If IMAX's VR Arcade is a "Huge Hit", Why Is It Making Much Less Money Than a Small Movie Theater?

Mashable recently declared IMAX's VR Arcade a "huge hit", and the company CEO seems to agree:

"Our LA facility, which has been opened for roughly 3 months now, has seen over 20,000 unique visitors," said IMAX CEO Richard Lewis Gelfond during the earnings call. "From a revenue standpoint, the center is pacing at roughly $15,000 a week over the last month or so, including our highest grossing week to date, this past week, and continues to exceed expectations." ... At the time, such bullish talk wasn't hard to believe because we kept getting interrupted by the constant flow of consumer traffic coming in off the street. Real, non-techie families and couples were coming in to buy a ticket to a VR experience ($7-$10), and it was like watching the dawn of a new entertainment era.

It's easy to think you're glimpsing a new dawn if you don't scrutinize it against an old entertainment model and do some basic math. For example, contrast those IMAX VR arcade numbers with a small movie theater of, say, some 300 seats:

• Assume 28 screenings per week (four a day)
• Assume an average of 200 audience members per screening (sometimes more, sometimes less)
• Assume each audience member is paying $8 per ticket (roughly the LA average price now)

On that model, our tiny old school movie theater is making way more than the VR arcade:

$44,800 a week, compared to IMAX VR's $15,000 a week. And that's not even factoring in higher ticket prices for 3D movies or for, you know, original IMAX movies. Or even counting revenue from concession sales, where theaters really make their money. (And VR arcades fall short there -- customers can't exactly eat popcorn while fending off dinosaurs or whatever while in a full rig.) Also factor in additional personnel costs for maintaining and managing VR set-ups, and IMAX is making even less money.

None of this is to say VR arcades are a bad idea, because I rather think that's going to be a decent niche for the technology. But when media hypesters start talking about "a new entertainment era", get out an old envelope to calculate if the math actually adds up.

Comments

[Patchouli Woollahra]

*rolls eyes* oh dearie, Mr Au, they're falling for the snake oil hyperhypetrain all over again. is it too much to just say "we're building something we think is going to be the future, but the fun's just getting started"?

Less seriously, I think Bryn Oh was getting at something when the 'dream pods' in his recent Hand installation were surrounded by intravenous nutrient canisters. (setting aside the fact that half the lot had already perished from starvation by the time the story in it takes place!) Perhaps that's what the concessionaire of the future VR arcade will look like: putting in services to allow the user not to break their sessions up with necessary toilet or food breaks that aren't written into the VR experience itself as VR developers increase the amount of time that people can stay wired into it without discomfort setting in.

Still, I'm not too sure I like the crossover between entertainment and invalid care there. feels too dystopian even though I'm looking forward to future days always...

[Clara Seller]

Most of the excitement I'm seeing for VR is coming from places that hope to make money off of it. There is an independent children's clothing store close to where I work. I know the owner. She pays $7000.00 a month in rent and during peak season her sales can exceed $35000.00 a week because she sells various private school uniforms. White blouses and plaid skirts are the next big thing in children's fashion. How much more proof do we need?

[Amanda Dallin]

Was the IMAX VR Arcade's revenue gross ticket sales or did it take into account expenses. By the time that small theater takes into account expenses such as rent, payroll and licensing for the movies, I'd imagine it's a lot closer too that $15000 than the $45000. If the IMAX VR Arcade has expenses out of that $15000 then I wouldn't be shocked too learn they are losing money.

If profitability were demanded from the start then Facebook and Twitter shouldn't have lasted long enough too ever turn a profit. That said you have too turn that profit before you run out of startup money and credit.