VR, AR and Emerging Tech for LBE Experiences

Manatt Digital and Technology

Manatt has previously covered the role of location-based entertainment (LBE) in driving awareness of virtual reality (VR)—in early 2016 after witnessing more brand-driven VR activations at SXSW (and its first AR/VR track), and at the end of the year in my review of VR in 2016. As the sales estimates sunk in early this year, the industry was hit with the reality of slower-than-expected consumer adoption. With a small install base and an even smaller number of users spending on in-home/mobile VR, the attention turned toward VR applications in out-of-home entertainment (commonly referred to as location-based entertainment VR, or LBE VR). This year, we saw major movement in the space. Here is a quick rundown of some of the announcements made related to LBE VR companies:

  • Disney invests in The Void as part of the Disney Accelerator and partners with The Void on a Star Wars “hyper-reality” experience.
  • Nomadic raises $6 million to build accessible, modular VR experiences for retail spaces, with the first set launching in early 2018.
  • Two Bit Circus raises $15 million and will be a launching a “micro amusement park” in 2018 that uses VR and other interactive tech.
  • Spaces raises $6.5 million in a round led by Chinese theme park company Songcheng.
  • HTC gives 100% of Q4 2017 revenues to developers that are part of its Viveport Arcade Manager, which connects operators and VR developers.
  • VRstudios, which offers its VR experience management platform to venues and operators, announced the launch of its eight-player VRcade Arena attraction Terminal 17.
  • Australian company Zero Latency opens an arena-scale experience in the MGM Grand Las Vegas hotel.

In the cycle of consumer tech adoption, VR is still in its early stages. We used to go to Internet cafes before PCs made the Internet accessible at home. Such was the case with arcades and gaming consoles and theaters and online streaming. But with investments by major tech players, and announcements such as that of Facebook’s $200 stand-alone VR headset, the cycle will keep getting shorter, which is why the industry needs content creators to continue to create.

There is a spectrum of out-of-home VR experiences ranging from VR arcades and installations, including those we now see in many malls, to VR theme parks. Dozens of VR arcades have popped up in cities around the world in the last two years. While consumer VR and location-based VR is new, out-of-home social experiences are not. We’ve had gaming centers like arcades and laser tag zones; entertainment centers like Topgolf or Dave & Busters; retail experiences like Landmark Entertainment’s Forum Shops in Las Vegas; and attractions like Madame Tussauds or Attraktion’s Polar Journey in the Mandalay Bay Hotel, which averages 50,000 visitors per month, according to CEO Markus Beyr.

So why are out-of-home consumer experiences more important now than ever? Streaming and e-commerce have made it more difficult for businesses to get consumers off the couch. 72% of young consumers say they would rather stay in than go out on weekends, and this creates challenges for entertainment and retail industries. However, the recent earnings report of Disney, which has its hands in all these areas, points us to a solution. In Q3 2017, while Disney’s entertainment and consumer products divisions saw decreasing revenue, its theme park division reported a 12% increase in revenues.

VR, AR and other emerging technologies can empower businesses to create big experiences without having to run theme parks. However, with these opportunities come the old set of challenges in physical operations. Unlike with apps or the Internet, “daily active users” is a nonexistent metric, and we are now faced with limited real estate and the competition for the limited five-hour window consumers spend on leisure activities per day.

The key challenge faced by out-of-home experience companies is increasing foot traffic, throughput and repeat visitors. Customer acquisition depends on several factors, including location, marketing and brand/intellectual property. Regardless of location or brand, great experiences always make their way into social media and can do a lot of the marketing for you. The throughput problem is related to revenue per square foot. In addition to the pricing model, companies will need to think about how to maximize every square foot, which could include the use of mobile, AR and other technologies to expand the experience outside the limitations of physical space. Finally, to create repeatable experiences, companies must continue to keep their content fresh and relevant (e.g., museums). Other ways to increase repeatability include loyalty or gamification programs (e.g., Dave & Busters), as well as social elements (e.g., karaoke). The good news is that while technology can enable creative solutions, there are also existing models we can pull from.

The need for better out-of-home experiences, combined with the availability of emerging tech such as VR and AR technologies, and the sharing culture of social media, create the perfect storm for companies bridging the physical and digital experience gap.



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