The VR Arcade industry has evolved since 2016, but the big changes are only beginning. There’s lots of fuel in the growth engine, but not enough companies are making it into orbit. One thing that will help, is more consistency in best practices, and standards to help the industry consolidate and grow. Join me in Vegas in March at the VR Arcade Game and Attractions Summit, where we will discuss an industry association to help move things forward.

"Sometimes, Rockets Explode”

One Big Thing

The State of the VR Arcade Industry

I am writing as IAAPA Europe wraps up in Amsterdam. The show was busy, and the floor was packed. Like IAAPA Orlando, it sold out early and amassed a waiting list of exhibitors hoping to showcase their stuff. 

IAAPA’s official post-show statement claims it had the highest number of registered attendees in the region’s history: approximately 17,370, representing 11,529 buying companies and more than 680 exhibiting companies. This year’s event surpassed EMEA’s record for the largest trade show floor ever, taking over 18,000 square meters of the venue space. 

There was lots of virtual reality, escape rooms, and immersive gaming rooms. Immersive entertainment is a hot sector. Companies bragged about how many sites they were in: 50, 100, 200, 250…

Sandbox VR just opened its 51^st location—or was it its 52^nd or 53^rd ? I can’t keep track. Zero Latency just opened its 100^th and claims to be opening one new site a week. (By the way, I played its new Warhammer 40K Space Marine VR game, which was truly epic.)

The VR Collective receives dozens of monthly inquiries from people entering the location-based VR Market. Our search traffic is increasing by 10% monthly, and interest in new VR arcades is higher than ever.  We just updated the VR Collective website, which now has free-roam launcher products from over 30 companies featuring over 200 experiences in a dozen genres.

Anyone observing the market would say it’s healthy and growing, so it keeps attracting new operators and suppliers. But if you look below the surface, you might see a different picture.

The Birth, Death, and Rebirth of the VR Arcade

The VR Arcade business was kickstarted when HTC VIVE launched VIVEPort Arcade in 2015, enabling entrepreneurs to license games and charge consumers by the hour to play legally. HTC was struggling to get people to try their headsets, so they incubated an industry of VR enthusiasts to set up arcade demo centers. Any entrepreneur could spend $50K on computers and headsets, build some walls (or hang curtains in many cases), and pop up an arcade in a strip mall, a bookstore attic, or an old gas station (all real stories.)

The VR arcade business never made anyone rich, except maybe for HTC and the founders of Beat Saber (good for them!) But for entrepreneurs that wanted a lifestyle business, it paid the bills, at least until the pandemic fucked them. Some held on and emerged afterward thanks to trillions in government subsidies (which are driving the inflation pissing everyone off - how short are our memories?), but the industry has never really bounced back.

The room-scale VR business is now evaporating like a puddle in the Las Vegas summer heat. Locations are closing rapidly (or pivoting to free roam if the owners have the energy and capital.) There’s debate as to why it’s declining so quickly. Many say it’s because so many people have VR at home, even though the cost of a consumer VR system has fallen from $4K to $299 since 2016.

Industry analysts forecast 25% compound annual growth rates for VR gaming. Meta Quest has driven hardware prices down to game console levels. And it’s entirely possible that the same people who were attending room-scale VR arcades got sick of paying $30 an hour when they could buy a headset for $299 and play at home.

But arcade owners must shoulder at least some of the blame.