Commercial Licensing Landscape in VR Arcades

A conversation about the tensions, challenges, and solutions with a VR Arcade Operator and a VR Game Developer

Early adopters and Arcade operators worked through a lot of problems that boosted the rapid growth of the LBVRE industry.
There is currently a limited number of centralized hubs and standard procedures for the handling of game licenses.
Game developers need to be fairly compensated for their work and need access to gameplay data in order to make more-informed decisions.
Arcade operators want the ability to offer popular, relevant, and multiple game titles for their customers.
The LBVRE market has yet to figure out which pricing structure for commercial game licensing is the most beneficial for both LBVREs and game developers.

Commercial Licensing Up to this Point

When VR Arcades began to emerge a few years ago, it was very much the “Wild Wild West” in many ways. There were no guidelines, no rules, and no standard procedures on how to correctly license and pay for games. About two years ago marks the birth of this industry, and the only people really getting into it were the early adopters and people who were excited about the technology. All of these early adopters have worked through a lot of kinks, and really done a lot of manual work to get up and going, specifically with commercial licensing.

Some Arcade operators were reaching out to developers and asking permission to license their games. Some were not. There were (and still are) games that developers offer for free, but the majority expect fair compensation for their work. We wanted to find out more about how Arcade operators and game developers were handling commercial licensing up to this point.

In order to obtain the best information possible we interviewed James Pollock, CEO/Owner of Arctic Sun VR, and Joe Radak, Game Designer/Co-Founder at Eerie Bear Games.

JAMES POLLOCK: Arcade Operator

At what point were you originally exposed to commercial licensing, and what were your initial thoughts towards it?

A: “I was exposed to commercial licensing and the cost for all that a few months before I actually opened the Arcade, so I had time to plan around that. I didn’t really know what to expect at all for the commercial licensing in terms of pricing. I was worried that I might have to pay $1,000 for a game. I didn’t know there would be subscriptions, or what. I just didn’t know what to expect. So I was really pleasantly surprised to find out what the costs were. I didn’t think that they were too bad, for the most part.”

Where did you first hear about commercial licensing?

A: “I started discovering information about commercial licensing, about specific prices, through the Steam Cyber Café program. I think I uncovered that in mid-November of [2016]. I originally just made my own spreadsheet of all the different ones that were on the list; along with the prices, the reviews, and the type of game.”

Now that you are almost a year into this venture, what are some other avenues or ways you go about correctly licensing games?

A: “So currently I’ve got a number of licenses, whether through the Steam Cyber Café, or directly with developers themselves… I’ve got a couple that are six-month deals, one-time payments. I’ve got one that’s a whole year long for a bundle of four games, and with three of their games I’m doing a per-minute deal.”

JOE RADAK: Game Developer

I’d love to hear your perspective on the commercial licensing space from the very beginning.

A: “This time last year we would have been just over six months into commercial VR. That was a year ago, and [VR Arcades] were still really growing. The only Arcades that I really knew about were the ones that were being popped up in Japan and China, and Ctrl V over here, well, not really over here; in North America, but, more specifically, in Canada.”

Did you have a lot of Arcades reaching out to license your game?

A: “We were getting contacted from a bunch of people who were like, ‘Hi, I want to start a VR Arcade. Can we use your game?’ And that’s it. And we would have to be like, ‘Yeah, but you need a license to do that. Here’s our rates.’ And then usually we never heard from them again. I don’t know how many emails I got of people saying, ‘Hi, yeah, can we use your game?’ I’d be like, ‘Yeah, sure. Here’s how much it costs.’ And then they’d never come back to me.”

Tensions & Challenges in Commercial Licensing

Among the many tensions & challenges within the LBVRE commercial licensing space, we’ve seen two sides emerge that help to further the overall understanding of this space. In one corner we have the content creators (Game Developers), and in the other corner we have LBVRE locations (VR Arcades and FECs). Boiling down the tensions and challenges in commercial licensing for each side, we see two distinct truths emerge:

Game developers want to be fairly compensated for their work (after all, that’s how they make a living).
Arcade operators want the ability to offer popular, relevant, and multiple game titles for their customers.

While these two truths may seem easily achievable, there are a multitude of factors that prevent achieving them. We sought to get answers as to what these factors are.

JAMES POLLOCK: Arcade Operator

What commercial licensing solution did you first use? What didn’t you like about it?

A: “I didn’t like the fact that it was per headset. For the first couple of months I went directly through the Cyber Café portal.”

How else did you go about commercially licensing games? Was that an easy process?

A: “I started reaching out to developers independent of the Cyber Café portal, and I had a couple of them reach out to me. We’ve had a bunch of responses, like, ‘Just go ahead and use the game for free, no problem.’ And I’ve had some that I’ve emailed that have never got back to us, or that don’t do commercial licensing, or what they wanted didn’t make sense.”

JOE RADAK: Game Developer

What challenges do you encounter when trying to license your game the proper way?

A: “…We are seeing a lot more VR Arcades pop up, and then we’re also seeing a lot of problems with VR Arcades using content without permission. I don’t want to assume that it’s malicious or anything. I think it’s just a lack of understanding of what’s needed to start up an Arcade.”

What advice would you give Arcade operators when adding games to their library?

A: “If you’re going to be selling our game, it doesn’t matter if it’s free — you still need our permission. You still should be telling the developer, ‘Hey, I’d like to use your game. How can I do that?’ We’ve seen a lot more people not really using licensing as much as they should be.”

What are your thoughts on Arcades who are not licensing games properly, or at all?

A: “As a developer, that’s really frustrating, because I can’t keep track of every single Arcade that could be using our game, and then contacting them and being like, ‘Hey, you’re using our game without permission.’ And I don’t even think that that would really do much, because we’re just a two-man team, and so I don’t think that they’re really going to listen to a two-man team…”

How can developers be negatively impacted when Arcade operators do not correctly license a game?

A: “I think when it comes to commercial space I’m sure there’s plenty of problems, but one of the problems, like you mentioned, is it does hurt. Even though a game might only be making $10 a month at an Arcade, that’s $10 more than a developer would be making… It’s like, if an Arcade is using a game without permission and not paying appropriate licensing fees, that’s still $10 that an indie developer doesn’t have. Sometimes for even a small developer, even if it was just one guy, or a one or two-person team making a game, that $10 could really mean a lot; more than just financial support, but just mentally being paid for something that you did. That’s really motivating for developers.”

Do you think the lack of content created specifically for commercial use is correlated with the current relationship between Arcade operators and developers?

A: “It’s demotivating to see Arcades using stuff without permission, again, either intentionally or unintentionally. I’ll give the benefit of the doubt and say that it’s a lack of understanding and education of how to run an Arcade, rather than a malicious, ‘Screw all the developers, ha, ha, ha, we’re going to save money,’ type of thing.”

Thoughts on Pricing in Commercial Licensing

To this point, there are currently a limited number of commercial licensing pricing structures. To our knowledge, these are the most popular avenues of handling commercial licensing, and the pricing involved with each:

Flat fee per game (typically involves one-off agreements between Arcade operators and game devs)
Monthly fee for a bundle of games (no control over games within bundle)
Pay-per-minute (pay for what is played, with game titles being added daily)

To get a better idea & understanding of how pricing for commercial licensing should be handled, we went straight to the sources to find out their thoughts & perspective.

JAMES POLLOCK: Arcade Operator

What do feel is the best pricing structure to ensure the success of your Arcade?

A: “It’s weird with the licensing, because I can have some games, like, for example, one title, I don’t really have that many people play it. I pay a very high per-month cost for the commercial license, and I only put it on my premium bay. As opposed to another title, which I paid a nominal per-moth cost for, it’s on all three of my bays, and it’s in the top seven of minutes used on SpringboardVR any given month. So with the per-minute structure, I’ll probably end up paying like $0.002 a minute or something for it.”

JOE RADAK: Game Developer

As a game developer, is there interest in a pay-per-minute pricing structure? As opposed to just a flat monthly fee?

A: “When it comes down to specific types of the payment options, it really does depend on the developer. I know some developers who don’t feel like they fairly get compensated for use of their game with pay-per-minute, so they always push for the pay-per-month, per-license. Others don’t mind as much. They do pay-per-minute. It really depends on the type of game. If a game is really, really popular, and I don’t know any specific numbers to these games, but Space Pirate Trainer, big, popular game. Job Simulator, a big, popular game. They might want to go with pay-per-minute, because that might actually get them more money in the end, rather than just a straight up monthly license.”

Pay-Per-Minute Structure in Commercial Licensing

With a pay-per-minute structure, Arcades can offer more games, which expands their game library, without having to worry about paying for games that aren’t played. Or, if an Arcade wants to offer & promote a specific game on a special event weekend, they can do that without paying a flat monthly fee.

For developers, because this structure for commercial licensing is so granular and down to the very minute, the potential for clear & insightful data becomes a reality. Game developers can use this data to decide what to build, and who to cater it to, for their next game.

These benefits lead to better content and expanded accessibility for consumers––creating a win-win for Arcades and game developers alike.

JAMES POLLOCK: Arcade Operator

What are your general feelings toward a pay-per-minute pricing structure?

A: “I’m really excited for the SpringboardVR per-minute licensing program. I’m really excited that that’s actually going to tie in with everything else. It centralizes everything, and it makes, for me, a cost of goods sold, instead of essentially a fixed cost. But it makes my costs leaner, and it gives me the ability to have more games available to my guests, which is going to make a better guest experience for every guest. Moving to per-minute is going to be a major boom for the business.”

What are you most excited about being able to have more games on pay-per-minute structure?

A: “Frankly, just the fact that I’m not paying for them unless they’re in use. I mean, that’s not 100% the thing, but that is like, 75% what I’m most excited about. That and being able to get games I haven’t been able to get yet, just because I was unwilling to pay for them. Or, no commercial license was available.”

What average price-per-minute would you like to see available?

A: “I was okay with what you had stated before as most games were going to range between $0.03 and $0.12 a minute. That seemed great to me, whether it was $0.03 or $0.12.”

What is the highest price-per-minute that you would pay?

A: “My overhead is really small, so I could pay quite a bit for a game — especially when I’m only paying for it when someone’s playing. But I’d say $0.15 is probably getting up there a ways.”

JOE RADAK: Game Developer

What average price-per-minute would you like to see available?

A: “I’ve seen and heard contracts as low as $0.03 per minute. I haven’t seen a high end of that, but my guess is that it would probably be no higher than $0.10 for really, really popular titles.”

Do you think a pay-per-minute structure is the best licensing option to use?

A: “It’s hard to really judge that before you actually get into Arcades. You can’t really tell which one’s going to be better or not. So usually, the first few Arcades you’re kind of experimenting and just trying to see which one, and kind of judging the popularity, because it’s hard to tell.”

Benefits of Gaming Data

With the increase in FECs and LBVRE locations comes the need for content. But the industry needs more than just content, it needs great & relevant content. Creating great content is no easy task and comes with many factors to consider, such as:

What are customers playing the most?
What are customers playing the longest?
At what time of day are FPS most popular/played?
What demographic likes what type of content?

To make more-informed decisions in regards to the games developers are creating, and what games the Arcade operators are offering, data is key. To answer these questions, content creators and Arcade operators alike need data. Data data data.

JOE RADAK: Game Developer

What data do you want? What would be valuable for you to see for the Arcades using your game?

A: “I think for me, I love data. The big things that I want to know from an Arcade that’s playing our game is, “How long is our game being played per month? How long is our game being played per day? Is there a specific time of week? Are more people playing our game on Mondays rather than Thursdays? Why is that? The average play-session time, so every time someone boots up, how long are they in our game for?’”

Referring specifically to functionality, what type of data would be of valuable to you a game developer?

A: “The major thing is, I love having all this data, but I like to see the data over time. And being able to, if you can’t graph it and provide a visual representation of that data, at least allow us to export it so that if we choose to we can then graph it ourselves, so we can see if there’s growth, if there’s a decline, is there more people playing our game after school on Monday during the week, or something like that. Because then that might say, “Maybe more students like playing our game rather than adults.” Those types of things.”

Conclusion

We’re a little over two years into this LBVRE boom, and from the looks of it, its not slowing down. More and more VR Arcades are opening up each month. More and more FECs are adding VR headsets to their entertainment repertoire. And more and more VR content is being created by developers.

With all of this happening, there is still a very real disconnect between Arcade operators and developers. Based on the countless conversations we’ve had with both sides, it seems like the biggest hurdle in bringing these two groups together is a lack of communication and understanding. Arcade operators would benefit from developers creating content specifically for LBVREs, but developers don’t see it as profitable because many operators are licensing their current games. Developers would benefit from operators bringing VR to the masses, and giving people the opportunity to play a developer’s game. But a lack of data and statistics leaves them with no direction for moving forward.

This is a new venture, with new challenges and new opportunities. If you’re like us, you’re in this industry because you believe it can have a real impact in the world we live in, and want to be a part of it. But in order for VR to continue to gain popularity and exposure, we must all find a way to work together towards this common goal of changing the world for the better.