Stinger Report - 12/04/2021

TSR Newsletter | April 12, 2021

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-- The Stinger Report: Service Message --

The Global Digital Out-Of-Home Entertainment (DOE) Sector covered in The Stinger Report .

Wishing all our subscribers, famlies, loved ones, (and those serving) stay safe and well.

Kevin Williams

Publisher, The Stinger Report (TSR)

Entertainment: Developing Investment

Part 2 | # 1065

Report Skinny

In The Stinger Report #1065 – This issue covers in detail:

1. [BREAKING NEWS] Massive investment being made across the scene including some $100m in Rec Room and Virtuix raising over $14m along with other developments.

2. [TRENDING NEWS] Entertainment and cinema chains see new investment and lifelines to adapt to the new power struggles, with AMC and Hollywood Bowl seeing developments of their own.

3. [TRENDING NEWS] Mall-based entertainment also in upheaval with news regarding repurposing of empty space from Nickels & Dime and Sandbox VR replacing The VOID in key flagship locations.

4. [BREAKING NEWS] Repercussions on the previous developments in frictionless payment, with the news of a major partnership between leading corporations Nayax and Tigapo.

….and much, much more!

To read the full Stinger Report, register for your subscription here.

- The Stinger Report, published by KWP and its director, Kevin Williams, is the leading interactive Out-of-Home Entertainment news-and-views resource, covering the immersive frontier and beyond.

Main Report

This latest Stinger Report looks at the investment being made into the immersive entertainment, amusement, and attraction sector, following the upheavals of the recent year. This is brought into sharp relief following the previous Stinger Report’s coverage of the investment made in the Management Buyout (MBO) by the SEGA Amusement International (SAI) team and the implications this will bring to a changing sector.

- New Investment Drives the Way

The investment being made into the immersive entertainment scene has only increased, as more developers position themselves for the business landscape post-COVID. It is also obvious that a war has started towards capturing the high ground in the changed environment, post the business lockdown, with corporations and individuals with unimpacted financial capital looking to invest this towards giving them a dominant place at the industry table. This has also seen the creation of new corporations and partnerships to accelerate the process.

The trend of “Investment”, along with mergers and acquisitions, was illustrated with the breaking news that the VR social gaming platform, Rec Room, had raised a sum of $100m – this round of investment is led by exiting supporters Sequoia Capital, Madrona Venture Group and Index Ventures. Rec Room had been an early free-to-play multiplayer online VR game platform, started in 2016, and it has seen an estimated 15m lifetime user – although actual recuring user data was not shared. This platform was valued in the raising at some $1.25b – illustrating the interest in the investment community for user-generated gaming platforms. This also raised questions about a possible impact on Facebook’s aspirations in this space with ‘Horizon’. Furthermore, we wonder if the new investment in Rec Room will create a dominant contender in this space.

This trend in investment continued with news that Virtuix, the VR omni directional platform and LBE developer, had raised some $14m in investment from some 4,000 investors (through the SpeedInvest crowdfunding platform) – this will lead to the completion of the current round of investment that is hoped to raise as much as $15m. At the same time, industry motion systems specialist D-BOX announced the securing of $5.75m Public Offering in the corporation – the corporation is known for the use of its motion actuators on attraction hardware, ranging from TRIOTECH, Major Mega and Backlight motion seat systems and full cinema seating adoption.

The investment opportunities continued with the news that one of the emerging VR headset developments was cementing its position in the market. Pico Interactive announced they had received some $37m in Series-B investment from a group of corporates including Shenzhen Yidun Media Investment Fund, CCB International and others. The China-based technology provider has become well known for its own standalone VR headset, with interests in Enterprise as well as planning to expand its consumer facing products with this new line of investment. Sources close to the corporation also revealed there were plans to announce the launch of a new standalone VR headset.

Speaking of standalone VR headsets, there is a current trend for these mobileVR platforms, offering powerful XR chipsets, and inside-out tracking, and rumors surfaced at the beginning of the year that HTC had plans to launch a new system into the choppy waters. Overshadowed by the estimation from industry insiders that Oculus and its Quest 2 standalone had achieved some 2m sales, HTC was linked to the launch of its own system which, rather than looking at racing down the price, would be focusing on raising the bar on performance in comparison to the specs previously achieved with the VIVE line of PC VR hardware. The Taiwanese corporation’s president revealed, in an interview, the Summer 2021 launch plans for the new standalone system, and the operation is also looking at its presence in the Enterprise sector, with a second new system that would replace the VIVE Pro – two new systems are still wrapped in mystery at the time of writing.

Illustrating the speed of development in this sector, and just as we go to the wire these two manufacturers started their marketing campaign for the next generation of headsets. Preparing to send this report, and Pico teased details for a May 2020 launch date for their new ‘Pico NEOM 3’ headset. Looking to comprise more features than their standalone VR competition. At the same time, we received information from HTC, who teased images of their new Standalone and PC VR (VIVE replacement) headsets. The consumer battle ground for the mainstream adoption of VR broken into “Console”, with SONY’s teased PSVR2 reveal, “Standalone”, with Oculus, HTC, Deepon, Lynix and Pico (with Apple, Panasonic, and Samsung in the wings), and “PC VR”, with HP, HTC, and Pimax. All vying for recognition alongside the resurgence of commercial VR entertainment.

Teasing for business [HTC]

Further covering the explosion in investment raising, and we also see those in other emerging sectors looking to consolidate their positions. The Stinger Report has covered the turbulent “Skill Gaming” sector, and its crossover into casino, amusement and even eSports businesses. One of the prominent names in the Skill Gaming development was GameCo – known for its ‘Video Game Gambling Machine’ (VGM), previously securing numerous IP including the 2017 licensing agreement with BANDIA NAMCO Entertainment, towards a VGM version of the ‘SOULCALIBUR II’ fighting property (one of two inconclusive Skill Gaming ventures by BNE). GameCo announced, in March, they had started a round of fund raising (for an undisclosed sum). Investment will be used to expand the company and grow its eSports betting aspirations. The fund raising is being led by corporations SpringOwl Asset Management and Playtech. It will be interesting to see if the refunded operation pivots more towards eSports than Skill Gaming.

The continuing investment into the immersive entertainment sphere was not lost on the manufacturers of new hardware, and the need to strengthen business positioning. A spate of new partnerships and representations also followed in the wake of the increased activity in the trade moving forward. One of the big developments was the announcement that Major Mega, developer of the ‘Hyperdeck’ VR platform and creator of several other soon to be released concepts, had signed a far-reaching agreement with turnkey and custom attractions developer Creative Works. Well known for its laser tag arena, mini golf, escape room and eSports work, the company has also led the way in deploying the HOLOGATE VR range of systems. Now, with a new agreement, Creative Works can expand its product line with new platforms and has signed an agreement to represent the Major Mega line in North America, including their latest developments.

The ‘Hyperdeck’ in operation during IAAPA [KWP]

That new investment also included the preparation of facilities looking towards the move from the lockdown conditions. It was revealed that Hollywood Bowl owners had opened a stake of some 8.3 percent (representing some 13m shares), towards raising some £30m ($41m). The bowling entertainment facility comprises of 60 venues across the UK and, with the new investment, it was revealed the operation will use this funding to invest in new center opening opportunities and look at facility revenue plans, alongside possible new concepts. The availability of space for new entertainment concepts was illustrated with research from PcW and Local Data Company (LDC), that reported the impact of the “Retail Apocalypse” on the UK sector. In the finding, it was calculated that some 4,600 high street stores and some 1,700 shopping center units had closed during 2020. This is a number that will balloon with the return of landlord enforcement powers and the end of the rent payment holiday period.

Along with retail, the upheaval caused by the Global Health Crisis has been reflected in the impact it has had on the cinema theater business. The latest ramifications of this saw Dalian Wanda Group, the Chinese conglomerate holding the majority share in AMC Entertainment Holdings (the world’s largest cinema chain with 978 theaters), announce they had given up their majority control of the cinema operation. Wanda had originally acquired its controlling position after paying $2.6b during 2012. It was revealed, during a March earning call with AMC’s CEO, that while giving up majority control, Wanda will still represent the largest shareholder in the corporation. The cinema chain has made repeated warnings regarding its finances impacted by the lockdown of its operation, having to raise over $1b to remain afloat. This marks the latest of the cost-cutting measures undertaken by Wanda, as the company reconstructs following its own financial impact from the lockdown – though it will still have significant influence over the AMC board.

Restructuring for the road ahead seemed to be the key focus for many of the current organizations. The cinema sector is seeing a move towards reopening, linked to a restructuring of the window of release between movie theaters and streaming, with much to accomplish. This was reflected with international news that Malaysia’s largest movie theater operator, Golden Screen Cinemas (GSC), was to be acquired by the country’s third largest theater operation, MCAT Box Office (MBO). This would see MBO’s 26 venues combined with GSC’s 34 locations in the country (though some rationalization of operations has happened during lockdown). The combined operation will also include venues outside the country and will be looking towards expanding its brand into other areas of entertainment business.

Moving on from the frictionless payment feature recently covered in The Stinger Report, and the continuation of adopting a cashless business model was reflected with news that the re-entry into the entertainment market of ATARI will see the creation of an Ethereum blockchain virtual casino, employing classic ATARI games including many of the company’s arcade and VCS titles. This will see the games paying out with a special ‘Atari-Token’ (ATRI) for prizes. The virtual ATARI casino will be developed in partnership with Decentral Games, with the virtual casino being operated from the company’s ‘Decentraland’ online game space. This will be the first time that previous amusement IP will be used in this manner and speaks to the aspirations of the new ATARI owners to generate revenue from their library, stating in some reports that they expect to see $150m in bets in 2021, when the service goes live. No word if the blockchain gaming experience will be continued across the planned ATARI Hotel project currently under development.

Following on the extensive coverage of the frictionless migration in the entertainment business, and news of the latest facility chain to invest heavily in the latest ePayment technology was revealed. It was announced that Intencity, owned by Village Entertainment, had completed the third full facility installation of the Intercard cashless platform for amusement and attractions. The facility operation was promoting seeing a 160-percent increase in revenue at the sites which had upgraded to the system. Intencity operates some 50 facilities in the Australian territory. FEC and LBE facilities in this territory are leading the charge in embracing this technology, a model that is closely being watched by Western chains.

Just to ram home the momentum in the payment market towards the entertainment approach and, following on from our previous exclusive coverage on “ePayment”, Nayax (the leading cashless payment system provider, primarily focused on vending, online sales, and laundromats), announced the momentous news that they had formed a strategic partnership with Tigapo – the developer of payment platforms for entertainment venues (with a digital and mobile-first infrastructure focused on amusement machines). With this partnership, Nayax has expanded its interest towards amusement and entertainment and this latest move is seeing a greater emphasis on the deployment of cloud-based POS supporting NFC tag, and smart payment infrastructure. This will represent a major development of the proven application from the vending payment landscape migrating through a dedicated operation, represented by Tigapo, who will be focused on the Family Entertainment Center (FEC) and leisure landscape.

Example of smart Nayax payment facilitating kiddie rides [KWP]

Investment and acquisition news continued with regards to entertainment facility support services, with the news that Hownd, the foot traffic generating platform, had acquired PoweredLocal. This acquisition brings new capabilities into the Hownd organization, such as a mesh wifi solution provider for the corporation’s users of the ‘MyHownd WiFi’ visitor secure facility connectivity. The plan is to expand the ability to help merchants generate both foot traffic and revenue. As with the embracing of frictionless payment, the need for a dedicated CRM (Customer Relationship Management) platform is at the heart of driving leisure entertainment to the next level.

With continued news of acquisitions, there is also the news of the restructuring and closures in the sector. It was announced, through their social media feed, that the ‘Angry Birds Activity Park’ location in Johor Bahru City Center, Malaysia, would be permanently closing from April. The facility was developed based on the Rovio Entertainment mobile game property, and the site developed in partnership with Johor Corporation (JCorp) subsidiary Damansara Assets Sdn Bhd. This was one of ten entertainment facilities operated by JCorp – who had recently closed its Sanrio Hello Kitty Town facility (opened in 2012) in the territory in January. The operation was still running its other flagship sites, such as Legoland Malaysia, and there no word on the next phase of business from JCorp at the time of writing.

The need to adjust to the new landscape was also reflected with the restructuring taking place in the retail sector. Many have speculated how the mall industry will look towards entertainment to redress the impact of the “Retail Apocalypse” and the first examples of this have started to appear. The 100,000sq.ft. JC Penney store within the Magnolia Mall, in Florence, South Carolina, has been turned into a ‘Tilt Studios’ venue (12-months after the retail store closed). Part of the 13-US chain of Family Entertainment Centers (FEC), the new venue will comprise ten-pin bowling, attractions, and an extensive amusement offering. This will be the latest repurposing of a previous retail space towards entertainment, a trend that will be gaining momentum in the post-COVID landscape.

Retail store transformed into 100,000sq.ft FEC chain [Tilt Studio]

The example of reproportioning of retail units into entertainment was seen back in 2017, with the launch of the Hyper-Reality VR poster-boy, The VOID. Now over a year since the company’s ignominious removal from the market, and the first examples of the cannibalization of its venture are starting to be seen. Competitive free-roam developer, SandboxVR, revealed that, following on from its own US operations emergence from Bankruptcy Protection, it had now opened a new venue in Las Vegas. That new site is sitting in the previously occupied VOID Grand Canal Shoppes at the Venetian hotel and casino location.

Still swathed in mystery on the actual fate of The VOID, SandboxVR has acquired the keys to the Venetian unit from the mall owners. This site had been a flagship location for The VOID and had been heavily dependent on the use of Star Wars properties. There was a loss of rights to use Disney IP at this site (as with all The VOID’s 17 locations which had been shuttered), although sources suggest the Malaysian VOID sites are still operating. New owners of The VOID assets (VR Exit LLC) have yet to make an official statement on the fate of the heavily hyped VR offering. In the vacuum, SandboxVR opened its latest US venue – planning to operate 15 sites by the end of the year (as revealed by media site Protocol).

Specialization is rife regarding the possibilities of a massive growth in the leisure entertainment sector, as the global market emerges from the health crisis. In a prediction by the research company Technavio, it was proposed that the global amusement and theme park market will grow by $19.8b during the years 2020 to 2024, representing a 7-percent growth in the industry. This speculation mirrors other reports and observations in the media, that expect a “Roaring-‘20s” style renaissance for the leisure entertainment sector as a “stir crazy” audience emerges, globally, from lockdown.