Stinger Report - 7/09/2020

TSR Newsletter | September 7, 2020

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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)

Reinvesting in the Entertainment Landscape

Part 2 | # 1036

Report Skinny

Redefining the new phase of immersive entertainment coverage in The Stinger Report; and in this latest series of features, this second part looks at the reactions to the changing post-lockdown market, and how this is restructuring numerous businesses in the entertainment sector. We conclude in this part with a look at how consumer VR has turned to Enterprise Investment, and the ground-breaking shifts in business that are impacting the commercial entertainment approach.

Main Report

Continuing our coverage of the devilments impacting the Immersive Out-of-Home Entertainment landscape, and we start with the convulsions inevitably being felt by those emerging from lockdown.

- Administration, Closure and Possible New Suitors

The impact of the global pandemic, and the vulnerability of key entertainment offerings internationally, was placed into sharp relief with the news that Britain’s fourth largest theme park was initially facing administration. Drayton Manor, the 280-acre theme park and zoological site located in Staffordshire, was revealed to be in the process of filing for administration; while two major entertainment operators fought for control of its assets.

Having been in the ownership of the Bryan family since its opening some 70-years ago, Drayton Manor comprises a major theme park holding Europe’s only standing rollercoaster, the Thomas Land themed village, and the extensive Drayton Manor Zoo with some 100 animals. The park operation has been under considerable pressure long before the current health crisis forced the site to temporarily close. Reports suggest a loss of over £1.8 million, during the fiscal year ending in 2019.

The operation’s owner had been looking to find additional funding and filed notice of its intent to appoint administrators. It was reported that the 150 staff had been notified by email that, even though they were facing administration, the theme park and zoo will “Operate as Normal”. Regarding possible suitors, behind the scenes there had been advance attempts to secure “fresh investment” – with leaks regarding the negotiation being revealed over the past few weeks. Well-placed sources revealed that two operations had been attempting to secure the property.

The first being French operation Looping Group, the European regional theme park and resort owners with some 15 venues dotted across the mainland. While the second possibility was Nottingham-based Mellors Group, a specialist in theme parks and attraction operations, and facility business. The Mellors’ bid seems to initially have been more advanced, with the operation forming ‘Drayton Manor Operations Limited’ during July. However, at the beginning of August, it was announced that Looping Group had successfully acquired the assets and operational infrastructure from the joint administrators. This move would see a large portion of the staff retain their positions, with the buy-out of Drayton Manor from the owning company. The new owners are looking to develop and expand the operation, working with the original management team, including the Bryan family members.

The fast-moving nature of this move from administration into acquisition is an example of the new conditions many operations will be finding themselves under – one of many seeing the impacts of the global health crisis totally changing their landscape. The most recent victim of this was Adrenaline Entertainment Centers, with venues in York, Pennsylvania, Cincinnati, Ohio, Columbia, South Carolina and Lexington, Kentucky. The company revealed in a statement that: “the shutdown and subsequent economic climate have made it impossible for us to keep our doors open”. This sees all the four venues presently closing their operations.

Regarding LBE VR operation and the name that has appeared several times in the Stinger Report, Sandbox VR, was again in the news as an illustration of the precarious nature of some of the private investment operations. These seem to have garnered so many headlines and so much investment money. Following on from our previous report about the redundancies and loss of the CEO, then the reopening of facilities, Wall Street Journal was the first to file a report that the parent company in the West for Sandbox VR (Glostation USA Inc.) had filed for Chapter 11 protection at the US Bankruptcy Court in Woodland Hills, California. Sandbox VR had been linked to a $68m and $11m round of investment over a matter of months (along with other undisclosed investments) and had depended on the patronages of major supporters from the Alibaba Entrepreneurs Fund, and A-list celebrities.

But for Sandbox VR, even with the reopening of some of its Western sites, the difficulties of the operation and the haemorrhaging of investment capital had started alarm bells. With the US subsidiary filing for Chapter 11, it was hoped this would allow the operation time to restructure its business and address its debts, and possibly look for a White Knight for the operation. Sources close to the company suggested that the remaining management team will once again look to its Asian influence and focus on the faster recovering Chinese LBE market – against their previous US aspirations.

The situation is similar as seen with The VOID, when they had to remove all Walt Disney IP from their operation following the inability to clear particular financial agreements (news was leaked that the second Disney property VOID location had also closed). With the situation impacting Sandbox VR, will they also have to remove the IP-based VR experiences that they had licensed (such as ‘Star Trek: Discovery’) due to the move into Chapter protection? The vulnerability of all the LBE VR operations that had depended on high profile investment and expensive licensing agreements for content, could now come back to haunt them. This is deomonstrative of the impacts of prolonged closure and diminished operational revenue caused by the post COVID-19 marketplace. The vulnerability of these “entertainment” offerings is accentuated by the off-the-wall business strategies being employed by many of these start-ups.

One of the other operations previously reported as impacted by COVID-19 in the early phases was Punch Bowl Social. It had been revealed in August that the operation’s Founder and CEO had resigned, following the closure four locations, and with the remaining 14 (“eatertainment”) venues under extreme pressure. The collapse of the operation came with the abandonment of the acquisition of a $140 million non-controlling stake in the company by Cracker Barrel Country Old Country Store. This collapse forced the permanent closures and started the process of looking for new investment and a possible White Knight to buy the operation through what the departing founder called “…some type of asset cleanse” (in a statement to The Restaurant News).

In later coverage, it was revealed that between 30 and 40-percent of the revenue for Punch Bow came from large parties for this self-styled restaurant-arcade hybrid. And a week following the departure of the founder, the company announced the appointment of a new CEO – an individual with a strong background in the sector under aversity, namely ex-CEO of Garden Fresh Restaurants that filed for Chapter 7 in May. He made clear that he would be focusing on “surviving another tough 12 months” and start the long process of reopening the surviving venues and looking towards expanding the “eatertainment” concept.

- VR Enterprise Investment

While many still talk about VR, especially following the influx of interest for consumer VR during the enforced home isolation, and the promotion of remote working applications, in the background there has been a seismic shift in the fortunes of key VR manufacturers and the reality that the consumer battle has proven a bloody and difficult one.

In August, the culmination of a situation that had been much rumoured hit home. HTC had been a successful provider of consumer VR headsets – their partnership with Valve had resulted in the HTC VIVE that had launched first and seen serious consumer penetration. While Sony’s PSVR had taken the sales lead, in the PC VR scene the VIVE had established a strong lead, while Oculus and other worked hard to catch up. But all that has changed. The PC VR scene has fragmented into a battle between high-end consumer VR (HTC Cosmos Elite, Valve Index and HP Reverb) and low-end PC VR (Oculus Rift-S). HTC have been compounded with the launch of the HTC Cosmos failing to achieve sales – it has been a poor successor to the VIVE. Attempts to rectify this with an updated release have not yet reversed these fortunes.

It was revealed that HTC has decided to end sales into the consumer VR sector and will focus entirely on the Enterprise sector – selling to corporations wanting to use VR for business. This also includes HTC’s investment into the LBE VR scene through their Asian business with partnerships and their own VIVEPORT Arcade entertainment investment. But the reality is that, supplies of HTC VIVE Pros (one of the remaining HTC VIVE platforms available for LBE VR) will start to dry up in the coming months. Sources speak of HTC looking to restructure its VR business. But the Taiwan corporation is addressing several internal issues and will need to consider a root-and-branch approach to moving forward. There are hopes that the HTC Cosmos Elite (developed after poor reaction to the first version), can fill the shoes of the VIVE, but the jury is still out. Enterprise is proving a major future for other VR manufactures with commercial VR high-end PC headset manufacturer Varjo raising some $54 million to continue their work in the engineering, simulation, and automotive sphere.

The poster boy for the consumer VR scene, Oculus, has been undergoing major changes of its own. Having seen an exodus of executives, the operation’s owner, Facebook, has been rationalizing its plans going forward. First off, the company dropped the Oculus Go platform – amid rumors and leaked images of a new Oculus Quest platform being launched. It is expected that, in October, a new release will be made, along with incremental changes in the Oculus strategy. This was underlined by the revelation that some six years since acquisition, Facebook would now expect mandatory logging into Facebook accounts by headset users, to be able to run Oculus VR headsets. This is a move that sent seismic fault-lines throughout the consumer VR community. This move is seen as the final assimilation of the VR developer into the belly of the beast – and caused vocal outcries across the community.

The shock was compounded by the news that Facebook had renamed its Oculus VR studio to Facebook Reality Labs and, at the same time, renamed the yearly conference to Facebook Connect 7. This rammed home the reality of plans to assimilate the VR operation, and also revealed the acceleration of the corporation’s plans to create an Apple-style ecosystem around their MR plans (both VR and AR wearables). The planned conference, later in September, will reveal this new roadmap, but already the VR community seems unhappy. Many are feeling this to be the first major barrage of the next phase of VR, as Facebook looks to the Console Wars and news that Sony had started work on their successor to their million selling PSVR headset.

For the Commercial Entertainment application of VR, the emergence from lockdown for the businesses had caused much upheaval (as best illustrated by the above Sandbox VR news), and The Stinger Report will be running a special on the key LBE VR developments in the coming weeks. But regarding more conventional VR developments in this business, Japan was showing signs of continued investment after the recent Stinger Report’s coverage of venue closures.

The recent coverage of closures in Tokyo, of amusement sites with VR attractions, was offset by other reports of new openings. CAPCOM, the amusement, and game publisher has run their chain of amusement sites under the Plaza Capcom brand for many years. In August, the company announced the reopening of one of their most ambitious venues, with the refurbishment of the Plaza Capcom Kochi Store, located in the Aeon Mall. This is the most recent example of retail-tainment. As part of the re-build, the site is being expanded with new attractions, including a children’s activity zone (‘Kids BANet’), and the new look to the site will also include the ‘VR-X’ zone. Installed in several CAPCOM sites, the operation offers VR experiences. The Kochi venue will include ‘Biohazard: Valiant Raid’ and ‘Rockman VR’, 45- and 25-minute experiences respectively, charging a higher per-play sum, ¥2,000 ($19) per person. There is continued investment by the Japanese amusement factories to incorporate an immersive offering to their lineup, driven by these kinds of projects.

Interest in VR theme park attractions had not really diminished, although it seemed that it was the Asian sector that was still leading the charge. It was revealed that Universal Studios Japan was to open a brand new VR attraction in August, called ‘Stand By Me: Doraemon 2 XR Ride’. This is a time-travelling dark ride experience, with the visuals supplied by Pico 2 headsets, the latest in this genre of attraction, using two-seat people movers, with the experience supplied via the headset. Universal has deployed this approach in another previous experience, using the same attraction hardware, but have replaced their Samsung GearVR headsets for the Pico platform. This is also the second VR attraction launched based on the loveable and popular Doraemon character, celebrating its 50th anniversary.

Another VR attraction announced its opening in August. ‘The Ark Encounter’ at the Creation Museum threw the doors open to their $3million investment – ‘Truth Traveler’. Working with the organizers Answers to Genesis, developed by MediaMation, who supplied the 48 ‘MX4D’ seats, in partnership with Groove Jones who developed the installation, the attraction comprises 12-bays, with four 4D effects seats each, all using Oculus Rift-S headsets, to supply a 10-minute VR show called ‘A Flood of Reality’, where the guests travel back almost 4,500 years to Noah’s Ark. The Virtual Truth Experiences are collaborated on the Truth Traveler VR project. This is the first MediaMation deployment of their 4D effects seating with a permanent VR attraction.