Virtual reality in the home is taking off slower than expected, as evidenced by CCP Games’ decision to shut down VR game development. But there’s a good chance that VR will find a way to thrive in arcades, whether in Asia’s internet cafes or America’s shopping malls.

Should VR game makers pivot to the arcades? Greenlight Insights recently staged a whole conference about this opportunity, where 450 people talked about the prospects for location-based VR entertainment and other opportunities. In some ways, it makes sense as high-quality PC-based VR is still expensive to buy, and arcades can write off the equipment over many users.

I moderated a panel on VR arcade development at Greenlight Insights’ VR Arcade Summit at the recent Virtual Reality Strategy Conference in San Francisco. Our panelists included Marc-Antoine Pinard, CEO of VR development studio Lucky Hammers in Montreal; Nick Cooper, chief creative officer at VR kiosk maker VRX Networks; Vien Ha, CEO of iSimu VR; and Jonathan Flesher, head of business development and partnerships at VR animation studio Baobab Studios.

Here’s an edited transcript of our interview.

Above: VRS arcade panel.

Image Credit: Dean Takahashi

Nick Cooper: I’m from VRX Networks. We’re a production and distribution company. We produce our content in-house, but we also work with content providers, and we have a range of VR kiosks here in the U.K. We’re expanding into Australia and South America.

We work exclusively with movie studios. We have a multi-picture deal with Sony. We started off with Emoji Movie, we just released Jigsaw, and we’re about to release Jumanji. For us, we have these kiosks and franchisees who host them, and we provide a constant stream of movie-based experiences into those kiosks.

Jonathan Flesher: I head up business development and partnerships for Baobab Studios. Baobab creates narrative, story-driven content in a VR environment. The first one was Invasion!. The second one, Asteroids, is coming out this holiday season. The third, Rainbow Crow, will be some time next year.

Vien Ha: I head iSimu VR. We’re a virtual reality arcade, and the well-known secret is we’re also a software company. We’re developing VR arcade management software, similar to Springboard. Today’s our first announcement around that. It’ll be released in about two months. I’m also an advisor for Subdream Studios in the commercial space.

Marc-Antoine Pinard: I’m from Lucky Hammers in Montreal, although now I’m Los Angeles based as well. We used to be a game studio, and now, we’re a technology company. You can try Apex, which we just announced yesterday in a partnership with Starbreeze, on their StarVR technology.

Basically, we’re a bunch of guys from movies, gaming, and location-based entertainment. I came from a company making arcade games. If you ever played Fruit Ninja on the big screen at Dave and Buster’s, that was us. We’re world builders. We believe in a cross-platform strategy, taking a story and finding different angles on it using different media. All this other stuff notwithstanding, books are still good, right? It’s just a question of taking storytelling to a new level.

Along with the release of Apex, we’re announcing a partnership with A&E and one of their TV shows, creating something that’s an in-depth experience and a historical piece as well. We have much more to come.

Above: Jonathan Flesher of Baobab VR tries out StarVR at VRS.

Image Credit: Dean Takahashi

GamesBeat: As far as a development strategy for VR arcades, who wants to tackle that first? When you started thinking about arcades and VR content, how did you approach that?

Cooper: I come from an LBE [location-based entertainment] background. I worked very closely with Marvel to produce a big touring attraction. When I got into VR, I was fortunate enough to witness some … moving pieces. It’s an amazing platform to tell a story. My business partner comes from a marketing background, and so, we looked at how we could create a Starbucks approach to this, a franchisable approach.

We’re both from the studio end, so our focus was always on studios — developing deals with studios so we can create not just advertising pieces but fully interactive, immersive stories. That’s always been our approach. So, in regards to what content we choose, that’s it. I’ve been in the licensing industry for a long time — everything from stage shows to exhibitions to activations. When that big brand IP is up there and people form a relationship with that, it’s trusted. To have a constant pipeline of that content coming out around the same time as the film, you leverage a lot of the marketing spend and buzz around that to drive people to our kiosks.

GamesBeat: Would you call them games, or….

Cooper: I call them interactive stories, but it’s — I think it’s hard. The emoji thing, it was a less-than-favorably-reviewed film, let’s say? But to us, it didn’t matter. We have these attract loops on the screens, and kids just see these emojis, these funny characters dancing around with a VR headset on. They just come up and put their grubby ice-cream hands all over the thing and [they] want to be part of it. Kids under 12 made up 35 percent of our sales in that first summer holiday period. IP has a strong hold.

Pinard: To your point, it’s not about the success of another medium necessarily driving the success of VR. If you bring in a good simple mechanic to play with, you’re going to get people’s attention. You’re going to get their interest. As far as I’m concerned, ideas are shit. It’s all about execution. If it’s simple, if it works, if people are going straight to it and they’re understanding what they’re doing off the bat, if you don’t need to teach what there is to be done, they’re going to take it from there and make their own dream out of it. That’s where you can catch their attention.

Cooper: A couple sessions ago, someone made a good point. Obviously, there’s a gazillion shoot-‘em-up games out there, right? Everyone loves that. But when you tell stories, like these guys do and like we’re trying to do, you get that connection. People coming into it, they relate with characters. With Emoji, you go in there and interact with High-Five. You see the mirror there and choose to be Poop. You can play Just Dance and get this big thing going on.

With Jigsaw, it’s like an escape room. You have to crank this lever and beat this other guy. It has this ticking time bomb intensity. It’s not as big as Emoji, but there’s a visceral, emotional experience that you get from this kind of story. We have a 95 percent approval rating once people come out. That’s one thing I would say that everybody here — it’s about good content if you’re going to have sustainability. With ILM and VRC and these guys, quality content is what’s going to build this industry. The better the content you have in your arcades, that’s going to be key.

GamesBeat: Jonathan, you guys are taking that approach. You don’t have games either?

Flesher: No, we don’t have games. We don’t specifically design for location-based entertainment. We’re trying to design and drive for that narrative, story-driven experience. We layer interactivity on top of that.

Right now, the market is kind of fragmented. There are lots of different plans and business models around what LBE is. Very much like when the platforms first came out, it’s very focused on games. “Hey, this is great, I can do modern laser tag in these shooting games.” But very quickly, there came an understanding that narrative, story-driven content really does have a place in location-based entertainment.

What I’ve been seeing personally, there’s a kind of full spectrum of everything: from what we do, which is more theatrical with some interactivity laid on top, to video game experiences, to what I would call more “light amusement park” or even heavier amusement park experiences. You might have 4D effects, physical objects, even robotic arms like what Spasis does. All of that spans the definition of LBE. Right now, we don’t develop specifically for experiences that require additional hardware development.

Above: A scene from Baobab’s Rainbow Crow.

Image Credit: Baobab

GamesBeat: Your first two experiences were pretty short, but Rainbow Crow sounded like it was going to be a bigger experience.

Flesher: Yeah, about 30 minutes.

GamesBeat: I wonder how you would try to bring that to an arcade setting

Flesher: That remains to be seen, but it’s coming out in two chapters, so it’ll be more digestible. Right now, most people’s tolerance is relatively short compared to a traditional movie theater, where you’re sitting for two hours, plus or minus a bit. It’s not clear yet how that’s going to play out with the new headsets and things like that. But we’re confident that we can at least do it in two parts, chapter one and chapter two.

GamesBeat: Vien, what do you have guys in mind?

Ha: I’m from a development background, but I do think it’s important to identify what target demographic you’re going after. Are you going after the commercial space or the consumer space? In terms of what Subdream does, they’re geared more toward the consumer. They’re focused on building games that have social interaction. But part of their strategy is to bring that to an arcade setting. The arcade will essentially be a platform for distributing their content, getting it out to more users, so that hopefully becomes sales in the future.

Pinard: As far as we’re concerned, it’s a question of focus. Location based should focus on ROI. It’s a cash flow game. You need a while to drive people in, but once they’re in, you want them there for more than one ride. If you’re only keeping people for under seven minutes, you’ll never recoup your costs, unless you’re charging a ridiculous amount of money. If you’ve been to Dave and Busters, you understand how that works — and Chuck E. Cheese as well. It’s two different business models: one is charging a premium, and the other is going by the penny.

But the fact is, you need to drive something that’s bigger than life, something that people can’t find at home. I think we’re about to see content that bridges the gap between location-based entertainment and home applications, where you can do something at home that will enhance what you’re able to live in the location-based and vice versa. But it won’t be the same piece of content.

The gaming world got this all wrong, all backwards. We’re back in 1972. [Nolan] Bushnell is the second generation, in the mix. [John] Carmack was there for Oculus. We’re about to see Chuck E. Cheese happen. That’s the state of the industry in LBE right now. You guys, and all the content developers, need to focus on shorter-span experiences and charge like — if you charge less, you can have a broader audience. You’re not selling to anyone who’s driving a Mercedes-Benz. If you’re just driving VR, you forget about food and other types of collaterals. That won’t cut it. You won’t be in business two years from now.

Above: Baobab’s Rainbow Crow.

Image Credit: Baobab

GamesBeat: Are we talking about $10 for 10 minutes or what?

Pinard: I think you’ll see two different models. Some will be per experience. Mostly, we’ll see the type of card mechanic, where they buy credit. But they’ll shift to the all-you-can-eat model. That’s proven its worth in arcades around the world. We’ll see membership happen because you’ll see leagues coming up. If it’s not from the others, it’ll be from Lucky Hammers. We’re exactly 12 months out from that, and we’re not alone.

You can bridge different technologies. Being able to cross from HTC to StarVR — because I understand that StarVR is going to be way too expensive for the average consumer, but you can still have a great experience on HTC. Or Samsung with their new Odyssey. That’s going to be an LBE type of device. You’ll see some developers focusing on LBE solely.

Flesher: I agree with you generally, but I’m going to disagree on some parts. I very much agree that it’s an ROI-driven business. When I talk to a lot of LBE operators, I’m surprised by how many of them don’t actually understand the dollars per square foot — what’s the utilization rate; what’s the dollars per square foot they’re going to drive; what’s their expense ratio? If they can’t understand that their business is going to fail — I totally agree with you there.

But it really depends on what your expense ratio is. Where is your real estate? Is it in a low-cost or a high-cost environment? Are you building out something much bigger, more like an arcade or a mini-amusement park, or are you doing something that’s more theatrical? You can have a different price point, different numbers of people going through the experience, different length of content depending on where in that spectrum you sit as an operator. But it depends on your business model. You need to focus on what that is and understanding your economics.

Pinard: Right. We all remember internet cafes. All of those guys are gone. It’s just a question of knowing where you go.

Flesher: In my opinion, long term, you’re going to have to be better in the LBE experience, whatever that is, than what’s in the home if you want to really drive it.

GamesBeat: From watching the market, watching arcades now, what seems to work? Maybe not your own stuff but observing what’s already out there.

Ha: I would say you definitely need multiplayer interaction. That’s probably the most important aspect. Seeing groups come into the arcades — it’s always groups. It’s not a single person. One of the most lacking things in the VR arcade is social interaction. If you don’t have multiplayer games, then you’re not going to get that type of interaction. Inherently, VR — you’re excluded from the environment. Once you put the headset on, you don’t see anybody. The most important aspect is, how do you bring other people into the mix, into the game?

You mentioned that it’s not about the quantity, how long the content is necessarily. But you need to keep the user’s attention. It can be a short experience, but once you go into the arcade, you may want to try out a whole bunch of experiences. You’re not going to want to just sit there and learn how to play one game. If you’re making the customer try to figure out something in the first five minutes, you’ve already lost them. You need to keep them engaged with quality content. That’s the most important part.

Above: Capcom is trying out Capdon, a VR game in a Japanese arcade.

Image Credit: Capcom

Pinard: We’re seeing that because of what you guys do. The quality level is going higher and higher. We need to propel that. There can be a way to make cheap stuff look good. There are ways of doing that. Minecraft is a simple example. But the meaningfulness of a piece of content — you need to be able to get school buses of people driving up to your location. That’s how museums do it. They don’t make their money on the weekends. They do it during the week with groups.

You need to have edutainment attached somewhere to whatever you’re going to be offering in the next six to 12 months. Content that isn’t a gun, that’s offering a perspective on something for more than just entertainment. That way, you can get groups; you can get schools; you can get mothers of three. That’s who was spending on FarmVille. You need that type of content that’s historical, that’s richer, that’s film to a certain extent. A Dunkirk experience would have been so awesome, to bring a perspective on World War II. Something that can stand the test of time.

That’s something that came up earlier in the conference. You need stuff that’s going to last. Your agenda, your programming of experiences — at some point, you need to have something that stays. You need to plan for those guys. If you’re following something like a Hollywood agenda that’s going faster and faster and faster, that requires you to buy and buy and buy. Or have a distributor that offers you a kind of streaming strategy, paying per month. But for now, you’re going to need content that sticks around, and we haven’t seen a lot of that yet.

We haven’t talked much about tourism yet, but tourism is going to be super huge. People who can’t travel anymore, who don’t want to take a plane, they’re going to pay to experience that.

GamesBeat: How do you look at whether the content should be the same as what’s in the home or much better than what’s in the home? Do you have to provide something that has different input systems because you can afford to do so?

Cooper: Our licenses, our deals, these exist because you can only play our games in our installations. They’re exclusive to us. You can’t get them at home. That’s one thing we can leverage for this attraction. If you want to see it, you have to go to the cinema or your FEC [family entertainment center] or the arcade or the mall. That’s the only way you get to play our content.

GamesBeat: Are they using the same Touch controls or something new?

Cooper: We use Oculus because Touch and — just for pure deployment to the consumer, it’s easy. When you have a five- or six-year-old kid, you want to put it on and get them in quick and get them out quick. To your point, it’s about throughput. We support four players using the Oculus system. It’s very intuitive, very easy for operators to get consumers on and off. But as I said, our exclusivity is what drives us and separates us from the home.

Flesher: I’d propose that you don’t need to be different right now, although it helps. There are so few VR headsets in the home. It’s great marketing play for selling headsets to have people try the experiences. I go to VR conferences all the time, and I still do demos for people who’ve never put on a headset. Or, believe it or not, even for people at these companies that sell the headsets. They still haven’t tried their own.

But we’ll later transition to one of two models. Either it will be better than home — that could be a Void, a Dreamscape experience — or it could be something that’s windowed, just like a traditional movie release. Maybe you sell these first, and then, it’s released at home later. We don’t know yet.

Above: Starbreeze plans a StarCade VR arcade.

Image Credit: Starbreeze

Pinard: The real problem we’ll see in the next year. The home application stuff is made for the home. HMDs [head-mounted displays] will be fine, but the problem will be controllers. People are going to drop them on the floor. The Void did a great job, but the first time I tried it, I don’t know why, I just dropped it. You need to consider this kind of thing, usage past the first year. The amount of buttons that have been broken on arcade machines, you couldn’t believe it.

For now, it’s sustaining, but it’s going to need to shift. You’re seeing more of the dedicated players coming into the space. They’re just about their products, commercial-quality headsets, and bigger-than-life experiences. Who has a skee-ball setup at home? You need to bring something that you can’t have in your own place. You can do a lot in a small space with the proper content, with something that stands out. Things like adding that theatrical aspect, that’s your job as an operator, to drive that and make your location appealing. If it’s just a railing and a curtain and PCs. … That’s going to get boring in a short amount of time.

The big arcades — there are some big ones coming up. Talking about Nomadic, they’re coming with a product that is spotless. If you don’t have something spotless, you’re going to be a B-grade player. We’re not talking five years from now. The content needs to follow the quality of the venue, and quality needs to be very high. The engines are starting to be more and more accessible.

GamesBeat: What do you want a VR arcade to be, and what kind of experience do you ultimately want to deliver in the years to come?

Ha: At current arcades, you can get away with the HTC Vive and the Oculus. There’s a cool factor to that right now. But that market will change as people become more familiar with these things. Then, you’ll need to have these big devices, these single specific pieces of hardware, experiences you can’t get at home.

Flesher: I’d love to just see a quality experience. That’s the thing that’s going to differentiate, aside from just your business model. Making sure we’re making money so we can all sustain this growth in the future. The other key is to just have a great customer experience, so people aren’t turned off by VR. That helps consumer adoption. It’ll help raise the whole industry up.

Cooper: Quality of content is going to be critical. It’s what you remember when you go away that makes you come back. If you have a great social experience or a singular experience where you’ve bonded with the characters or the game, that’s what’s going to keep people coming back. You go to old-school arcades, and you crank your dollars through, but it’s about how much fun you have with your son playing whack-a-mole or something like that. Emotional connection through customer experience, through the content in the games, all of that. And having a broad spectrum, everything from singular through the social experiences, is going to be critical.

Pinard: I want to be able to embed myself in something. I want to live inside the H. P. Lovecraft sanity check. I want to be in it. I want to be able to do something crazy. I want to be able to travel through time and space and see things shifting and transforming themselves. Traveling through time and space, that’s what VR is for.

 

Above: Jonathan Flesher of Baobab VR tries out StarVR at VRS.

Image Credit: Dean Takahashi

Question: You mentioned edutainment and also keeping experiences under seven minutes. How can you do edutainment in only seven minutes?

Pinard: It’s not necessarily about the teaching. It’s about helping people, especially a new generation, figure out how to understand what’s going on. The way that kids currently look at the world is completely different than just five or 10 years ago. They enter a specific word into YouTube to find whatever they want to find, whatever perspective, and they can choose because they’re looking for people who stream content of their own. They’re not looking to read something. It’s a time capsule you’re building, just snapshots. It needs to be quick.

Flesher: That’s where I disagree a bit. For a bunch of types of content, absolutely, but for other ones that are more kind of lean-back, less active, less interactive, lengths can be different. I don’t know which is going to be more prevalent in the future, but time will tell. It’s already starting to prove out in a number of location-based installations.

Cooper: All of our experiences range between about six and eight minutes. It is about throughput. I think right now, it’s a question of what the customer will pay.