A Spotlight on Destination/Location-Based Virtual Reality

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2Q 2018 | IN-5161

Amidst the excitement surrounding the buildup to the launches of key VR platforms like Oculus, VIVE, PSVR, and the expanding presence of mobile VR, one company, in particular stood out among the crowd: Survios. ABI Research has spoken to a vast array of companies operating in or touching the VR space, and while some during this period went as far as to nearly wax poetic about how VR would change the world, most held a very healthy level of optimism. This isn’t to say there weren’t naysayers, but most of these individuals fell outside of the VR sphere and had never donned an HMD themselves; it was easy to dismiss these individuals as among the uninitiated (because trying “good VR” would make you a believer). Survios, however, at the time was designing a full-body standalone VR solution, which even with the excitement at the time seemed outside the realm of economic feasibility (it was); still, the company wished to impart a voice of caution. A company trying to design and build a solution that targeted the pinnacle of what VR could be, even before the “mass market” took effect, wanted to impress upon everyone that it will take time for the market to develop. The company was concerned with all of the excitement that expectations would become unattainable and the resultant disappointment would damage the market and draw comparisons to 3D video.

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Companies Like Survios Deserve More Attention

NEWS


Amidst the excitement surrounding the buildup to the launches of key VR platforms like Oculus, Vive, PSVR, and the expanding presence of mobile VR, one company, in particular stood out among the crowd: Survios. ABI Research has spoken to a vast array of companies operating in or touching the VR space, and while some during this period went as far as to nearly wax poetic about how VR would change the world, most held a very healthy level of optimism. This isn’t to say there weren’t naysayers, but most of these individuals fell outside of the VR sphere and had never donned an HMD themselves; it was easy to dismiss these individuals as among the uninitiated (because trying “good VR” would make you a believer). Survios, however, at the time was designing a full-body standalone VR solution, which even with the excitement at the time seemed outside the realm of economic feasibility (it was); still, the company wished to impart a voice of caution. A company trying to design and build a solution that targeted the pinnacle of what VR could be, even before the “mass market” took effect, wanted to impress upon everyone that it will take time for the market to develop. The company was concerned with all of the excitement that expectations would become unattainable and the resultant disappointment would damage the market and draw comparisons to 3D video.

Jump forward to today and, at least on the consumer side, the VR market has certainly taken on a slower growth rate than many within the industry initially projected. ABI Research, like other analyst firms, has also had to scale back projections. Shows like NAB have also seen attendees make the dreaded declaration “it’s pretty much like 3D” when asked about the VR space. Survios? Well, Survios took what it learned, developing its all-in-one platform to pivot to become a game/software developer and released some gaming titles like “Raw Data.” Now Survios is pushing into location/destination-based VR, opening its first VR arcade in Torrance, California. Survios took this path because it wanted to develop its expertise, but it also was hedging its bets in the event that the market grew faster than they anticipated. So, while the outcome (in the consumer space) was more aligned with Survios’ assumptions, we are not suggesting that Survios is especially prescient, but rather that the company has exhibited a commendable amount of pragmatism and willingness to adapt its strategy in anticipation of what is to come.

VR Is and Isn’t What We Thought It Would Be

IMPACT


While some have already written VR off as the next version of 3D, the truth of the matter is more complex and certainly not as dire. It is worth repeating here, again, that much of the attention in the market still rests on the consumer front: Oculus Go generated significantly more media buzz than anything in enterprise, and yet this facet of the market has shown remarkable strength and interest. Similarly, destination-based VR is also growing somewhat under the radar. Note that while much of the industry has settled on the term “location-based” VR, ABI Research has adopted “destination-based” VR to help distinguish it from location-based services and applications (those unfamiliar with the VR space often confuse the two).

Survios’ push into the destination VR space is noteworthy, but it is not alone. Other companies like Virtuix Omni made similar business decisions to pivot away from a direct-to-consumer position and target the commercial spaces (by commercial we are including destination VR). In some ways, parallels can be drawn to destination VR services and the video game arcade/home console markets.

Before the Nintendo generation made home consoles a fixture in gamers’ households, arcades served as the primary way for consumers to play video games. Even when consoles started to take off, the arcades still created enough differentiation (e.g., more interactive, better graphics and gameplay/controls, etc.) to hold their position for a time, but eventually, the home and later mobile entertainment markets took over. VR in many ways mirrors this pathway where the best and most immersive experiences can be had in VR arcades or other destination-based VR locations. The processing power and hardware is typically not wholly unique to these locations (as was the case in the early console and arcade days), but the overall experience is difficult if not impossible to replicate at home.

Early VR devotees were right about one thing: experiencing is believing, and destination VR is a better way to introduce individuals to the technology compared to alternatives like Google Cardboard. While some interviewees will sarcastically say that destination VR is the only profitable facet of the market today, things are not universally rosy. We have already discussed the rapid expansion and then plateau (if not decline/correction) in the Chinese market, where estimates still put the total number of VR arcades in the several thousand (earlier, more ambitious estimates suggested this figure could have passed 10,000 by now). Competition in this market can be fierce and the barriers to entry relatively low, e.g., many VR arcades can use off-the-shelf VR equipment to start a business.

Other businesses like IMAX, which was an early proponent of destination VR, have halted the expansion of VR arcades due to overall recent business performance. Despite these bumps along the proverbial road, destination VR remains a healthy and growing segment of the market. So, while VR (or mixed reality for that matter) has a long way to go before it becomes the next computer platform, there is still plenty to point to as signs of progress.

Differentiation and Deep Immersion Are Key

RECOMMENDATIONS


The landscape for destination VR is expanding quicker than many are likely aware. The list of companies and regions (where they originate and/or operate) below is far from a comprehensive list (e.g., missing a vast array of services/arcades in China and Asia-Pacific), but it still represents nearly 300 facilities or locations and encompasses a range of functions from immersive theater to platform providers and even an airliner.

 

Company-Region-Chart

 

For those early adopters (outside of Asia-Pacific), competition may be limited, but in time competition will mount as the barriers to entry fall (e.g., the rapid decline of HMD prices) and differentiation will be key for these services to thrive long term. Content is still an issue, with many locations suffering from limited repeat customers (especially considering the high price of admission, in some cases upwards of US$30+ per session) or replay-ability, but over time these issues will diminish, particularly as multiplayer engagements increase. Heightened immersion stands out as a key way to differentiate from a standard VR arcade experience (and allows services to charge a higher price) and in particular the home setup. Whether this means physical props (e.g., THE VOID uses physical objects to mirror the virtual) or “4D” experiences (e.g., other sensory cues like temperature, smells, vibrations, simulated movement, etc.), these implementations create the differentiation and deep immersion that helps spread word-of-mouth viral marketing and potentially brings back customers. AR and mixed reality is also a player in this market: HADO and Battleverse, for example, use AR/MR to provide immersive experiences.

Entertainment is often tightly associated with destination VR, but there are other applications like enterprise (e.g., some VR arcades in Asia-Pacific have started to position themselves as ambassadors of VR to the commercial space) and tourism (e.g., First Airlines offers travelers VR experiences that showcase its destinations). This could serve as a form of advertising for key tourist hotspots or local businesses. Ultimately, it’s imperative to view VR, not through limited lenses but to consider what the technology can do to offer unique, differentiated, and immersive experiences. Only then will others start to see the true value in VR.

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Companies Mentioned