The acquisition of Springboard VR by Synthesis VR seemed to take everyone by surprise, except yours truly. Read on to the One Big Thing below the news to see what it says about the VR arcade gaming business.

I will be holding a live Zoom with Shabeer and Kamen, co-founders of Synthesis VR on Tuesday next week - February 18th. You can sign up via this Calendly link.

Nobody in the VR arcade industry will be happy with this article. But it needs to be written.

New Developments

Theme Parks

Experience the Magic: Flying Broomstick VR Attraction Coming to Epic Universe’s Wizarding World
Epic Universe’s Wizarding World is set to introduce a thrilling VR flying broomstick attraction, immersing visitors in the magic of the Harry Potter universe. Read more

FECs and Arcades

Edge VR Opening New Arcade in Appleton: A Gateway for Kids to Learn in Virtual Reality
Edge VR is launching a new arcade in Appleton, blending immersive gaming with educational VR experiences to engage young minds. Read more

Museums and Science Centers

How Free Roam VR Is Transforming Museums and Galleries
Museums and galleries are embracing free roam VR, allowing visitors to explore exhibits in an interactive, immersive way. Read more

Exploring the Ukrainian War Through VR: Two Sides, Two Narratives
A new VR experience provides a dual-perspective look at the Ukrainian war, offering immersive storytelling from both sides of the conflict. Read more

Zoos and Aquariums

Can You Survive India’s First Virtual Reality Safari? Here’s What to Expect
India’s first VR safari lets visitors experience the wild from a new perspective, bringing them face-to-face with nature’s fiercest predators. Read more

Art, Music, and Culture

Experience the Ancient: Virtual Reality Brings Niya Site Artifacts to Life
Explore the ancient Niya ruins in VR, where digital reconstructions bring historical artifacts and lost civilizations back into focus. Read more

Unleash Your Inner Explorer with New Free Roam Adventures at the Titanic Shipwreck
A new free roam VR experience lets you explore the Titanic shipwreck up close, offering a deep-sea adventure like never before. Read more

How Virtual Reality Is Connecting Rural Highland Fans to Football Memories
A new VR project is preserving football history by allowing rural Highland fans to relive iconic matches and moments in immersive detail. Read more

Travel and Tourism

Royal Caribbean Upgrades SkyPad Attraction with VR Technology
Royal Caribbean is enhancing its popular SkyPad attraction with cutting-edge VR, offering cruise passengers an out-of-this-world experience. Read more

One Big Thing

Synthesis VR and Springboard VR Merger

Why it happened and what it signals for the industry

The biggest news from the VR arcade industry in a while came via a press release announcing that Synthesis VR was acquiring Springboard VR from Vertigo Games. The merger will significantly impact the industry, but it also signals an overdue wave of consolidation. 

Disclosure: Springboard VR was a strategic mentoring client of Bob Cooney before its sale to Vertigo. Both companies have been sponsors of the VR Arcade Summit, in which Cooney has an financial interest.

Springboard and Synthesis own about 80% of the room-scale VR arcade distribution and operating system market (outside of China). Springboard is known for its ease of use, and Synthesis is known for its customization and flexibility. It’s like iPhone and Android. If you want things to work quickly and simply, you choose Springboard. If you want to customize everything, you go with Synthesis. They mainly distribute the same games, as the market isn’t big enough for developers to limit themselves to one distribution platform.

VR Arcades are Hard

Most VR arcades are run as small entrepreneurial retail businesses. Most attempts to scale beyond a single location have failed. Owners with visions of regional and national chains of VR arcades ran up against low operating margins, high customer acquisition costs, and challenging technology. Sandbox VR is an exception, having opened dozens of company-owned stores in the US before turning to franchising recently. They also have a franchisee in Germany that’s expanding rapidly there. The licensee of Zero Latency in Spain has expanded beyond those borders and is acquiring the UK operations of Meetspace VR. Maybe there are a few others that have escaped me. 

It’s worth noting that those “success” stories don’t use the old-school room-scale VR arcade model. When HTC Vive created VIVEPORT Arcade in 2016 to enable entrepreneurs to license arcade content, the content was all room-scale. Players would rent a 10’ x 10’ booth, strap on a headset, and play from various titles that had officially been licensed for out-of-home play. Springboard and Synthesis were born from that operating model. It’s also interesting to note that both companies started operating VR arcades.

Let's Open a VR Arcade!

Springboard started with an arcade in Oklahoma, and Synthesis began with one in Los Angeles. Brad Scoggin from Springboard and Shabeer Sinnalebbe from Synthesis quickly realized that arcade management and content licensing systems were needed to operate a profitable retail arcade. The burden of helping people onboard into experiences and chasing down and managing licensing agreements with indie game developers would eat up any profits. 

Both companies quickly pivoted to building enterprise software solutions and, over the years, became the top two players in the market. From 2019 to 2020, Springboard was a mentoring client of mine. Understanding the razor-thin margins of even a well-run arcade, I advised them to look for other vertical markets that might promise more substantial growth, like enterprise training. 

The following year, they completed the sale of Springboard VR to Vertigo Games during the height of the COVID-19 pandemic. They turned towards enterprise as Arbor XR, now one of the leading MDM companies in the VR space, with clients like Adidas, Bank of America, Coca-Cola, Dell, Pfizer, Nike, and Walmart. They raised $12 million last summer from Mercury Fund and Cortado Ventures. 

Failed Rollups

Vertigo had high hopes for the VR arcade market. Gaming behemoth Embracer Group had just acquired them, and they were keen on market domination. They also had the capital to ride the wave of global lockdowns that shuttered the location-based entertainment market. But a year later, Embracer Group showed signs of cracking. By 2023, they announced a $2 billion deal had fallen apart and started shedding assets. The VR market was not performing up to expectations, so garnering growth capital as the parent was shedding would be difficult. Springboard VR languished despite the efforts of the core team. 

Synthesis had remained a relatively lean company that serviced the market, responded to feature requests, and built a nice lifestyle business for its owners, Shabbeer Sinabbale and Kamen Petrov. But they had their share of corporate drama during that period. In early 2022, a company called XR Immersive Tech out of Canada announced the acquisition of Synthesis VR. 

XR Immersive Tech was a Canadian penny stock company run by Tim Bieber (no relationship to Justin despite their Canadian origins.) Their prior business had been creating branded escape room experiences for trade shows. They tried to leverage that experience into an LBE business called Uncontained, a hyper-reality adventure built in a shipping container. It was an overpriced, buggy mess that never delivered on the promises to operators who couldn’t see beyond the hype. (I warned you that a six-player $300K attraction will never make money even if it does work.)

When the deal was announced, I did a little poking around. I spent much of the 1980s in the penny stock business in Denver, Colorado. I acquired the prototype of what became Laser Storm from a blind pool company trading on the OTC Pink Sheets in 1989. I was intimately familiar with pump-and-dump schemes and was leery of anything from the loosely regulated Canadian OTC markets. Digging into the financial statements and reading the flowery press releases had my BS detector pegged to red. I called Shabeer and told him I hoped this worked out for him, but I was dubious. 

Within 6 months of the acquisition, Tim Bieber was quietly removed from the management team, and Shabeer was named CEO. He was now running a public company with a revenue base of less than a million dollars a year. After another year, he managed to wrestle Synthesis back under his control. XR Tech was repackaged by its controlling shareholder, Victory Square Technology, to exploit investor interest in the AI trend. 

The Size of the VR Arcade Market

One of the downsides of being a public company is anyone can see how your business is performing. Considering that one of the two market leaders in VR arcade software and content distribution was generating around US$500K a year, you get a clear picture of the market's questionable viability. So, combining the two companies was inevitable. I applaud both management teams for their pragmatism. 

Zooming into that revenue number gives you a sense of the bigger picture. A significant component of the revenue of both Synthesis and Springboard are licensing fees collected on behalf of the game developers. They both brag about having hundreds of titles available for play. Now divide the total combined revenue of the two companies (I don’t have revenue numbers for Springboard, but how much bigger can they be than Synthesis?) by the number of games available, and you get a sense of how little any game developer might be making in this market.

From Room Scale to Free Roam 

Both Springboard and Synthesis realized that the future of room-scale VR was bleak, so they have worked to expand their library to include free-roam games. Before the purchase of Springboard, Vertigo had developed a proprietary free-roam platform called Haze, which included its wildly popular Arizona Sunshine game and a few third-party titles. Once they closed the Springboard deal, they integrated those games into the new platform. Synthesis VR also worked on an expanded free-roam library with third-party games like Rotten Apple, Blasters of the Univrse, and The Raft. Currently, they offer 25 PCVR titles and about six titles for HTC Focus and Pico standalone headsets. 

However, the free-roam gaming category is dominated by companies that have each created an exclusive launcher management system bundled with their games. I’m just guessing, but combined Springboard and Synthesis will have about 1000 locations between them. But then Hero Zone, the leading free-roam provider in the world, is closing in on 400 sites. VR Cave, the number one VR escape room provider, has nearly 300. And about 50 other companies are doing similar things. Warpoint, Another World, and Anvio dominate the Russian and Eastern European landscape with hundreds of sites. We currently track over 250 games spread across 40 launcher companies on the VR Collective website. 

The market will become increasingly fragmented as VR arcades switch from room-scale to free-roam games. Many companies will struggle to gain enough market share to warrant continued focus on the arcade market. The good news for operators is that switching costs for software providers are low. The hardware has become standardized around HTC VIVE and Pico. Most software will run on one or both hardware platforms. So, even if a company stops innovating or investing in new games, the hardware investment is safe. 

So What's the Future Hold?

None of this dissuades new companies from entering the market. Every week, I see one or two posts on LinkedIn from a developer building a new location-based VR game. It’s pretty insane if you ask me. And just in the last quarter, there’s been a realization among consumer VR game developers that investing in high-end games that cost between $40 and $60 is no longer a business. The only growing consumer VR gaming market right now is the under-12 crowd (remember when people said VR wasn’t safe for kids?) Gorilla Tag and Animal Company, free-to-play social games, dominate the engagement stats on the Quest store. So, developers are looking at the LBE space as a potential revenue source. This is funny because we saw this in the early days of VR. What comes around goes around, I guess. 

And speaking of those kids playing Gorilla Tag and Animal Company, they’re the prime market for FECs. If you’re not looking at free-roam VR for your FEC, you’re just not paying attention to the market trends. So drop by the VR Arcade and Attraction Summit and see what’s new this year. Or just check out the VR Collective Website. 

What We’re Reading

The Art Newspaper: The second wave of immersive institutions has arrived—how can traditional museums and galleries harness their power? 

Museums and galleries have a fresh opportunity to work with a new type of digital art venue that is spreading around the world, with the power to tell interactive stories of cultural heritage to multiple users using free-roam VR headsets Read more…