The experts weigh in: 3 reasons why location-based virtual reality will revolutionize the industry

SuperData’s VP of Strategy and Head of XR Stephanie Llamas discusses why location-based VR is the key to catapulting the industry.

Special thanks to Vinay Narayan, Charlie Fink, Joanna Popper, Amy Peck and Dreamscape Immersive for sharing their insights.

I am in an airport anywhere from two to eight times in a given month and I’ll be honest, I hate it. Not the traveling part – I love that. It’s the unrelenting TSA checks, the crowded lounges and worst of all, the blob of people that “queue” up when you are trying to board the plane. But I think the thing that kills me the most is the boredom…

What if you could travel before you travel? What if you could fly before you fly? That’s what Periscape wants to do for travelers with their new VR stations in J.F.K. airport in New York. For $1 a minute, users can jump into last year’s top-selling VR game Job Simulator or bounce beats from their favorite songs off red and blue shields in Audioshield.

But Periscape hasn’t invented the wheel – far from it. Location-based (or out-of-home) virtual reality was the fastest growing VR software segment last year, and this year we can expect it to reach over $200M in worldwide revenue, making it the second-largest entertainment category after XR games.

That’s not to say the market is full of winners. Quite the opposite – last year we saw a wave of location-based entertainment (LBE) venues shut down, and IMAX has admitted their VR initiative is bleeding cash. While it’s not without its challenges, LBE is still the path to the industry’s success. In-home VR is growing slowly and is far from mainstream with only 15M devices in use this year, compared to the 120M televisions in the world or the 89% of households in the US with smartphone access. It’s going to be a long time before VR proliferates the home, but in order for that to even happen consumers need to understand the tech first.

In this industry, seeing is literally believing. You cannot know VR unless you use VR. And that’s where LBE comes in: Instead of spending a couple thousand dollars on a computer rig, why not check it out at a local airport or mall or theme park to see what the fuss is all about? I mean, you were going there anyway, right?

I’m a strong believer that LBE will be the savior of VR. A bold statement, I know, but the experts have weighed in and they’ve helped me find the three reasons why this will be a revolutionary endeavor for the industry.

#1. Consumers don’t need to invest thousands in VR to know what it’s all about.

Accessibility is the name of the game here – finding VR in your favorite places is getting easier than ever. “LBE has grown beyond traditional arcades and now has moved into mainstream locations such as movie theaters, airports and malls,” says Vinay Narayan, VP of Product and Operations for HTC VIVE. “For the mass consumer, it is increasingly becoming the way they experience VR, especially high quality VR, for the first time.” It’s affordable and popping up in places consumers visit frequently. So why not give it a shot?

Joanna Popper, Global Head of VR for Location-based Entertainment at HP agrees: “LBE is the best way to experience content for the price of a ticket and, in many cases, creates a social and bonding experience. Additionally there is usually an expert assisting with the technology as needed which makes it seamless for the user.”

First-hand experiences aren’t the only things driving awareness, though. After the exhilaration of a high-powered, full-scale VR experience, people are going to want to talk about it, and that’s one of the biggest issues the tech has right now — not enough evangelism. Dreamscape Immersive, makers of Alien Zoo which ran at Westfield Century City mall for a month this past winter, said their number one driver of sales was word of mouth: Dreamscape CEO Bruce Vaughn says 97% of their guests said they would recommend it to their friends.

VR shouldn’t wait for the consumer, and accessible LBE experiences are going to be the path to getting VR to find consumers, not the other way around. By creating high-end experiences that show users the true power of VR, LBE is teasing them with a taste for what they can – and will – have at home some day.

#2. It’s growing fast, raking in $1B by 2021.

LBE is growing rapidly and Forbes writer and XR author Charlie Fink believes it will stay the course if operators run it right. He sees the trend emerging primarily around adult entertainment centers. “VR does best when it is surrounded by other electronic/game attractions like those found in Toronto’s Rec Room. There The VOID is nestled comfortably amongst VR attractions from the biggest names in the industry like Sega, Namco and Bandai, who have been carrying the torch for VR since the ‘90s.”

Investors have taken notice, too. Amy Peck, CEO of EndeavorVR, points out that one company, CityLights, “acquired the epic VR space adventure Spheres for $1.4M making it one of the first real wins in terms investment into high-end VR content.” I’m with Peck here – a quiet acquisition of this kind is no small feat. And as we see more investment and M&As, Peck says the landscape “will be less about arcades and destinations. Immersive experiences will be integrated into everyday entertainment, retail and other public spaces.”

But for now, destinations will be where LBE gets its start, particularly those with consumer throughput already. Narayan highlights that the Dave and Buster’s Jurassic World VR installation is the largest to date, with experiences at over 110 locations. This is providing an easy access point for users at an enormous scale (not to mention the attraction of recognizable IP). Whereas VR arcades are still finding their footing (last year saw quite a few shutdowns), traditional arcades and entertainment centers with VR add-ons are profiting since people are not there to seek out VR experiences – they are happening upon them. And companies like Nomadic plan to travel the country to bring it to as many people as possible and not just setting up shop in one place. Consumers aren’t proactive with VR so don’t try to force it. Go to them.

#3. You can actually make money from LBE.

Fink says it’s not expensive to start: “Today it is very, very inexpensive to buy ten Vive units and gaming PCs, drop pipe and drape around the stations, install POS and other management systems like Springboard, and open your doors for business in a couple of days.” But it’s also not easy to stay afloat… he warns that “operating retail entertainment is not for the faint of heart.”

I agree, and that is why I believe in the integrated approach where VR is put in places people already frequent. According to Popper, there is a sweet spot in “a gamified multiplayer experience native to VR in an environment that doesn’t require high marketing spend to drive traffic.” Alien Zoo allowed Dreamscape Immersive and Westfield to find foot traffic and help keep shoppers in the mall. This drove revenue for both. Alien Zoo was a temporary installation, but its success has spurred both Dreamscape Immersive and Westfield to install a permanent experience in the shopping center, which will debut later this year.

If you’re one of the lucky ones who has recognizable IP to attach to an experience, there’s an even bigger opportunity to increase throughput. “IP holders like The VOID are in a strong position because they can charge a premium for big titles like Ghostbusters,” says Peck. The VOID’s Ghostbuster experience debuted at Madame Tussauds in NYC and has the best of both worlds: IP and organic foot traffic. Add Popper’s recommended “gamified multiplayer experience” and you have LBE gold.

On top of this, one of in-home VR’s biggest challenges is monetization. Consumers aren’t ready for the free-to-play model, and upfront full-game purchases have a revenue ceiling (once you’ve tapped your accessible audience, there’s nowhere left to go). But after the in-home opportunity wears out, these experiences have the chance to license out their content to LBE centers and derive additional revenue from somewhere new.

Popular IP, installations at tourist attractions and gamified experiences are helping drive real revenue for companies like The VOID.

If you build it (somewhere people go), they will come (because they’re already there)

What VR is lacking most is awareness, which is about much more than just knowing the technology exists. It’s about embracing the power, presence and agency VR affords users, which is unlike anything else. In order for the entire industry to hit 109M shipments in 2021, it has to put the devices in consumers’ hands, not just put them on shelves. And the focus isn’t just on entertainment: $4.6B is being invested in enterprise applications for VR. Consumers aren’t just going to consume products, they are bringing VR back to the workplace and building transformative tools for their professions – that is, once they know what the tech is.

LBE is going to be the thing that opens the world’s eyes to VR’s true potential, and even though some installations won’t succeed, we need operators to keep putting out compelling experiences so we can get consumers into headsets. Peck put it best: “Why do it? Well, because there are those who will make a lot of money in the near term… Beyond that, what could be better than cracking the code for a new paradigm in storytelling?”

I couldn’t agree more.


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