#1193 – Entertainment Rings in The Changes!

The first month of 2024 passed and developments abound in the reshaping and restructuring of the entertainment offering in the market. This is supported by a spate of Mergers and Acquisitions (M&A) and the continued restructuring of business strategies towards the changed landscape of the market – in both commercial entertainment and consumer gaming.

Acquisitions and Mergers Continue

In the LBE operation scene, the latest acquisition was revealed with news that Ten Entertainment, operator of some 52 venues in the UK, comprising lasertag, bowling, escape rooms and amusement sites, was the target of a £287m takeover by US-based Trive Capital, an investment house with an interest in this sector. This represents one of the largest UK acquisitions for the year, and a continuing trend in the acquisition of obvious opportunities, as the market prepares for a major restructuring.

Competitive Socializing in the UK continues to prove a major focus. Regarding Roxey Leisure Group, known for their ‘Roxy Lanes’ and ‘Roxy Ball Room’ (over 17 venue chains), the formation of a new division was announced. Called Pins Leisure, this new division will be focused on family-led social entertainment projects, having launched their new ‘King Pins’ bowling venue, first in Manchester, with three other venues in the works. This move reflects a growing investment in social entertainment venues in this market, and the need to create specific divisions dedicated to this. We also reported on the Conductr creation of the Game Volt division, seen at EAG.

Another major development in the M&A sphere was the news that K1 Speed, the karting entertainment venue, announced its latest acquisition of the Autobahn and Accelerate Indoor Speedway operation, representing some 11 venues. This grows the K1 operation to some 83 locations in Europe, America, and other countries. K1 will now become one of the largest karting operations. The acquisition will see the newly acquired indoor karting sites transformed into full e-Karting premises, including the operation’s branding and tournament platform.

US social entertainment has also been seeing major upheavals, such as seen with the announcement that Pinstripes social entertainment chain had been merged with Banyan Acquisition, a special purpose acquisition company (SPAC) company, which undertook this move towards a float of the operation on the New York Stock Exchange (NYSE). Representing some 15+ facilities in the US, the bowling, entertainment and hospitality chain is the latest to go public and joins Dave & Buster’s in 2014, Bowlero in 2021, and Topgolf who were acquired by Callaway, with the latter already on the public market.

Speaking of Bowlero, their latest bowing location was announced, with the company revealing the acquisition of Ten Pin in Hillard, Ohio, USA. This will bring up-to-15 locations under the brand, and one of the latest venue acquisitions of this growing chain of entertainment centers.

The US amusement scene seeing similar investments, mergers, and acquisitions. This was illustrated near the end of the 2023, with the news that amusement developer and manufacturer Coastal Amusements had received an undisclosed investment from Surge Private Equity. This is stated as being undertaken to leverage the operation’s expertise and market position, in the face of reported growing demand for engaging and interactive entertainment experiences. The operation is keen to use this new capital to explore new avenues for growth and develop more cutting-edge products. This is expected to be the first of a series of announcements from the US amusement and distribution scene, based on additional investment.

The Japanese amusement venue powerhouse GENDA was once again in the news, with their latest acquisitions. First was news that Fukuya Holdings, a merchandising and amusement prize operation with divisions in Japan and the US, had joined the GENDA Group – marking the latest major acquisition to the growing operation. At the same time, it was revealed that the operation was, in December, to have acquired the right to open their first China-based ‘GENDA GiGO’ facility – though an acquisition deal of the right through KaKu, a gaming machine and capsule manufacturer and operator in Japan. The first Chinese GENDA facility is opening in the Fashion Tianhe Plaza, in Guangzhou province. This will be part of a concerted move towards opening more venues in China, along with converting existing chains.

GENDA had announced plans to open their first Chinese amusement entertainment space back in 2019, with the establishment of their subsidiary, and opening their first site (‘QIGONG’) in China during July 2023. The next Japanese amusement factory China announcement was made in December, with TAITO Corporation announcing the opening of their first China facility in Hong Kong – a 3,500-sq.ft. location comprising some 40 game and prize machines. The ‘TAITO Station’ will be supported by Invest Hong Kong (InvestHK) and hopes to grow a chain of facilities. TAITO is currently running 158 Japanese operations. Also, with the New Year, news was revealed from GENDA that they had expanded their facility operation further, announcing the development of a video amusement piece (‘Hard Puncher’) – reminiscent of a previous TAITO video boxer.

Along with the M&A shaping the market, we also see the leveraging of debt and new investments being made. This was reflected in December of last year, with the news that AMC Entertainment had wrapped up a $350m at-the-market equity offering and reduced their debt by $62m. As reported by the media, the move to reduce debt and position the operation is defence against challenging conditions expected from box office revenue in the business. The impact of the writers and actors strikes on release schedules, and a softening of audiences expected in the 2024 financial landscape, all factor into this position. AMC, which operates some 950 theaters (10,500 screens) in US and Europe, has been noticeable in looking to include an immersive entertainment offering into their mix, initially with their $20m investment in the abortive IMAX VR concept, but more recently including their $20m into Dreamscape Immersive and others – looking at foyer popup VR experiences.

Another announcement in the LBE sector saw France-based Illucity confirm their merger with DreamAway. Illucity is a VR entertainment facility with three locations – owned by the YMagis group (cinema tech services), the VR chain comprising a mix of experiences. Meanwhile, DreamAway is a developer of VR room-scale adventures for multiple players, with over-ten of their spaces across the country (five of which are owned directly). The merger is hoped to create a powerhouse, which will see DreamAway go into restructuring towards rolling out more locations under the combined structure. This is the latest European VR LBE operation looking towards growth.

Speaking of immersive LBE, and one of the leading operators of a chain of VR destination venues is SandboxVR. The company is fully bouncing back from the privations of the Global Health Crisis, that saw it US operation fall briefly into bankruptcy protection. Now, once again fully established, the company is growing their chain of owned and franchised VR LBE venues at a fast pace, currently comprising 46 locations. It was also announced that the corporation had signed a franchising deal with Next Level Eriebnisse – a location-based entertainment experience developer. This deal will see ten new SandboxVR venues opening across Germany, operated by the partner. This partnership comes just as the operation announces success with its latest experience, the Netflix licensed ‘Squid Games’ property, with the company reporting ticket sales, since it was rolled out in 2023, of over $1m.

The highs of LBE are also met with the lows of this turbulent period. Following close behind the surprise reveal of the shuttering of the London Kidzania children’s role-playing chain, another LBE operation undertook a surprise closure of its latest venue. It was revealed that Two Bit Circus had shuttered their new Dallas facility, after just over 12-months of operation. The self-styled “micros-amusement park” had opened in 2022 within a 35,000-sq.ft., site (a former Dicks Sporting Goods store) at the Shops at Park Lane in the Texas city. A statement from Northwood Retail, the owners of the shopping center where the Dallas Two Bit Circus has been located, and who had negotiated the venue opening in 2022, commented that, unfortunately, funding challenges early on with the entertainment company, had forced the retailer to realize they needed to switch gears on the space. This resulted in its immediate closure and the laying off staff.

It is expected the site will now be reverting to retail, as the entertainment aspirations failed to achieve any of the projected returns. The Dallas venue had comprised the signature Two Bit Circus venue style, with specially developed Story Rooms (the operator’s take on escape room operation), a Midway with amusement and VR, along with a restaurant and bar capability. However, this big project was still ongoing by the time of the opening in November 2022, taking longer than planned to fully complete, while at the same time, the company was in a failed hospitality SPAC project. This now leaves the original Los Angeles entertainment venue, which is still firing on all cylinders with plans for several events.

In another example of the fragmented nature of the business, it was revealed that the ‘Tomb Raider: The Live Experience’ in London, developed and operated by The Little Lion Entertainment, has permanently closed after some eight-months of operation – following the fanfare of the April 2022 opening. The experience included live actors taking groups through various zones based on the popular videogame and movie property, solving various puzzles. Little Lion is famous for the crowdfunded ‘Crystal Maze: Live Experience’, the team-based immersive rooms adventure opened in 2015, based on the TV game show (a precursor to escape and mission room business). The Tomb Raider experience included many elements which were famous from this original immersive room adventure, including theatrical live performers. The reason for the sudden closure of the IP-based experience has yet to be revealed, although speculation is that audiences failed to be attracted to the high-priced tickets.

Speaking of the need for diversification by major IP and brand holders, we have previously discussed Hasbro’s entry into the LBE sector, having created an LBE division. The corporation has launched some 35 fixed LBE operations based on their properties, including ‘Hasbro City’, ‘Monopoly Lifesize’, and ‘Nerf Action Xperience’. The need for this diversification was self-evident with the news that the more traditional toy operation of Hasbro was seeing a significant downturn in sales (boardgames and licensed toy sales languishing on shelves). The impact of this is reflected in the corporation’s announcement of a further 20-percent layoff of workforce (some 1,100 staffers). This is on top of the previous 800 layoffs earlier in the year, and the selling of the company’s eOne film and TV division.

Consumer Scene Sees Changing Landscape

Concerning a company with a development history in both consumer game development and the creation of location-based entertainment content, it was revealed (during the end of last November) that pivotal software games developer nDream had been acquired for $110m by Aonic – a diversified videogame group. The operation had previously invested in the game developer and has now fully acquired the company. nDreams, along with the consumer game content development, has also worked in the LBE scene – including in the development of the ‘FarCryVR’ content for Zero Latency, in collaboration with publishers Ubisoft.

This all marks a spate of large acquisitions in consumer gaming, with Keywords Studios also being acquired by the Multiplayer Group (MPG), (a division of Improbable), for $97m. MPG has provided technology for game studios across the sector. Meanwhile, at the same time, the games media scene is seeing major upheavals with continuing layoffs from once-prominent brands, as more impacts of the global upheaval are felt in the consumer game industry.

Speaking of layoffs, the consumer games industry has seemed to be facing a second phases of the videogaming apocalypse charted back in 2022. As reported by VGC News, it was estimated that 9,000 jobs had been lost in the video games scene during 2023. It was also reported in the media that several media services were undertaking drastic restructuring, including major layoffs, with the fallout seen with the mass resignations from Escapist Media after a mismanaged restructuring. While Enthusiast Gaming laid off some 10-percent of its workforce (20 employees), blaming the move on advertising revenue collapse. Also, the fallout of the recent acquisition of Rovio Entertainment by SEGA Group saw the shuttering of affiliate Studio Lumi (with the loss of 16 jobs).

The state of the consumer game industry was also mirrored in the collapsed move to establish a trade-supported convention. It was revealed that the Entertainment Software Association (ESA), operators of the two-decade old ‘Electronic Entertainment Expo’ (E3), had ended its long-running expo. The official show cancellation has been cited as a victim of the Global Health Crisis, having abandoned to hold a 2022 event. But after a sea of rumors that the event was on life support, many observers point to the fractious nature of the video games industry, and the big publishers reverting to an individual media event calendar.

Talk of changes in the video game scene was mixed with M&A and upheavals, with video game layoffs also triggering talk of both a videogaming apocalypse, and restructuring for one of the biggest years in the sector history – mixed messages indeed. Layoffs also include the Microsoft Gaming operation, who laid off 9-percent of its workforce in the start of the year. Some 1,900 employees were fired from the Xbox operation, dealing directly with the game aspirations – this follows on from the 2,000 layoffs from Microsoft’s core operation recently.

Closure of the Team Kaiju game developer came from owners Tencent – the US game developer has worked previously with Warner. This news was linked to an active restructuring operation within the vast Chinese entertainment conglomerate, and a rationalizing of closing unprofitable or problematic divisions. This rationalization was later linked to reports that the planned collaboration between Meta and Tencent, to sell the Quest 3 VR headset in China, had been shelved for the foreseeable future – sources suggest the Chinese corporation had cooled on the idea. This marked the latest abandoned Chinese project for Meta, since the Xiaomi agreement, and then the partnership with Lenovo.

This move by Tencent mirrored major restructuring and layoffs from PICO, as their parent Bytedance rationalized the reality of achieved business from the previous high aspirations of consumer VR claims. This was also reflected throughout most of the consumer VR games scene upon entering 2024. Consumer VR continues to prove a difficult market. Also, speaking of Microsoft, the company also announced the suspension of further support of their Windows Mixed Reality platform. The cabal of VR headset manufactures gathered to release a range of VR headsets in 2017 – corporations such as Acer, Asus, Dell, HP, Lenovo, and Samsung all released, to varying levels of success, WMR headsets. Most of these have now been “sunsetted”, but Microsoft revealed they would be withdrawing further software support. WMR was promoted heavily to the Enterprise sector and attempts to gain success from the VR LBE sector were made, including several initiatives to gather entertainment industry support.

Meanwhile, Sony Corporation, in a statement about their PSVR2 release, commented that selling the hardware was proving a “challenging category right now!”. This frank statement reflects slower than anticipated sales since launch, far less than achieved with its predecessor – all this while announcing successful 50m sales for their PS5 console. This was also true for developers, with indications that several VR game studios were in difficulty – the first to blink in this round was First Contact Entertainment, a VR game studio known for title ‘Firewall Ultra’, which announced closure while citing a lack of support for virtual reality within the [games] industry.