leaping into VR are finding it impossible to charge fees akin to cinemas or bowling alleys to get a VR experience. One VR arcade proprietor told iHeima that he saw eager queues when charging US$1.50 for a 30-minute session, but everybody vanished as it climbed to US$5. From that sort of revenue it's impossible to cover the lease."
Even if the match was sold out daily, at $1.50 per half hour they're only earning $30 a day. Together with retail rents in North America running $1 -- $2 a square foot, there is no way to make the math work, even if you suppose
that Americans will spend more to play the matches.
The actual world data flowing in from China must serve as a canary in the quarter mines of North America. Operators who spend considerable amounts of money on fancy VR setups will soon find their small VR rooms being substituted by the whole world as a stage. Since the installations get cheaper, smaller and more mobile, the virtual arcades will seem more costly, bulky and limited. I would love to be proven wrong on this one, but I feel the arcade VR trend is more hype than hope.