VR Arcade Success Factors and Content
May 24, 2018 | 12 min read
Brad Scoggin speaks at VR Arcade Conference 2018
Rather read-through than watch? Transcript below!
All right, my name’s Brad Scoggin, I’m a co-founder and CEO of SpringboardVR. Twelve months ago the world thought that VR arcades were a joke. The major companies scoffed at it, most content creators didn’t want to mess with it, but they were wrong.
Over the last 12 months we’ve seen nearly a hundred new locations coming online per month, outside of Japan, Korea, and China. The cool part of that to me is that it’s the VR Arcades, it’s the LBE (location-based entertainment) market that is actually sustaining VR and propelling the growth right now. The folks that are running these locations are not the well-funded, high experience guys. It’s indies. These are indie locations. It’s a couple friends in their hometown who got passionate about VR and were willing to take the risk. Businesses and entrepreneurship is hard enough in its own right, but to do it inside of an emerging industry, you basically decided to jump out of a plane and didn’t parachute on the way down. And we were in the same boat.
October of 2016 I put on a headset for the first time and was totally blown away by the technology. A week later we decided, let’s open up a VR Arcade. And so we put together a business plan, and like any good entrepreneur we made up some projections to raise money. Can I get an amen for making up projections to raise money? Yes. Okay, I think all the VCs will be here tomorrow, so that’s a joke. We don’t do that. We’re a data driven company, and that’s the whole point of this talk, right?
We raised the money, we get the gear, and we’re going through our processes and the idea is that we’re going to launch four weeks later, on Black Friday, because we don’t know what we’re doing and we think the holiday rush will cover over all our ignorance. So we get the gear, we’re going through the processes, and we realize we’re totally screwed because there’s no way to manage this. And so we’re going to have to hire at least double the staff we have planned. Which is going to totally kill the slim margins we’ve already made up for our investment, right? That was basically the genesis of SpringboardVR. SpringboardVR is experience management and content distribution for VR. And we built the first version just to solve our own pain point, and save money on employee overhead.
So, we launch Black Friday. We had a great holiday season - we survived. We’re watching the market and we’re seeing the growth that I talked about a minute ago, and it was in March of ’17 that we decided to vet the stock market. We’re gonna build a company completely devoted to the software solution. We’re gonna do the latent marketing, all that crap, right? But we said we’re going to focus on two things, because at that point the industry was still very volatile. We said we’re going to focus on building really good relationships with operators and with content creators, and then we’re going to become experts in their pain and we’re just going to serve them to the best of our ability. So, if the whole thing blew up in six months, hopefully we would have enough relational capital to bend it to whatever next.
And that was the best decision we’ve ever made. We officially launched our company a year ago at this conference with 40 locations on the platform. I’m happy to tell you today that we have over 300 locations using the platform in 30 countries, and we’re up to just over 3 million minutes being played through our system on a monthly basis. We do define ourselves now, as I mentioned before, as experience management and content distribution. We’re working on a number of verticals, primarily still focused on the entertainment vertical. Within that vertical you’ve got family entertainment centers, who work with everything from casinos and cruise lines all the way down to movie theaters and trampoline parks, and then of course the arcades. At this point the arcades still do make up a pretty good bulk of our company.
What we’ve done over the last few months is we’ve done a deep dive into the data that we’ve been collecting over the last year. From extensive interviews with operators and content creators, and we’ve partnered with university data analysts to do pretty ridiculous surveys. We’ve found what we believe are seven factors that are important to success in the arcade. We did a pretty extensive study. Make sure you come to our website SpringboardVR.com, we’ve already released a few articles but more articles coming in time for our newsletter. We’re going to do a very deep dive on a number of these points. We do feel a certain level of responsibility with our positioning that, when we come out with a recommendation, we do want to make sure that it is based on evidence and data. We want to be very specific with that. I’m going to hit a couple today though that I think will be actionable, whether you are thinking about opening up a location or whether you’re already running a location, based on our analysis over the last few months.
The first thing we’ll talk about is marketing. It shocks me a little bit that, still to this day, if I ask ten operators, eight of them are going to say that their number one challenge is people don’t know what VR is. I’m sure that you’ll try to explain to your family and friends what you do, you understand. I think I’ve told my parents 100 times what I do and they have no clue. Here’s our recommendation for marketing. If you’re going to spend $5000 on marketing this year, don’t spend it on digital media. Don’t spend it on flyers. Buy an extra headset or two and get an employee to go to every event in your city. Go to university campuses, go to the park, go to the church, go to the festivals, and just get people in VR. That’s the only way that people are going to know what VR is. Get them in VR. Demo, demo, demo. Then give them a coupon or whatever you think to get them back. As soon as you get them to your store, your number one effect can become how do I turn this customer into a repeat customer.
And so, I’m going to put three quick things, and some of this may seem pretty basic, but you would be surprised after looking at 300 arcades who is doing what. First of all, it needs to have a professional look. Again, I know that’s very basic, but it’s very clear when you look at who’s being successful and who’s not that appearance does matter. There’s some examples some of the arcades that we work with. And these are all places that you would want to go, you’d probably take your family, these are cool places. Very different styles, and style doesn’t matter, but there needs to be some sort of theme. We’ve got a great, very long, blog post that goes into the details on the customer experience.
The second part is that it needs to be run professionally. That’s where SpringboardVR can help a lot. Part of our experience management has to do with the in-headset model. We’ve got the view 360 launch environment that has been built on feedback from 300 locations over 12 months. It’s very user-friendly and the whole idea is that you put the headset on a three-year-old or on your grandma and they navigate their entire experience on their own. I know I’m getting a look here that you shouldn’t put a three-year-old in VR, and you’re right, but you get the point, right? You want them to be able to navigate their experience without the employee’s assistance.
The second thing is we’ve got a back-end if you’re a manager or an operator to use to manage, one station, twenty stations, one location, twenty locations, everything in between. We’ve got a booking system that can be embedded into your website or you can use it in-store. We’ve got user profiles that go along with that and then of course all the data and analytics that come with all that. I’m doing super high level, make sure you come by our booth and we can go through a deep dive of it.
And then of course, content. Content is very important. And speaking of content oriented, we do have an online marketplace we handle commercial licensing so we can make that more efficient. We release each month our top twenty most played titles. We give operators an idea of what the popular titles are.
Second thing is price, and this is a tricky one, this is a fun one and we’re going to come out with some very specific information, but this is what I’ll tell you today. You don’t want a customer to feel they’re paying for a high-end experience a couple times a year. You want a customer who’s gonna come in a couple times a month. So, your price point has to reflect that. Across the board when you look at successful operators versus unsuccessful operators, this is a huge point to be taken. What I would say to you, and these are somewhat generalizations, but if you’re looking at North America, you need to not be charging in the $45–60 an hour range, it needs to be in the $20–25 an hour range. It’s got to be something that drives repeat business.
The third thing I think that everybody is pretty clear on the consensus that who we’ve talked to, again, across the board, our most successful operators, multiplayer is the foundation of their business. One of our operators, I’m gonna quote him, he said he works with the same mindset of going to the movies. Somebody doesn’t want to go to the movies by their self. It’s the same thing here, so you’ve got to bring in the social element. There’s a lot of good VR multiplayer games out there that can do that. Which we can help you and show you the games. We do have a release, in one day we’re releasing a massive rebuild of our entire product, we’ve been heads down for months. Version 3.0. But we’re very excited about that you can come try out today. But, once that launches on Monday, building out our multiplayer operation not from a content perspective, but from the ability to get into multiplayer experiences at one location, and then even multiple locations. That’s top of our roadmap.
So, the last thing I’m going to talk about is content. Of our seven success factors, this is probably the one I’m most passionate about because it impacts everybody the most, in my way of thinking. And really, it affects the whole ecosystem. It’s the relationship between the content creator and the operators, and some of the tension that exists there. We see ourselves as kinda of the middle man, but more than that. We’re not going to be bias and just focus on our own success. That means that both operators and developers have to be successful. So we’re somewhat in a unique position that we see the whole picture, and then we operate under our own bias to help everybody be successful.
A couple things here, so quality. I know that there’s very low opinions on quality. We are working with content creators, with arcades, to help them create content that supports the location. We’ve got a lot of feedback, got a lot of data, we release the copy of the titles every month. Part of our new build that is coming out that the end-user has the opportunity to upload or download content. So part of our vision is that we want to be able to give content creators access and space to be able to be more capable. But ultimately we want to put the power in the hands of the consumer. We don’t want to be the gate-keepers, we want the consumers to be the ones to determine what content is good. Then we’ll take that data and go back to the content creators, help them create better content. Which again, we all kind of need.
And I do think, there’s one point in here that’s also just important that came to mind. That generally speaking, today, content is not what’s driving this market. People are not going to the arcade because they want to play Halo, or whatever it may be. They’re going to the arcade because of the novelty of VR. Now, once they get there, they get in Quivr, they get in Arizona Sunshine, whatever it is. Now they can go back to play it. That’s something we had to keep in mind as we’re looking at the ecosystem today. The content is not driver.
The second thing is distribution. Especially, obviously the data and market here, it’s very fragmented, and that’s one of the problems that we are trying to address. I think we’ve done a fairly good job so far, bringing 300 locations together and we’re still growing actively every month. But what that allows us to do is go to these content creators and offer them a more efficient way to monetize their content. We can put 300 locations together without having to go hunt down the “ma and pa” locations on their own. And so, that means two things. That means that Hollywood studios, content studios, are now more willing to invest more money in content because there is an efficient way to monetize it. But it also means that they’re willing to charge less because we can guarantee them a higher level of volume.
Which leads me into … let me start over with that. We’re also coming out with our own content hosts. Right now we still utilize Steam for our content distribution, but in the next few months we’ll be doing our own hosting. Which just takes another kinda layer of inefficiency out of the process, and also it helps us to address piracy. We all know that it’s something that’s happening, but we don’t even talk about, but it’s something that’s gotta be addressed when we’re looking at the health of the entire ecosystem.
The last point is price. This may be one of the most tension. I think one of the challenges here is that, if everybody’s honest, for the most part you don’t know what VR is worth. If any of you are actually looking at what people are charging now. If I call our game center and ask how did you pick $45 an hour. They’d say, “Well, we copied this guy, who got it from this guy.” Everyone was just guessing, right? We launched our content licensing again last year, and at that time we had about 800 headsets. So, we were in a position to go to a content creator and leverage that volume to get lower prices. Which that is very immature, that is bad for the whole ecosystem, if we’re trying to drive the prices through the floor, before we had any data.
What we did was we started very simple with an affirmative pricing model. We gave the content creators the ability to set their price, we gave them transparency of price, and then we gave operators the ability to opt-in or opt-out. We knew we were going to catch a lot from our critics, we knew it was going to be messy, but we wanted to get the data. It’s been awesome. It’s been messy. We’ve seen the opt-ins grow every month. Which is very encouraging, because I’m looking at it saying, “Wow! Everyone’s guessing still kinda within this deal, but it’s still growing, people are still adopting the pricing.” And so, we’re at a point now where we have a lot of good data, and this is where you’ve definitely got to stay tuned.
In the next month, or so, we’ve got some exciting announcements around the content and specifically around the price point that we believe people need to be getting to for operators to be successful. I’m in shock, a lot of operators aren’t even thinking about this in the detail they need to be, because this is a huge part of the business. And then going back to the content creators and saying, “Look, really everybody’s going to have to give a little. If we want this whole thing to be successful, which if arcades fail, operators fail, content creators fail, and vice versa. So, operators, you are going to have to pay a little bit more than you want to pay, and content creators are going to have to charge a little bit less. But if we’re all willing to give a little, things will be more successful.”
So please, come connect with us, our booth is right here. Sign up for our newsletter, we’ve got a lot of great data and blog posts coming out around all the seven success factors. Especially around content in the next month or so. Sign up for our newsletter, come check us out at our booth, you can check out our new version 3.0. We do offer a free 30-day trial, so if anybody’s thinking about switching you get set up in your arcade and work, you know, play around with it for 30 days. So look, this is awesome. This is so exciting. This is such an exciting time in VR. It’s exciting that the locations are actually, as Ilia said earlier, they’re the one’s sustaining and propelling the growth of VR. So, let’s work together to make data-driven, informed decisions and let’s continue to prove the doubters wrong.
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