The VR Landscape for 2023
by Bob Cooney
Virtual reality continues to capture the interest and attention of amusement operators, consumers and the media. Opinions about virtual reality range from “it’s going to change everything” to “it’s a fad that’s over.” As with most things, the truth is found somewhere in between.
The hype around the metaverse died down as Artificial Intelligence and Chat-GPT captured everyone’s attention. Then on June 5 at Apple’s World Wide Developer’s Conference, Tim Cook announced the new Apple Vision Pro headset, thrusting the term “Spatial Computing” into the zeitgeist. The continuously evolving hype cycles can distract us from the fact that hundreds of companies continue investing hundreds of billions of dollars in research and development, creating the enabling technology to bring virtual worlds to life.
VR allows us to experience digital worlds the way we experience the physical world. Whether they call it the metaverse, virtual reality, XR or spatial computing, the future of technology will be experienced in three dimensions. And Apple entering the market signals a new phase for virtual reality. Let’s call it “the end of the beginning.”
Apple’s entry always grows a market. From digital music players to headphones to smartwatches, nascent product categories became multi-billion-dollar markets when Apple jumps in. I joined digital jukebox pioneer Ecast just before Apple launched the iTunes store. We had acquired digital music provider RioPort, which powered every online music store from Best Buy to MTV. We measured downloads in the thousands per week across more than ten different websites. Apple sold 70 million tracks in its first year.
Apple’s entry into the virtual reality market acts as market validation. Apple stores will become showcases for VR experiences. They will spend billions on advertising. Investors will pour billions more into startups building apps and games.
For operators in the amusement market, who have been some of the earliest adopters of virtual reality technology, this next phase of VR growth holds real promise.
Unattended VR arcade games continue to proliferate. Raw Thrills, LAI and UNIS all recently introduced their second VR games. Following Sega’s footsteps, Elaut and Andamiro partnered with experienced VR companies to launch their first unattended VR arcade games. I know several other factories working on their first VR products. Competition is good for the market.
Despite the proliferation of unattended products, operators have grown weary of high maintenance costs. Since 2016, the industry has been using technology designed primarily for consumers. Early adopters were willing to pay the price of monthly headset repairs on games, but the market adoption seemed to hit a wall last year.
An innovation from VRsenal might herald a new era for VR arcade games. Working with HTC, they’ve created a new headset solution for unattended VR arcade cabinets. They’ve eliminated the fragile HDMI cable, replacing it with a 22-gauge, 4-wire cable they guarantee for two years. The solution has been deployed across hundreds of Dave and Buster’s and Main Event VR games, and it’s working well. They’ve also begun offering it as an upgrade for Virtual Rabbids: The Big Ride and claim to be working on other conversion kits. (See this month’s cover story.)
The costs of machines are also coming down. Where a single-player VR arcade cabinet cost over $40K in 2017, the latest two-player games sell for around $30K, representing a 260% price reduction per player. With costs dropping and reliability increasing, it might be time for unattended VR to enter the mainstream market.
Roam Free & Thrive
Free-roam VR costs have plummeted as new technology makes these experiences accessible to anyone. The expensive tracking cameras, heavy backpacks, fragile cables and short-life batteries are gone. They’ve been replaced by all-in-one headsets, reducing the equipment cost per player by as much as 90%.
There are two types of free-roam systems now: PC-based systems (PCVR) that deliver content from a high-end gaming computer to headsets via WIFI 6e streaming, and “all-in-one” (AIO) headsets where all the computer processing happens in the headset. PCVR offers significantly higher processing power, which enables more enemies, better graphics and lighting, and more interactive environments. PCVR systems cost 3-5X more than all-in-one, and the complexity of maintaining an enterprise-grade WIFI 6e infrastructure requires staff knowledgeable in IT.
Conversely, all-in-one systems are simple, cheap and reliable. The tradeoff is that the graphics are not as good. But, most players don’t notice the difference as they are still blown away by the concept of walking around inside a video game with their friends. There is also a much wider variety of content for AIO as the development costs are lower, and many game developers are entering the space.
Zero Latency continues to be the leader in the PCVR free-roam space. They’re approaching 100 locations now and keep bringing AAA games with big IPs to their licensees. Their most popular game is based on Ubisoft’s Far Cry and a new Warhammer game is in the works. Rumors are they’re also working on a new blockbuster IP that could significantly raise the bar for branded virtual reality attractions. Zero Latency calls their experience “warehouse-scale” because it requires 2,000 sq. ft. of arena space for eight players. Most locations charge between $30 and $40 per player, and locations can generate between $500,000 and $1 million a year in revenue. Zero Latency costs around $200K per location to set up.
Hero Zone is the leader in the all-in-one free-roam business with more than 200 locations worldwide. Their systems are compact, handling six players in as little as 400 square feet, with some operators pushing up to 10 players. A do-it-yourself Hero Zone system can be installed for as little as $10K, with a turnkey system running just over $50,000. They also offer a portable system for $20K.
vrCAVE takes a different approach to free roaming with a library of escape or puzzle games. Their long-form adventures (taking up to 60 minutes) place up to six players in a room as small as 270 square feet. Like Hero Zone, the do-it-yourself setup cost is minimal.
VR Takes on Laser Tag
There’s a narrative that unattended VR is the only thing many operators are interested in right now. It’s understandable with the post-pandemic labor shortage. Early VR systems required an attendant, offered short games and maxed out at four players. The economics of these systems were always dubious.
This new breed of free-roam systems allows six or eight people to play for 20 to 60 minutes, and they generate significantly more revenue. The workload for the staff is lower, too. Customers are more familiar with VR headsets after years of VR arcade games and simulators. Hero Zone operators offer 30, 45, and 60-minute sessions where the players can self-select their games with little to no staff intervention once they start. This frees up employees to work on other tasks.
The economics of free roam is approaching laser tag on revenue per square foot and labor cost bases. And the investment cost per player is lower when you remove the expense of fitting out and decorating a laser tag arena. With capacity per square foot increasing, it’s time for operators to take a hard look at free-roam VR for FECs.
The Golden Age of Free Roam
The introduction of the VIVE Focus 3 all-in-one with HTC’s Location-Based Software Services changed the landscape of free roam. Until then, each free-roam provider had cobbled together an exclusive combination of hardware and software to enable multiple players in a shared arena (called co-location). Suppliers competed based on differentiated hardware, software and games. They also lived on the margin associated with hardware sales.
With VIVE Focus 3 now a defacto industry standard platform, the hardware barely differs from company to company. Free-roam suppliers now must differentiate based on content, services, and pricing models. And with HTC garnering most of the hardware revenue, suppliers could become entirely dependent on subscription fees.
Suppliers with the biggest installed customer base have a significant advantage over those grappling for market share. The transition to a software business will also shift the focus from aesthetics and tech to quality content and operator features. With everyone using the same hardware, the companies with the best software will win.
Let’s Get Some GaaS
The latest trend in the consumer gaming market is “games as a service” or GaaS. Home video games are no longer sold on a disc but are cloud-based and downloaded. Developers continually add features, levels, missions and weapons. Some, like Fortnite and Roblox, even hold special events. Hero Zone is the first company to embrace what I predict will become a trend in location-based VR: They don’t just release new games every quarter or so but update their existing games with new levels, weapons and features.
Esports Virtual Arenas (EVA), with 20 locations in France and their first recent opening outside of Dallas, is another company embracing GaaS — following the Fortnite model of seasons. Players must play continuously over weeks and months to earn upgrades as they proceed through different game levels. This keeps players engaged and committed, driving recurring revenue for their franchise operators.
Game developers must focus on retaining their customers as they move to subscription models. A continual stream of new content will be critical to their longevity and benefit operators and players. Operators must embrace these subscription fees for a healthy, vibrant free-roam VR ecosystem. With hardware costs plummeting and game variety and quality increasing, this is the best time to stick your toe in the water of free roam.
Standards always benefit operators. Technicians can become proficient in supporting one hardware system across multiple attractions. Players become familiar with using the equipment, lowering the burden on frontline staff. And with suppliers sharing comment tech stack, operators are no longer locked into one supplier for content. If you’re unhappy with the content selection or quality you’ve been getting, the switching cost has never been lower.
In 1989, I started a company called Laser Storm. It was one of the first laser tag suppliers to the amusement industry. I remember what it felt like trying to convince operators that laser tag was the future. I see the same future for free-roam VR. I’ll see you there.
Bob Cooney is a global speaker, moderator, and futurist covering extended realities and the metaverse. Widely considered the leading expert on location-based virtual reality, his mission is to prepare the industry for the change coming as these and other emerging technologies begin impacting every aspect of our business and lives. He curates the VR Arcade Game Summit at Amusement Expo and the VR Collective distribution alliance as manifestations of that mission. Follow him at www.bobcooney.com.