#1203 – Tech Entertainment Turmoil

Continuing the trend in the entertainment and leisure sector for major upheavals during these financial and global conditions, we saw the next series of Mergers and Acquisitions (M&A) sweeping the market, along with some major disturbances.

Cinema and 4D Attractions

The 4D and 5D movie attraction sector has been seeing its own spate of M&A, with the consolidation of operations such as the TRIOTECH acquisition of CL Corp. in 2019. The 4D theatre and attraction scene has proven a tempestuous sector, as more and more attractions move from a passive film base approach to more immersive experiences, such as the development of “Soaring” style attractions, as well as new CGI film competition from Chinese studios. The impact of these changes was inevitably going to be felt by the older established operations in the scene which have not already prepared themselves for the road ahead.

Development operation Niceberg Studios has been famous for many of the previous 4D and 5D films, with their ‘Great Wall of China’ 4D film transformed into a popular VR ride film experience. Founded in 2011 with a seed investment of some $1.1m, the CGI film animation house has worked on numerous attraction projects, but at the beginning of the year, the servers on their website went dark and sources confirmed that the company had shuttered. One of the senior founders of the operation recently announced their appointment with DOF Robotics to work on their animation and game development plans moving forward. The company had previously deployed Niceberg films on their ‘Hurricane VR’ platform. We have received no reply when reaching out to the operation, in a bid for more information, at the time of going to the wire.

Another well-known 4D/5D and media attraction content provider and hardware developer is SimEx-Iwerks Entertainment – born from the famous iWerks operation’s $2.2m acquisition by SimEx in 2001, building a theater and film library operation with a slew of licensed 3D and 4D movie attraction properties. The operation has head offices in Canada, but also offices in California, and Maryland, as well as in India and China. The corporation, which is well known in the industry, had only last year announced a collaboration with CGI film developer Red Raion towards creating custom film productions for flying theatre deployment. SimEx has also licensed the movie property ‘Ready Player One’ to turn into a 4D/5D experience – along with launching their Immersive Theater attraction last year, which also marked the corporation’s 30th anniversary.

So it was with a big surprise that some in the industry woke up to the news in January that SimEx had filed for Chapter 15 bankruptcy (days after filing for Chapter 11 protection). At this time, the status of the various offices is unknown, or if the assets for the operation will be taken over by a third party – although the Royal Bank of Canada has been reported in offering funding to support the restructuring of the operation. The disappearance of this prominent name in the 4D theatre business from the industry will have serious repercussions, not limited to the non-appearance of the prominent exhibitor at the various coming trade exhibitions.

The cinema sector in Saudi Arabia is seeing continued M&A action, with the news that cinema chain XCNEX has embarked on a partnership with Mobily, an internet service provider within the region. The move is hoped to create a new streaming experience service in support of new digital entertainment. This news comes after Mobily announced a partnership with Tencent Cloud towards developing a new enterprise cloud platform for the region – supporting enterprise business sector digitally and contributing to the area becoming a global hub for business and entertainment.

The creation of compelling cinema experiences was reflected in another high-profile partnership, with the announcement that Digital Light Sources (DLS) would be teaming up with Positron – towards marketing and selling their ‘Voyager’ VR motion seat system into the North American cinema sector. This agreement will see the VR motion seat system that we have reported on, in both its marketing and promotion as well as gallery and exhibit configurations, now focused on placement as a cinema lobby entertainment system by DLS. The last time we reported on this application of the Positron platform was when it was used as a pop-up promotional attraction (‘Gravity Zero VR Experience’) in cinema lobbies for ‘The Mummy’ from Universal Studios in 2017. Many VR platforms have attempted to take the lucrative cinema lobby space for “Cinetainment” applications – we will watch the success achieved by this latest venture very closely.

The movie studio sector is embroiled in its own M&A woes. News comes that Apollo Global Management has placed a bid to acquire Paramount Global film and TV studio – in a deal offer totalling $11b.

This will see the Paramount media empire, comprising the likes of CBS, Nickelodeon, and MTV, along with film studio and streaming platform acquired. This is just the latest of ongoing discussions towards acquisition of the studio – which has also seen NBCUniversal and Warner Bros Discovery start active conversations. It is expected that a final decision to select one of these offers will be made by the Paramount board in the coming weeks following this latest announcement. Only a few weeks on, it was then reported that Skydance was now the favored bidder, with discussions started at a possible $26b acquisition package. It was suggested that the reason for the numerous discussions was the chaotic nature of the Paramount business, and the state of its IP, licenses, and commitments.

The need to address the devaluing of IP assets, through poor film and television choices – especially with the ‘Star Trek’ franchise – has impacted the negotiations on acquisitions or mergers. Some of the suitors are concerned that the list of Paramount properties has been hurt by poor business decisions. An agreement for discussions with Skydance was supported by the majority shareholder. Skydance has co-produced some of the most recent successful productions, such as ‘Mission Impossible’ and ‘Top Gun Maverick’. They would also be willing to keep the Paramount operation complete, rather than break it up. They would also be prepared to buy out the majority shareholder National Amusements – owners of the Showcase Cinema and other chain of over 1,500 theaters. But, at the time of going to the wire, the possibility of the Skydance deal was going fall through as negotiations floundered, with reports that Sony and private equity firm Apollo Global had made a last minute $26b cash offer to acquire the entertainment company. More details coming soon.

This is a similar situation to that which the Walt Disney Corporation recently went through. An attempted board room rebellion, to place new voices on the Disney board to address a spate of poor receptions, and stagnation in park development, was undertaken. The so-called “Proxy Battle” was won by the current management, but it was later revealed that a vast sum had been spent in achieving this – with a slump in the Disney share price after the news. Concerns regarding profits and spending, and a possible hole in finances, are seeing the board under increased pressure to perform. A spate of announcements regarding new developments across park and streaming are now expected to placate the market.

Vegas Welcomes CinemaCon

Just a matter of weeks after the bustle of BRE, and AEI vacated the Vegas strip, and the razmataz of the cinema and movie studio industry descended on Las Vegas. The Annual CinemaCon 2024, organized by the International Cinema Technology Association (ICTA) and National Association of Concessionaires (NAC), offered a breakdown of the latest movie properties planning to take to the international screens for 2024, as well as present the latest developments in the theatre operation.

This could be seen in the increased investment in high-level immersive projection systems. This year’s CinemaCon’24 was dominated by the presence of manufacturers such as Christie, who used the cinema event to unveil the latest advancements in their laser projection technology – combining their ‘Phazer’ illumination platform and empowering their ‘Cinelife+2k’ range.

Barco Electric Systems is promoting their laser-powered cinema solution, with the new High Dynamic Range (HDR) projection system and Barco Lightseeing projection technology. Meanwhile, CJ 4DPLEX and D’Place Entertainment announced their partnership to bring the new ‘ScreenX’ auditorium platform to the California market. Barco’s cinema projection division, Cinionic, announced last year their partnership with CJ 4DPLEX to support the ‘ScreenX’ platform and update existing venues globally with the latest laser projection technology. (We shall be looking more closely at “Shared Reality” systems in a coming feature on “Cinema 2.0.”)

The deployment of greater “CineTainment” was an obvious element, and a few prominent names from the amusement trade were present at the event. Motion simulator specialist D-BOX announced their new partnership with Advances SimRacing – developing sim racing platforms that are targeting the cinema lobby entertainment space as well as FEC. This investment in cinema entertainment spaces was underpinned by an announcement from Canadian leading theatre chain Cineplex, that they would be expanding their LBE business – currently running 15 CineTainment sites (under the ‘Playdium’, ‘RecRoom’ and ‘Junxion’ brands). The operation confirmed they will be expanding to 30 sites, reportedly by 2026.

Regarding entertainment platforms for cinema deployment, VR was represented on the CinemaCon’24 booth floor from VR360Action, showing their ‘OMG Simulator’ – the two-seater VR ride sim, seen as a perfect lobby platform. The big hoped-for theatre lobby VR installations are still a concept which had not seen adoption. Attempts by TheVOID, NomadicVR, SPACES and IMAXVR have failed at the first hurdle. As we have previously touched on, other VR investment in the lobby space saw Positron VR and their ‘Voyager’ XR cinema motion seat experience – recently announcing a partnership with Digital Light Sources (DLS) towards their attempt in selling their VR chair system into US cinema lobbies.

The more conventional amusement mix was represented at CinemaCon’24 by distributors (such as Betson, and Shaffer) – many of the key North American chains were represented by sales execs at on the show floor or holding meetings. The amusement distribution scene has seen some shakeups in the cinema sector. As reported last year, Cineplex was promoting the diversification of their amusement and leisure businesses under their LBE chains. Meanwhile, at the same time, the company divested itself of its Player One Entertainment amusement distribution operation, for $155m in cash, to an international investment company.

The placement of amusement in CineTainment-equipped venues is a new sector for investment – from bowling, VR and lastag, as well as supported payment infrastructure. An aspect of the new cinema environment is the greater investment in a boutique-style movie-watching experience. The mixing of F&B to the movie experience, linked to the new style of movie seating, seems to mirror much of what is being seen in the Social Entertainment universe.

As can be seen, with the M&A action impacting the major film studios, and the impact of the “Streaming Wars” gathering momentum, there is a stronger need for the theatre operators to redress the previous impact of the Global Health Crisis and actor strikes, as well as address the underlying impact of the downturn on Western movie ticket sales – and CineTainment is seen as a vital element towards their survival and future growth. However, the doom-and-gloom of previous speculation on global box office for the movie industry saw a revision for 2024, with some media and analysts reporting an upward revision on previous pessimism in the face of stronger speculated ticket sales.

New film releases planned wowed the media with high hopes to relive big box offices – as seen last year with the surprise hits of the ‘Barbie’ movie and ‘Oppenheimer’ and, more recently, ‘Dune 2’. Although, the undercurrent of possible mergers of big studios and poor handling of big IP still raise concern. This is indicated with the stock prices in Disney falling significantly following their reveal of their 2024/5 film release plans during CinemaCon’24, sparking continued concerns in the corporation’s direction, even after winning a recent proxy battle for control of the board.

Reality of Business Technology

With the current M&A phase taking hold, several corporations are looking at previously hyped projects with greater scrutiny. Where promises that some technological applications would generate great windfalls are now being reevaluated in the cold harsh light of day. Also, many of these proffered technology claims are being revealed to be less revolutionary than promised.

One of those promised technologies was that of self-service checkouts, which have started to be pulled from some retailers, as these stations are found to offer little customer satisfaction and also encourage a spate of shoplifting. Linked to this is also the downfall of the much-promoted Amazon ‘Just Walk Out’ technology of the Amazon Fresh chain. We had previously reported that Amazon had closed several stores as they restructured their operation. But it now has been revealed, in a shock development, that Amazon will be abandoning their plans and focus on other directions. This news was also followed by revelations that, rather being dependent on Machine Learning (ML) technology and camera tracking to allow shoppers to walk into a store, pick up items and leave, the reality is that the whole ‘Just Walk Out’ application was more dependent on remote checking by humans, as each store used visual confirmation of shoppers purchases by employees in India via camera (called human moderators) that helped the ML/AI platform much more than reported.

This surprising revelation may also explain the poor operation of the system, being overwhelmed on occasion – and begs questions of the whole check-out-less (cashierless) retail proposition, launched some seven years ago. This has proven incredibly embarrassing for those promoting the Amazon system – seeing jokes online that the “AI” in ‘Just Walk Out’ stood for “Actually Indians”! However, there are other systems being deployed in the sector that claim to be 100-percent dependent on technology with no human interaction. A possible use in entertainment can be seen with Dave & Buster’s involved in carrying out an experiment into a cashierless concession system with the Coca-Cola Company.

Regarding the deployment of robotic service systems, these have also seen systems depending on “humans in-the-loop” – remote human operators controlling robots up to 3,000 miles away. The latest application saw the demonstration of the Reflex Robotics – a humanoid robotic platform controlled remotely and achieving a high standard of interaction. The company is promoting the system as costing a monthly fee that is two times lower than current labour costs. Remote operation of robots has been seen in the construction sector, but it looks like many of the best service support systems require a “human in-the-loop”, that are augmenting or replacing the hoped AI system, and helping compile the Large Language Model (LLM) library towards teaching the AI.

 LBE Feels The Heat

The reality of the VR facility business has been brought into sharp relief by several developments. We have already reported on several venue closures across the scene.

Those facilities which mix VR with amusement and attractions have been seen as a brand-new aspect of the burgeoning business, but current conditions have impacted even these popular undertakings. LA seems to have become a maelstrom for the baptism of fire for these start-up operations. As stated, we have already reported on Dreamscape in the area – and recent sources confirmed the next to feel the heat. It was reported that the flagship Two Bit Circus venue in LA had followed the Dallas facility and presently closed its doors.

The first Two Bit Circus was dubbed a “micro amusement park”, as well as a hi-tech amusement venue, and comprised many attractions uniquely developed by the team at Two Bit Circus, who proffered an illustrious linage in the amusement and entertainment scene. This first site was opened in 2018 in a 38,000-sq.ft. standalone venue in downtown. The team had attempted many new innovations with their interpretation of a Mixed-Use Leisure Entertainment (MULE) venue. Most notable were the VR attractions (‘BattleZone’) developed by the team. As well as their unique redemption games and their vision of the escape room called “Story Rooms”, comprising group-based puzzle games. And their “Cabanas” and “Club01” private gaming lounges.

In 2022, the Dallas, TX second site was opened in a 30,000-sq.ft. mall location on the second level. It had been hoped that many of the lessons from the first site’s birthing would have been applied – with the Dallas site comprising VIP room, amusement, Midway, VR from HOLOGATE, as well as a self-developed VR free-roam game and a planned HyperDeck installation, along with the continued deployment of the Story Rooms concept. But sadly, all of this was impacted by the operation’s attempt to expand the corporation’s reach. There was a 2022 attempted acquisition by Alpine Acquisition Corporation, a newly organized blank check company, of Two Bit Circus for a $50m all-stock transaction. This would have funded the acquisition of two hotels to have been turned into an immersive Larp’ing venue branded ‘Revelers Resorts’. The collapse of this agreement and the loss of funding went on to have a domino effect on the LBE operation.

Now, some months after the closure of the Dallas site, the first Two Bit Circus in LA shuttered its doors. However, this is not the end of the story. The operation confirmed in a statement that they are regrouping and redeveloping (what they called going back to the lab!), and moving out of the LA location towards reopening in a new venue that will employ many of the lessons learned from their initial rollout. We have been promised more information when the time is right. Watch this space for more details.

The reality of the business conditions for new projects continues to be felt. One of the most innovative, but also most tempestuous, of LBE projects of recent years has been for TheVOID (The Vision of Infinite Dimensions). Covered numerous times from its ups following Walt Disney involvement, and then downs and eventual collapse – the company assets were acquired, and we saw an installation of a recent TheVOID VR platform updated for deployment within the Sony ‘Wonderverse’ flagship. But one of the pivotal components of the establishment of the VR concept was born from the creation of the ‘Evermore Park’ – a fantasy adventure attraction, in Utah. The park eventually opened in 2018, and the concept of a VR attraction was born from the development of this park going on to find its own path as a virtual reality theme park. However, regarding ‘Evermore Park’, it was announced that the venue had been forced to shutter its doors in April. The concept for the fantasy venue had seen a tempestuous history – with the VR experience originally conceived in 2016 as an element of the park concept. The idea of a roleplaying/Larp’ing style adventure park would eventually be opened and attract sellers and participants – but due to an inability to sustain revenue, has been forced to closed.

The 2018 developed hopeful projects are seeming to now come under the microscope, entering the difficult conditions of 2024. Such projects are having to prove they are more than just novelties, and that they can generate ROI to warrant their continued investment and growth plans. VR-based installations are expected to be even more critically appraised, as we move into the VR 2.0 sphere of development, and operators of original platforms in the 2018-2019 period undertake hard thinking about further investment, when more proven revenue earners are available.