Do VR Games Better Than Seth Godin
Over the previous few years, we have seen an array of news posts about how virtual reality was about to save the timeless arcade. The theory goes that the VR equipment is too expensive for home users, therefore it creates an opportunity for operators to pony up the big dollars to purchase it and then make their money back by charging a game to soft play equipment with it. From the MIT Technology Review.
"While many high-end cans were released annually which may bring virtual-reality experiences to your living room, adoption of the technology is still in its first days to get a lot of reasons--it's still bulky, pricey, and there is not all that much to do as soon as you've got it on your face. Over two million headsets were shipped globally in 2016, according to a quote from market researcher Canalys, but this figure pales in comparison to the popularity of, say, video game consoles (earnings of their top one, Sony's PS4, topped six million during the 2016 holiday season alone). Consumer virtual reality will probably catch on as costs come down and headsets improve. Meanwhile, however, a number of companies are betting that customers could possibly be happy to pay a much smaller sum to try out the tech with their friends at, say, an arcade, theme park, or bowling alley."
It is tempting to dive into this trap, but from an operator's perspective VR is a terrible deal. Operators are being asked to pay top dollar for technology that is all but guaranteed to plummet in value over the very short term. Aside from buying a brand new car and driving it a time, I can not think about a way that you could lose money faster between what you pay and what you will be able to get down the road.
Another limit for operators is that while you may have the ability to supply a space for VR individuals to roam around in now, as fresh VR technology is unveiled, we are likely to find the stage expanded from 100 square feet into the whole world. Rather than viewing just the matches from your headset, you'll realize the real world with game play overlayed. Kids can go to the park and relive the knights of the round table or parking garages to take aliens. As the technology allows more real world places to be explored, it's going to make a cramped arcade seem fairly feeble in comparison.
VR is heading for mass market acceptance, but it is demand is not being driven by gamers who want to pay big buck to play with video games, but like the BETAMAX that came before it, by people who want to watch pornography in their homes.
Even when an operator can create a little bit of money for the next few decades, once VR achieves critical mass, then it will crush whatever earnings stream that operators are dreaming of. Don't believe me? Just check out what is happening in China.
A year later 22,000 of them have closed.
This is an unbelievable failure rate over this short time period and one that should serve as a sharp warning to anyone considering investing in the VR games. Maybe Dave and Busters is able to take losses over the matches more than Chinese startup arcades, but I doubt that most North American operators are going to fare much better using the technology in their game rooms and will only wind up in debt in the end of the day.
The problem basically boils down to customers not being willing to pay a premium for the encounter. Tech In Asia, clarifies the issue perfectly in their own article, on the Chinese VR boom and bust. 
Even if the game was sold out daily, at $1.50 per half hour they're only earning $30 a day. Together with retail rents in North America running $1 -- $2 a square foot, there's no way to make the math work, even if you suppose that Americans will spend more to play the games.
The real world information streaming in from China must serve as a canary in the quarter plantations of North America. Operators who spend considerable amounts of money on elaborate VR setups will soon find their little VR rooms being substituted by the whole world for a stage. As the installations get more expensive, smaller and more mobile, the digital arcades will seem more expensive, bulky and restricted. I would like to be proven wrong on this one, but I think the arcade VR fad is more hype than hope.
