VR Around the World: The Regional Variances That Matter Most
The strategy behind monetizing a VR experience by scaling it globally is much less straightforward than it is in the case of other forms of content. It is essential to understand the consumer and political influences on which VR experiences will perform well around the world in order to identify the best ways to maximize revenue. We connected with the leading VR and AR market intelligence group, Greenlight Insights, to uncover some of the regional variances that matter the most.
Clifton Dawson, Greenlight Insights’ Founder and CEO, shares that, coming into 2019, “there are things that are happening outside of the context of any individual large stakeholder that make the immersive media entertainment landscape really exciting—from geopolitical, to technology investments coming to fruition.” And these influences are coming from around the world. Here are the ones that content creators should be paying most attention to:
Consumers’ willingness to spend on VR
What consumers are willing to spend on VR varies by region. Analyst Natalie Yue explains, for example, that China’s at-home HMD (head-mounted display) market “is massive but very challenging. […] Due to the highly competitive nature of the market, consumers are price sensitive […]” as they are choosing to buy cheaper headsets. And she cautions that “there is a positive correlation between the headset’s cost and the consumer’s willingness to spend on content.” This correlation exists globally. Analyst and research manager Alexis Macklin adds that “an HTC Vive owner will spend more on content than a Gear VR owner, all regions confounded.” This is thought to be because “currently, consumers purchase headsets based on what they would like to do with their headset. Therefore, content is a very important factor in the purchasing decision. HTC Vive, Oculus Rift and Sony PSVR owners are expecting to pay more for content since the platform is more interactive than a mobile headset.”
When it comes to location-based entertainment (LBE) centres, “emerging Asia-Pacific is expected to have the largest amount of LBE VR venues in 2019 […] but that doesn’t translate to revenue.” However, that may soon change, driven by more premium experiences rolling out within key countries in the region. “China is seeing a rise in locations with free-roam systems. Numerous small locations with relatively low-quality content closed down in the past two years, leading to consumers gaining exposure to high-quality content.”
The region where consumers are currently spending the most on VR out-of-home is in North America. Macklin shares this: “One dollar per minute is what many industry leaders are quoting as a healthy goal. Within the US, a majority of consumers are not willing to pay more than one dollar per minute a majority of the time.” And, according to Greenlight Insights, the average is closer to forty cents per minute in the rest of the world. This is significantly lower in part to the massive number of locations around the world that offer basic VR at a set rate per half-hour or hour. However, Macklin highlights that “at the end of the day, it’s more about how much the overall experience costs the consumer.” Both content and length of experience impact consumers’ likeliness to spend. For example, Dave & Buster’s Jurassic World VR Expedition in the US costs $5 for about five minutes of entertainment, which represents an accessible price point for a large group of consumers. In contrast, a 50-minute experience priced at $50 will be less accessible from both a price and time commitment.
"One dollar per minute is what many industry leaders are quoting as a healthy goal."
Pricing can be regionalized to account for consumers’ willingness to spend on entertainment locally, and it is therefore important to take this into account when building a VR experience’s financial model. Furthermore, content creators can think beyond a standard price per game download or per ticket.
The rise of LBE formats
Globally, location-based VR revenue is projected to surpass US$10 billion by 2023. As mentioned above, the expansion of premium experiences in key regions will be one of the main drivers of this growth. The cost per square foot in LBE centres is a driver of the formats of the premium experiences these centres roll out. In regions where space is limited and comes at a high cost, the formats that will thrive are those that have smaller footprints. It is important to note that the need for entertainment experiences to take up a smaller space in these regions is not new to VR. Also, the pre-existence of other entertainment experiences in smaller spaces has helped to form an out-of-home entertainment culture. Macklin gives the example of China’s karaoke booths, where friends head out to enjoy singing as much as they do waiting and watching others perform. Because of this, smaller free-roam spaces that allow for two instead of four or even eight people to play at once are more engaging than they would be in North America, even to groups of more than two. However, instead of developing content solely for a two-player smaller-scale experience, content creators can scale by developing flexible experiences that are adaptable to a range of players and spaces.
Additionally, Macklin celebrates the concept of VR experiences that are designed as “an attraction within an attraction”—those experiences that are just as entertaining to play as they are to watch. A good example of this is VRsenal’s Virtual Arcade Cabinet which combines a flashy unit with moving holographic signage and the ability to watch players physically move around in highly active and high-energy experiences. This works well in markets where smaller footprints are required due to cost as well as in markets that can benefit from having VR experiences that are enjoyable for even larger groups to watch from the outside while consuming high-margin items such as food and beverages inside. This suits a larger range of entertainment centres globally.
All of this is not to say that VR experiences that require larger physical spaces will not be important, even in locations where square footage is expensive. Why? Because certain cities will have the right number of consumers who can afford to spend a higher amount per ticket and operators may also be willing to invest to offer these experiences as traffic drivers to their locations and to generate revenue. For example, The VOID has shared that it plans to open over 100 locations in Asia over the next five years.
Regional content interests
As the most mature entertainment markets such as film and television showcase, audience interests in content range by region through to niche microsegments. VR content creators have barely scratched the surface when it comes to the diversity of experiences that can be offered. For now, as consumers’ access to VR experiences is relatively low but expanding, content creators who develop scalable experiences are the ones who are most likely to survive and thrive in the long term. This requires the development of a deep understanding of who is spending on VR in and out of home as well as of what they are seeking to obtain in exchange of their purchases. As a high-level example, in the United States, Macklin shares that they are noting the greatest interest in at-home VR among those in their late twenties to late thirties who have high disposable income and an interest in technology. While this may vary from region to region, most content creators will fund it challenging to make a profit from English content that is suitable for this audience segment only. Dawson considers that the “low hanging fruit” is the ability for publishers to internationalize their content and shares that there are strong titles in the market now that could do well by focusing more on global distribution opportunities.
"the « low hanging fruit » is the ability for publishers to internationalize their content"
Broadly speaking, the types of VR content that are doing well globally right now are content based on known IP, eSports and escape rooms. Macklin highlights that big IP “does really well universally” because it offers fans what she calls ‘wish fulfillment’ as they are able to live momentarily in aspirational words with which they are familiar. VR experiences based on anything from Star Wars to Mario Kart require limited localization to be able to scale globally. Additionally, eSports centred around the right VR experiences that are accessible in many regions help build communities, and consumption, faster. Brands such as Virtuix Omni and VRstudios are investing in the development of eSport platforms, and even casinos are experimenting with prize pools for VR eSports tournaments. Greenlight Insights sees Korea and Japan as the current VR eSports leaders, driven by eSports already being so dominant in these regions. In fact, AR eSports are also increasing in popularity—the HADO brand having achieved massive success to date.
Government influence on VR technology adoption
“We can’t underestimate the geopolitical effects on the industry,” explains Dawson. “Incredibly supportive governments, such as within China, have resulted in a more aggressive adoption curve.” This relates to the penetration of VR hardware and content, both in homes and in LBE centres.
Yue explains that beyond consumer sentiment for HMD brands and the varying content that can be accessed through them, hardware distribution is impacted by government regulations. “Firstly, standalone headsets are increasingly resonating with consumers globally, and most [of the original equipment manufacturers] have their own systems like Oculus and Pico. However, Oculus is owned by Facebook and Facebook is banned in China. Secondly, and more importantly, there is the issue of trade protection. China protects its local brands, which makes it more difficult for western brands to sell in China.”
Greenlight Insights estimates that a total of 66.1 million HMDs will be on the market in 2019, with 15.3 million of these being in North America. With just over three quarters of all HMDs expected to be sold outside of North America, it is important for content creators to assess the opportunity of developing for more than the leading North American brands in order to access larger available markets. Yue further highlights that “emerging Asia-Pacific is the biggest region for HMD unit shipments, and North America is the second biggest. Leaders in these regions vary significantly. For example, Sony and Oculus are leading brands in North America, but that is not the case in China. The Chinese market heavily favours local manufacturers including UGP, iQiyi and Pico.” In contrast, HTC Vive is a global leader with strong North American market penetration and no restrictions in China, for example. The type of VR experience, such as an interactive room-scale experience requiring a certain tracking threshold will, of course, dictate the HMDs that are appropriate.