Virtual Reality Isn’t a Hit at Home, So Imax Tries Arcades

Tech and entertainment companies are racing for a slice of the VR business, which Goldman estimates could generate $80 billion in revenue by 2025.
Source: Imax

When Nic Wehmeyer, an associate creative director from Brooklyn, visited Los Angeles recently, he was determined to check out the future of entertainment. But rather than tour one of the big movie studios, he headed to a nondescript building with blacked-out windows across the street from trendy L.A. mall the Grove. There, in Imax Corp.’s first pilot virtual reality center in the U.S., he and his buddies had their senses engaged in ways no conventional film can match. “The multiplayer game was by far the most enjoyable,” says Wehmeyer. “The immersive, shared experience was a lot of fun and something I would totally do again.”

Imax, best known for its high-tech movie screens, hopes others will feel the same at its new VR parlors. For $1 a minute, a group of friends can experience flight as eagles above a deserted Paris or dive into a world of criminals as assassin John Wick from the movie franchise of the same name. Ticketing is similar to most theaters: You can book time slots in advance online or purchase them at the center. 

Imax says the initial reception to VR content—often around 10 minutes—at the Imax VR center in L.A. has been so enthusiastic that it’s increasing the number of locations, to 11 from 6, for the rollout. On May 26 the company will open its second VR parlor in the U.S. at a multiplex in Manhattan. A total of five U.S. centers are planned, as well as locations in Tokyo; Shanghai; Toronto; Manchester, England; the Middle East; and France. “The idea of the pilot phase was to pick a variety of locations, with different characteristics so we could ascertain what kind of areas this worked in and didn’t,” says Imax Chief Executive Officer Richard Gelfond. “It’s really a learning phase.”

Technology and entertainment companies are racing for a slice of the virtual-reality business that analysts at Goldman Sachs Group Inc. estimate could generate $80 billion in revenue by 2025. With U.S. movie market growth stagnating, exhibitors are looking for new ways to widen their audience. 

Consumers have been slow to embrace the expensive hardware necessary to enjoy virtual reality at home, which can cost $1,600 for the Oculus VR bundle of a headset and a computer powerful enough to run the games. VR content is also expensive, and there’s a limited amount of it available. “One of the catalysts was that it was getting less traction in the home than was expected,” Gelfond says. “We thought that might be an opportunity.”  

In the first four months of 2017, the L.A. center registered more than 25,000 admissions and an average revenue of $15,000 per week. It estimates that 100 locations could contribute about $25 million in annual revenue.

Imax recently cut a deal with Time Warner Inc.’s Warner Bros. for VR content linked to future DC Comics Inc. superhero movies such as Justice League and Aquaman. For a time, the content will run exclusively in the centers.

Unlike in L.A., the center in New York will give Imax feedback on how consumers react to a facility next to a theater. “You walk out of a movie all excited about having seen John Wick or The Avengers, and you can walk right next door and continue that by being immersed in the experience,” says Eric Wold, an analyst at B. Riley & Co. Given the novelty of the experience, he says some in the industry think Imax’s pricing may be too low.

Rupert Murdoch’s 21st Century Fox Inc. has been one of the most active companies to develop virtual-reality projects linked to features from its movie studio. Its most recent, Alien: Covenant in Utero, is a virtual-reality journey released on April 26, based on the prequel Alien: Covenant. It was available on Facebook Inc.’s Oculus and Samsung Gear headsets.

Fox has also invested in Dreamscape Immersive, another location-based VR experience, which will open its flagship venue at Westfield Century City mall in L.A. later this year. Instead of being tethered to a computer, as users at most Imax center games are, Dreamscape customers can walk inside a virtual space. The mall operator and Steven Spielberg are among the investors.

“The location-based attractions that are developing all around the world are going to be the first way many consumers see VR,” says Salil Mehta, president of FoxNext, the Fox division that oversees its VR ventures. “We see this as the beginning of something that will revolutionize the way stories are told.”

The bottom line: The cost of equipment has been a drag on consumers’ embrace of virtual reality. So Imax is piloting VR centers.

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