Commentary

Extreme Reality pushes forward, forcing tough ROI choices on LBE operators

Many operators are looking at a picture where they are having to upgrade to standalone VR attractions and need to see proof that their sticker price warrants the return they will generate in a crowded market.

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February 5, 2024 by Kevin Williams

Extreme Reality, sometimes known as Extended Reality, or XR, has largely defined the future of the location-based entertainment business. Be it gamification, immersive attractions, mixed reality or virtual reality, the XR landscape is driving the latest applications in the attractions, amusement and waterpark sectors.

Where VR was the zeitgeist for many years, a growing concern about the revenue viability of increasingly expensive and encumbered virtual headset hardware is raising questions from operators closely watching their spend in the face of greater financial squeezing and global expenses. At the same time, the wider application of new tech, such as projection enclosures and mixed environments, are being seen as a new draw with unique appeal.

One of the biggest impacts of the XR age seems to be the utilization of gamification — both with traditional and new amusements. Gamified go-karting has become a trend.

VR free-roaming arenas have also witnessed extensive adoption, although, at the same time, questions are being raised about the encumbrance of these systems with additional charges from licensing fees — with some manufacturers looking to not apply these elements.

Along with robots and AI — another emerging trend is the continued growth of the immersive enclosure scene as more and more operators consider the alternative to the VR headset approach of immersion.

Cost concerns rumble

A key factor in determining which direction operators take with these different options is hardware cost, especially in times of greater pressures on spending. In response, manufacturers are offering more transparency regarding the revenue sharing models and service and support subscription fees.

There is a growing concern on the viability to generate ROI from VR, including some systems that were saddled with lifetime licenses.

Many operators are now looking at a picture where they are having to upgrade to standalone VR attractions and need to see proof that their sticker price warrants the return they will generate in a crowded market.

Manufacturers respond

Many manufacturers, for their part, are promoting free-roam VR arena systems, systems ranging from multiple four-to-10 and even 16-player enclosure/arena systems.

Some of these free-roaming arenas are now looking at pure software licensing agreements, leaving the purchase of the hardware to the operator with hoped for savings compared to buying the full package. This economy-of-scale has seen prices varying significantly between systems comprising similar hardware.

At the same time, there has been an increase in those VR arena platforms that implement a monthly or yearly licensing fee. Many of these are linked to the inclusion of third-party game content or a cloud-based operator management feature that needs to be active to a live account with subscription fees.

VR headset arms race ensues

Linked to this is an arms race in new VR headset hardware, seeing multiple upgrades and hardware revisions. Operators can be excused for feeling perplexed by the situation, especially if they are to take on the installation and maintenance of their new purchases.

The need to "future-proof" purchases and to be able to compete with the growing number of location based entertainment VR venues opening in direct competition to standalone VR arenas in entertainment venues have seen this aspect of the market come under serious pressure.

Compared to the claimed "attendant-free" VR amusement systems, all VR arena platforms need at least one member of staff, which is seen as another friction point for some operators.

The price of the hardware/software, a possible monthly subscription and confirmation of a reliable pipeline of strong content all factor into the purchasing decision. 2024 is looking to be an active year for VR arena business, with expected winners and losers.

Other factors have impacted the entertainment trade across the scene in recent months and years — from the global health crisis, the cost-of-living crisis and raising global concerns in the financial markets over Eastern-European and Middle East hostilities.

Through all this, the entertainment operation sector has seen increased attendance across regional and mid-scale venues, while some selected larger international resorts have seen record attendance. The reality is also that major investment in growing chains has seen the growth of brands and mergers and acquisitions.

A convergence of factors

Looking towards the 2024 market in general, world developments and political/election upheavals aside, 2024 is also an Olympic year — with all the impacts and changes in consumer spending and time allocations this normally brings.

Greater impacts on consumer spending will also be felt, especially if ramifications of cost-of-living and greater financial impacts come to pass.

What we can expect is a greater investment in new phases of entertainment business, as seen with the growth in "social entertainment," the continued implementation of "interactive digital" in attractions and parks, and the growing dominance of "immersive" across all aspects of the out-of-home entertainment offering.

Add to this deployment of AI and machine learning into the mix, and we can be sure to be ready for another wild ride in the sector in 2024.

(Editor's note: Extracts from this blog are from recent coverage in The Stinger Report, published by Spider Entertainment and its director, Kevin Williams, the leading interactive out-of-home entertainment news service covering the immersive frontier and beyond.)

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About Kevin Williams

Along with advisory positions with other entrants into the market he is founder and publisher of the Stinger Report, “a-must-read” e-zine for those working or investing in the amusement, attractions and entertainment industry. He is a prolific writer and provides regular news columns for main trade publications. He also travels the globe as a keynote speaker, moderator and panelist at numerous industry conferences and events. Author of “The Out-of-Home Immersive Entertainment Frontier: Expanding Interactive Boundaries in Leisure Facilities,” the only book on this aspect of the market, with the second edition scheduled for a 2023 release.

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