#1126 – Entertainment – After The Storm!

During the hardest days of the Global Health Crisis and the industry-wide lockdown, The Stinger Report publisher attempted to search out positivity in the face of growing gloom and doom. And so was born the occasional #AfterTheStorm social media feed, and hashtag. Now two-years since the last post, and it would seem fitting to take stock of what the “New Normal” of the Out-of-Home Entertainment sector has become, and some trends and issues shaping the landscape ahead.

The Road Well Travelled

The COVID conditions, for many amusement businesses, were grim during the early part of the lockdown and pandemic market. The need to depend on Governmental support was felt by many, and the inability to generate revenue hit hard at many corporations. Once reopened, the needs for strict hygiene and operational guidelines added even more pressure on operations, compounded by a need to hunt for staff, as the service industry was hard hit by shortages.

As reported in our Amusement Expo coverage from March, speculation from industry observers was that the US amusement trade has seen at least some 35-percent of its operation shuttered following the pandemic. An amalgamation of conditions, ranging from outstanding debts, poor business practice, a disinterest to continue, and competitive influence, resulted in the closure or merger of operations.

In the amusement machine sector one such example was ‘Laser Quest’. In the UK, the operation still operates over 50-venues across the country and has seen an uptake in business post-lockdown. Before COVID, ‘Laser Quest’ was founded in the UK back in 1988, and has continued to grow, opening its US operation back in 1993. But under the burden of the pandemic and the economic climate, the company decided, in September 2020, to shutter its North American operation. This represented some 38 US and Canadian venues. This was a major blow to many areas, as the venues had proven strong party locations, with strong local connections.

But as with all things, nature abhors a vacuum and, of the closed US operations, many would soon reopen under new management. At the time, it was stated that four California ‘Laser Quest’ venues were reopening under independent management, with another six across the States. At time of writing, other previous venues were being rebranded and reopened. The hunger for regional entertainment was not diminished by the pandemic, but traditional brands which were unable to move with the times were easy victims of it. 

Sadly, like much during the dark days of the global lockdown, reporting of the impact was sporadic, as the very media services that covered the sector were impacted. The well-known trade news portal, ‘Amusement Resources’, would see it ceasing posting, and the closure of its website. Along with some media, trade exhibitions, have endured the impact of the past few months (years). And now talk is of “Hybrid” shows added into the mix – the holding of both online conference sessions, alongside the actual physical show. Travel restrictions, and a gradual return to physical events, are playing their part in reshaping the public event business.  

There are concerns from some exhibition organizers that the new landscape of the trade event may revert to a condition seen back in the 1980s – international trade attendance is not a given expenditure but used as some exclusive opportunity for selected executives; and that international travel in general for work-based activities may be impacted as belts are tightened. As such, a perfusion of conferences and specialist trade events will be hit with lower-than-expected attendance. It is difficult to just blame the condition on post-COVID jitters, but now it is more of a reflection of the changed business landscape. 

However, many in the mainstream media that attempted to write the obituaries for the Restaurant, Cinema, Amusement and Cruise Line industries were sorely disappointed by the strength of rebound witnessed at the end of 2021. But also, the level of innovation and re-inventiveness. These new conditions, forcing the creation, created totally new aspects of once traditional trades. Be that the explosion in “Virtual Kitchens” (also called Dark Kitchens), being those only focused on delivery service; the investment in “Cinema-Tainment”, with the inclusion of an entertainment and amusement mix into the original site; and the growing deployment of “Retailtainment”, as the physical mall space looks to repopulate empty department spaces with entertainment offerings.

The Road Ahead

For the Out-of-Home Entertainment business, one of the biggest new awakenings reshaping the sector is that of “Competitive Socializing”. Many regular readers of The Stinger Report will be familiar with the term. A trend that had already started gaining momentum prior to the privations of the global calamity, this has not however slowed the growth of this entertainment phenomenon. Numerous new venues spring forth internationally, and behind the scenes, there is a major powerplay towards establishing international footholds for the leading brands, supported by multi-million Dollar investments.

Ranging from crazy-golf to football-simulators, and augmented-darts – all supported by an extensive cocktail and dining offering – these new entertainment venues seem to be speaking directly to a pent-up hunger within the young adult clientele. This is a trend that could quite easily supersede more traditional amusement offerings – what the publisher of the report has labelled the equivalent of the “Roaring Twenties Momentum” for the amusement and entertainment industry. As with pinball and arcade, at that time after the 1918 influenza pandemic.

Regarding the traditional amusement trade, one of those most impacted by the current conditions is the Japanese Amusement Factories sector. Japan is still reeling from the privations of COVID conditions – seeing businesses still stuck in the limbo-land of lockdowns and regional quarantines. The decimation of the Tokyo Olympics by the Global Health Crisis has been mirrored in the traditional amusement trade. This has resulted in restructuring and assimilation, with several Japanese amusement chain operations acquired or restructured. Further acquisitions and mergers are expected in that sector, as well as the rebirth of a new business landscape in that territory.

Internationally, it has been a constant flurry of activity in the mergers and acquisitions market, that has also marked the “new normal” that many of us must endure. Corporations with assets acquire the weaker competitors, as well as looking to create their own empires to dominate the verdant business landscape. All aspects of entertainment seem to have fallen into a constant state of acquisition, and even larger business deals are speculated on the horizon. Another aspect is the need to stay relevant, with major chains looking at investment in new hardware, décor, and even full pivots of brand to better embrace the changing audience tastes.

All these developments have been unfolding against a backdrop of international tension – first with the concerns of further variants of the original pathogen, then with the stress of impacted workforce and supply chains, and now with the unfolding European conflict in the Ukraine, with the ramifications against oil prices and wider implications of a rise in the general cost of living. It is this conflict that has also seen the impact on financial support for several corporations which depended on Russian funding (directly or indirectly) in the amusement and attraction scene. As well as with ramifications for China-based operations caught in the middle. 

We all have now come to understand the import of the Chinese curse, “May you live in interesting times!”    

Japan Amusement Redefining

Regarding the Japanese developments mentioned above, along with our recent coverage of the Japanese amusement facility scene, and news broke that reflected the mergers and alliances we have previously witnessed. It was announced that GENDA, the amusement facility operator in Japan, had formed a business alliance with two other corporations towards increasing development of amusement locations – including new XR-based attractions and entertainment. The two companies are well-known to regular Stinger Report readers, being Hashilus – who created several VR-based attractions and installations; and Dynamo Amusement – who have also operated VR attractions and worked with leading IP to create temporary installations based on the technology. Now, combined under GENDA, these parties are looking towards employing their experience in new styles of entertainment systems to be operated through the agreement. This comes after the January announcement that GENDA GiGO Entertainment acquired Takarajima, adding 24 entertainment stores to the operation. 

GENDA has started an extensive rollout of facilities, following the full acclimation of the SEGA JP amusement facility operation (now rebranded ‘GiGO’), with their own business to comprise now some 220 stores in Japan, China, and America. Meanwhile, Hashilus will be best remembered for their work with TAITO and Sony on their VR concept projects, and for the development and installation of many VR attractions in numerous locations, including the ‘Sky Circus’ venue and ‘VR Park’ chain of stores. Dynamo Amusement (a division of the Dynamo Picture group) has developed and sold products and content for VR amusement installation, such as working with CAPCOM on the ’BIOHAZARD Valiant Raid’ VR free-roam installation and working with MediaMation and VAR Live. 

The redevelopment of existing entertainment franchises to better connect with the emerging new audience has been covered in The Stinger Report, with news such as Chuck E. Cheese and Tenpin entertainment chains investing heavily in redevelopment and hardware upgrades. This is also being seen in Japan, and recently, following on from our reporting on the ‘VR ZONE’ operations shelving, it was revealed that BANDAI NAMCO Amusement (BNA) were now incorporating hardware previously developed by the ‘Project I Can’ team for deployment in their new ‘VS PARK’ chain. The stores opened to date have focused more on physical activity and digital engagement, but it was announced, with the opening of their new ‘VS PARK LaLaport EXPOCITY’ Store (opening in July), they would now include VR with previously-seen white-water game ‘VR Rapid River’, peddle game ‘Extreme Chest Test’, and ‘Ski Rodeo’ (one of the first VR games deployed by BNA, back in 2016 at the test-site ‘VR ZONE Odaiba’). The repurposing of the VR technology seems to confirm our previous coverage on the repositioning of the VR ZONE concept, for a more focused rollout of this technology.

Competitive Entertainment Challenges

The eSports scene has proven a complicated market to follow, with incredible highs and massive lows. A road paved with gold seems also to be populated with its fair share of potholes. Recent developments seem to illustrate the trends of mergers and acquisitions, as well as a need for the market to prove the high expectations promised by the high investment seen.

Starting off this current list of developments, we heard the news that British organization London Esports had been acquired by eSports organisation X7 Esports. The acquisition sees the organization and its regionally competitive team, and technology campus, rolled into the growing competition operation. X7 Esports has recently made other high-profile acquisitions of Absolved and Bulldog Esports (no numbers had been revealed at this time). This followed the news that Savvy Gaming Group had paid a massive $1b for a stake in Embracer Group – with the Saudi fund becoming the second largest shareholder in the game licensing and eSports organization. The ongoing feeding frenzy and merger of organizations are illustrating the landgrab that defines this highly profitable sector of competitive play.

It was also revealed that a crossover between eSports and Competitive Socializing, with more news regarding the ambitions ‘Formula 1 sim-racing center’, is planned by Kindred Concepts for a London Q4 2022 opening. It was revealed, in a media presentation, that manufacturer Vesaro with D-BOX will be partnering to make the race-sims that will be used in the venue, with some 60 simulators planned to be installed at the first site. These units will be running a specially modified version of rFactor 2, racing software. The Vesaro simulators will be equipped with the new generation D-BOX ‘G5’ haptic systems. The venue is the brainchild of Kindred Concepts, who have been involved with the ‘Puttshack’ and ‘Flight Club’ social entertainment sites, and plan to roll out 30 of these F1 centers in the next five years. These venues will incorporate social entertainment and eSports competition.

All this said, there are highs, and there are lows. And it was revealed that one of the poster boys of the eSports competitive venue scene revealed they suffered considerable losses. In financial reporting, Allied Esports Entertainment revealed that, during the first quarter of 2022, they had incurred a net loss of $3.8m. The organization is best known for the eSports venue operated within the Luxor Resort in Las Vegas, as well as several competitions and live events it organizes internationally – during this period running 92 events and all supported by the new ‘AE Studios’, producing live streamed productions of the events. 

This news came weeks after the announcement that Guide Esports had also seen a $6.1m loss. The organization, co-owned by football celebrity David Beckham, had been established to field professional eSports teams and compete in competitions internationally. And prior to that news, Enthusiast Gaming revealed a $8,6m loss during a similar period. These growing pains were expected to be the beginning of a period of restructuring in the sector, following an investment frenzy, marking the ending of the obvious honeymoon period for the sector. Now investors will be expecting to see serious returns to prove the eSports market’s true worth.