#1211 – Peaks and Troughs in Immersion

While many have been on the road, attending a chaotic mix of international trade events, the aspects of the entertainment business have seen many developments, some fueled by the M&A conditions, as well as the explosion in new trends in the market. We attempt to chart these developments.

Competitive Socializing Bonanza

AI Constructed Brief

Australian mini-golf brand Holey Moley is expanding into the US market, with plans to open three new locations in Denver, Austin, and San Francisco in 2024. The expansion is being led by Funlab, the parent company that owns Holey Moley and other competitive socializing concepts. Funlab recently received investment from private equity firm TPG Capital, which will help fuel the brand’s growth in the US. The news comes as other competitive socializing and “eatertainment” concepts like TOCA Social, FlightClub, and Electric Shuffle are also expanding their footprints, particularly in the US and Europe. However, the sector has also seen some challenges, with reports of declining sales at Dave & Buster’s and the bankruptcy of Chicago Whirly, which operated Topgolf franchises. The broader competitive socializing industry is evolving to offer more diverse entertainment options beyond single-focus concepts.

Stinger Full Report

News come that the Australian brand of mini golf, ‘Holey Moley’, has signed agreements to broaden the franchise and open its first US facility. With some 30 mini-golf branded locations in Oceana region, the owners, Funlabs, announced they intend to retheme two acquired Denver and San Francisco Urban Putt locations as Holey Moley sites, the first incarnation of the brand Stateside – planned to open for the end of 2024. This will mark the energetic moves by Funlab (acquired back in 2020 by TPG Capital for $250m), away from their home territory and into the US market and further expansion.

The accelerated deployment of competitive socializing venue chains is evident as these businesses escalate following new investment. In the news, TOCA Social announced their plans to expand the number of facilities, predominately on mainland Europe. In a joint venture agreement with Unibail-Rodamco-Westfield (URW), the European real-estate developer and operator will see two venues opening. These are currently in the planning stage and based on the immersive football simulator and F&B operation. We also expect a second London location (Westfield London) and a Paris, France site (La Defense Paris). This follows the latest news of the Birmingham Bullring brand-new chain opening. Other brands spreading their wings include FlightClub, with the competitive socializing darts and F&B chain announced the opening of its first Oceanic venue with Australia. Also, Electric Shuffle has announced the expansion of their US chain of shuffleboard competitive gaming sites in New York.

At the same time, it was revealed that Topgolf developers had rolled out a new MULE concept – with the launch in Dubai of ‘Tiger Strikes’, a bowling, golf simulator and social entertainment environment. This diversification in the Topgolf model marks an interesting point in the competitive socializing landscape. Speculation on the strength of some “eatertainment” brands in the market was brought under the microscope again. Reports from Dave & Buster’s suggest a 5-percent drop in same-store sales. But the market was rocked by the news that Chicago Whirly, the operators of five Topgolf franchises in the States, had declared bankruptcy. This news came as the Callaway Golf owned Topgolf operation had reported a decline by 7-percent in same-store sales. The issues of running a single entertainment offering and hoping to stay relevant may be a factor in the development of new entertainment concepts.

We recently reported on the SMAAASH chain of amusement entertainment venues rebranding to ‘Zoreko – Original Gamers’ (as covered in our Licensing Expo report), and the first of the new breed of venues under this name threw open its doors. Located in Elan Town Centre, Gurugram, India, the new 50,000-sq.ft. two story entertainment space comprises trampoline, bowling, VR and amusement, along with dining and bar elements. The new Zoreko location offers a more lavish modern design styling, and the corporation ensured a star-studded opening for their new site, inviting leading Bollywood actors to the event. This new investment in Indian MULE venues is favoring a more social entertainment mix and has been dubbed by some as “BollyTainment”.

But as we have written before, business is down as well as up in these current conditions, and we are seeing the first flush of liquidations and closures of early developers in the VR and social entertainment scene. One of the earliest of the London scene of VR entertainment spaces with a dedicated hospitality element, the self-styled “luxury virtual resort” OTHERWORLD VR (operated by The Dream Corporation), suddenly stopped taking bookings across their two London and one Birmingham locations. The first permanent site opened in 2019 with a £1m investment led by IMBIBA (athough started in 2017, with a popup concept). It offered a unique immersive VR pods concept (Immersive Room), incorporating FX elements to increase the immersive experience from tethered HTC VIVE VR headsets across 16 experiences available – in 45-minute game sessions (£14). The sites also included a dedicated bar area for groups, all designed by firm Red Deer and Krion.

Investment by IMBIBA to define this social entertainment VR venue is matched by the investor’s involvement with other competitive socializing chains such as their previous work with The Big Fang Collective, Clays, NQ64 and, influentially, with F1 Arcade.

Sources close to the staff of the operation reported that, a few weeks ago, staff had received termination of their contract, and further investigation revealed that The Dream Corporation and all the OTHERWORLD sites had suddenly stopped communicating with the outside world. Details of a possible liquidation agreement were still not available at the time of going to the wire. This would be a surprise, as most recently the operation had promoted their new experience “David Attenborough Immersive Anthology”, but there had been rumours of storm clouds rising regarding the facility business. Meanwhile, promotions claimed that the operation was expanding, with a Manchester and Dublin site “coming soon” – with purported Leeds, Glasgow, and even US opportunities under consideration. The operation had, in 2021, raised an additional £2.9m, and by 2023 stated in promotions that they had been backed by a total of over $8m in investment from leading venture capital funds.

There were also claims to be a “metaverse leader” – having reported in 2021 some 50,000 games played since opening, although a later statement in 2024 would say 376,000 visitors served. The UK operation was also hindered by the similarity of name with the US based OTHERWORLD entertainment chain. The UK immersive entertainment operation had been lauded by the media, called one of the 19th fastest growing startups in UK by the Financial Times media brand. The surprise closure of this VR arcade operation will place pressure on the VR LBE scene to evolve quickly from its novelty entrepreneurial roots to a firmer business and ROI footing – especially as storm clouds circle others in the sector.

The need for a strong platform for VR arcade business has been placed into sharp relief with the impacts facing the LBE VR sector. Many smaller VR arcades are dependent on the lifeblood of VR content supplied by the likes of Private Label, SynthesisVR and SpringboardVR. This licensed content (seeing its full license fees paid for, unlike some operations), is essential to keep the audience coming back for more. But at the same time, these VR content distributors have been forced to diversify to generate a better business model. The need for strong VR content, to be weighed against some VR arcade operators that avoid paying licensing fees, is encouraging a Wild West nature to some VR operations – with many now paying the price of their slipshod business practices.

During the European TwitchCon (social media event) in June, Vertigo Games owned SpringboardVR took a booth to promote their latest developments in commercial VR entertainment. Along with a VR arena (VR Playspace) running SpringboardVR content, the company also revealed their partnership with Cloud4VR, the developers of the ‘Kiosk4VR’ upright VR kiosks, with tethered HTC Focus 3 VR headset. The system has now been launched populated with a SpringboardVR platform supplying games directly to the kiosk via wi-fi streaming. Acting as a standalone VR arcade platform, the machine will soon be launched fully on the market, offering operators a chance to run VR arcade content in a standalone kiosk solution – not just for arcade and LBE, but also envisaging hotel lobby and lounge deployment. The need for strong VR content is reflected in the changing consumer landscape for some publishers.

End of Peak Consumer VR

AI Constructed Brief

The consumer VR sector is facing a cooling of interest and a reversal of the promised audience retention. Meta’s partnership with LG to develop a “Next Generation XR device” may have been shelved, with plans pushed back to 2027, partly due to the lukewarm reaction to the Apple Vision Pro. Meta is now focusing on a lower-cost Meta Quest 3 Lite system, while Microsoft has announced layoffs in its Mixed Reality division, though it remains committed to the Hololens 2 platform for commercial and military applications. The social VR platform Glue has been acquired by Hyperspace, and VRChat has scaled back operations due to slower-than-anticipated growth. Meanwhile, an indie mod called the Unreal Engine VR (UEVR) injector has emerged, allowing many existing games to be played in VR, potentially offering a more compelling argument for immersive consumer gaming than current industry offerings.

Stinger Full Report

Following our coverage on the impacts of restructuring and layoffs across the consumer videogame sector, another sector has been mired in downturns. More and more reports are surfacing, showing not just a cooling, but reversal of interest in consumer application of VR, faced with the reality of the failure of this generation of the lauded technology to garner promised audience retention.

One report that surprised many in the consumer VR sector concerned claims by a well-respected source [Seoul Economic Daily] that the Meta partnership with LG, only officially confirmed in February 2024 towards developing what was called, in the statement, a “Next Generation XR device” (reported as a successor to the failed Meta Quest Pro), may have been shelved, with plans pushed back to 2027. The reason for the reversal of interest was blamed on the lukewarm reaction to the Apple Vision Pro from the core consumer base. Meta has already started the fabrication process on a Meta Quest 3 Lite (low cost) system – and this is seen as, possibly, the last real hardware project Meta’s current management is prepared to fund with this generation of VR/MR. We now expect a focus on other-released hardware (through the announced ‘Horizon OS’ initiative) or a suspension of development until the fallout of the current Vision Pro and Samsung/Google MR release can be quantified.

The original source of the story also added to the reasoning for the abandonment of the release of the XR device, citing differences between Meta management and those at LG – although LG would later refute this, only saying they were now “controlling its pace” regarding the partnership. The LG situation was compounded by following reports that the electronic giant had revealed a shuffling of key staff from their XR division to other areas of the corporation. LG offered an official statement, saying they had confirmed the relocation policy for personnel in charge of the XR business. This would lend weight to the reality that the cancellation (for the time being) of the XR device, and the relationship with Meta.

This is not the first time that business partnerships have imploded between corporations attempting to work with the Meta Reality Labs management structure. Lenovo and Microsoft had previous abandoned partnerships with Meta (along with a Chinese VR sales partner), only to recently announce they would be re-establishing partnerships towards employing the Horizon OS as third-party developers. It has been suggested that further restructuring of Reality Labs management is expected under these current conditions. And only a few weeks after these speculations, it was revealed that Reality Labs had been restructured, split into two groups (‘Wearables’ and ‘Metaverse’), and would see significant layoffs as a result. While the Quest 3S (the current reported name of the new “lite” hardware) is still expected for reveal in October, the reality of the VR consumer business has been impacted.

The M&A impacts on VR game and content development have been previously reported. In recent developments we learn that the social VR platform developer Glue, which announced they were shuttering their service earlier in the year, has been acquired by VR and enterprise metaverse solution developer Hyperspace. Details of the deal are still being discussed, but this will see Glue continue running their immersive collaboration platform – although speculation is the acquisition will see the service migrate more to a monetized commercial system, alongside the previous consumer aspirations that failed to materialize.

The creation of a social metaverse solution in VR has seen much upheaval as the market levels. The attempts by Meta to establish their Horizon World ecosystem had fallen flat, forcing them to pivot to a smart phone inclusion. At the same time, one of the claimed leading lights for a VR metaverse, VRChat, which cited it had seen, at its peak, some 20,000 active users, announced it would be scaling back operations and losing some 30-percent of its workforce. This move was blamed by the company’s management on the slower-than-anticipated growth of their business. It would seem, based on the 2021 boom user numbers, that the corporation has seen an implosion of usage and, in reverting to a business profit model, has found their free-to-use approach not working. Established in 2014 and held up as one of the success stories of the consumer VR scene, the sudden impacts of declining user retention underline the issues that the scene is experiencing.

Another corporation is linked to abandoning its association with Meta VR aspirations – XR developer VARJO, famous for their MR based headsets used in enterprise work such as automotive and military training. The corporation is discontinuing previously announced plans, from only April, that they would work on support of the Meta Quest 3 and Quest Pro headsets with their ‘Reality Cloud’ platform. The company stated they would be reverting to an enterprise-centric focus on development, supporting their client base in this market. Many observers placed this latest discontinuance of support of Meta within yet further fall out from their plans to move to a Horizon OS, third-party approach – contradicting previous negotiations made. And, in a statement, the VARJO CEO stated on their discontinuance of Meta support, “…we believe that Varjo’s vision for the metaverse will elevate humanity during the next decade more than any other technology in the world…”!

The commercial application (enterprise) of VR still seems to be seeing strong interest, and even increased investment. One news report revealed that Microsoft had released a software update for their Hololens 2 AR platform. After previous consumer media reports had stated the platform had been discontinued, this was countered by news of continued development of the system – now wholly focused on commercial application, including in training, as well as defence spending. This AR headset cost the same as the Apple Vision Pro when launched but was focused wholly for commercial application. Attempts to downplay the cooling reaction to VR and, especially, the adverse consumer reaction to the Vision Pro MR system, have seen some mental gymnastics from some media that previously praised and hyped the launch of the system only four months previous.

Microsoft had doubled down on the Hololens 2 support in recent media interviews, confirming plans to continue to support the AR platform – meanwhile, at the same time, announcing a new slew of layoffs within its Mixed Reality division. Although, not confirmed by the representatives, sources reported some 1,000 job cuts to be made at the division (following last year’s 10,000 layoffs). Microsoft is staying fully committed to its MR platform, mainly due to the work they are doing with the Department of Defence, on their Integrated Visual Augmentation System (IVAS) platform for the US Army. Commercial application of the technology is the key focus allowing for the consumer aspects to be downscaled, illustrated by these layoffs. At the same time, Google announced a partnership with tempestuous AR glasses developer Magic Leap – information suggested this collaboration will bring the optics skills of Magic Leap to the advanced technology platform Google is working on (no word if this is linked to their collaborative Samsung XR project).

Speaking of Microsoft, the corporation recently announced a partnership with Meta to support the launch of the Horizon OS third-party operating architecture. This was linked to news they would be launching a limited-edition VR headset that would allow owners to play Xbox games in an immersive style on the headset. Not true VR but flatscreen gaming played from an immersive perspective, from within the VR headset. This is like the flatscreen gaming Apple has promised on its own headset. The need for content to feed these platforms is only being recognized as an issue from the remaining VR developers. But, just as the big corporations look to allow flatscreen gaming in VR, there came announcements of a new mod that allowed all Unreal Engine 4 and 5 developed games to be played, as if native VR.

Called the Unreal Engine VR (UEVR) injector, any game developed on the platform’s latest versions can be turned into a fully VR experience by the application of the config and mods to the original game content. Much more than just playing a flatscreen game in VR, this application, developed by a modder, drops the player into the game experience, allowing them to configure how they immerse themselves. This incorporates an injector that works on a host of headsets, ranging from the Meta Quest, Valve Index, HTC VIVE, and Pimax systems – as well as discontinued headsets such as the Microsoft WinMR range. The UEVR has sent shock waves through the VR gaming community overnight, turning hundreds of games into VR suitable experiences. It. offers a much more compelling argument for immersive consumer videogaming than anything currently being proposed from Microsoft, Sony, Meta, Valve or Apple. As the mainstream videogame industry seems to have washed its hands of spending considerable sums on developing fully fledged AAA VR games (deep in their own woods for survival), this indie mod looks to offer a lifeline to consumer VR. Once again, we see the abandoning the over bloated conventional videogame publishing hierarchy for the opportunities of the indie sector.

It needs to be remembered that this latest flush of interest in VR was engendered by indie game developers in support of the original Oculus VR Kickstarter, back in 2012. One of the first games developed by a then indie studio (Beat Games’ ‘BeatSaber’) would go on to become one of the most successful VR game titles, even after the developer was acquired by Meta. That the indie game development scene could once again step into the vacuum created by over bloated and failed AAA VR game aspirations, would be a very interesting situation – allowing VR to return to a more even, and less hyped existence. The previous VR headset manufacturers and proponents now pivot hard toward a hoped MR future – hoping for better consumer adoption in sales of this approach, against the failed aspirations of VR uptake.