The Future of Japanese VR is Arcades

Capcom’s recently announced VR Arcade
Monster-Sim “CAPCOM”

If recent announcements are any indication, the future of Japanese VR lies in a remnant of gaming’s past: Japanese arcades. This is a fascinating trend that is sure to accelerate in coming years as Japanese arcades invest into room scale VR that differentiate their offerings relative to what can be played in Japanese homes.

Earlier this year I was chatting with a Japanese game executive about how VR development was going in Japan. “Still awakening” was his answer. Although there had been a frenzy of startups working on VR games in North America, Europe and the rest of Asia, we haven’t seen a rush of Japanese VR startups.

From an investment perspective, Japanese capital deployment in games largely came from game publishers rather than VC, with investments both internally to owned teams and into opportunities outside the country. Colopl has not been shy about investing heavily into VR games and hardware themselves. Sunny Dhillon, an investor at Signia, recently wrote a great write-up on how VR is making headwinds in Japan in terms of consumer awareness, noting that GREE, Colopl and Gumi have all put together funds that have made significant investments outside Japan. And Sony has been seeding VR content for it’s PSVR both to its partners in Japan and elsewhere.

Big Japanese publishers have been dipping their feet into the water for years — and doing so in ways that made sense for the Japanese market. For example, Square Enix’s Tokyo Game Show announcement of Project Hikari which applied Virtual Reality to manga.

Yet one trend that hasn’t reached enough awareness in the West as it deserves has been the involvement of Japan’s biggest arcade makers into VR experiences. This was something I had been expecting (and even had my hand in) for a long time, and 2016 was the year we saw the last few years of secretive planning at these companies come to fruition.

As late as 2009, the Japanese arcade market was still worth USD$6BN. It has shrunk in recent years, but is still in the billions of dollars. Square Enix (Taito), Sega, Konami, Bandai Namco — all the major publishers — either make arcade games or own arcade chains.

Unlike the West, where arcades largely went away except the “arcade-as-bar/restaurant” phenomenon, or pan-Asia where arcades have been replaced by net cafes, Japanese arcades still draw customers each week. Card games, fighters, music games, driving games, crane games, and more are stacked up on the many floors of each “game center.”

VR is perfect for arcades. Given the cost of higher-end VR systems, and the space needed to use them, the arcades of Japan were always the first, best places for large swaths of the population to try room scale experiences. Japan has been pushing this high end for years, like the Gundam pod craze.

Thus it’s no surprise to see Japanese arcades joining in. In just the last few months we’ve seen a wide swath of announcements. Taito, for example, announced a VR Theater. One of the best known on the game side has been Zero Latency at Sega’s massive Joypolis amusement park in Odaiba, an island in Tokyo Bay. Joypolis has been known for big, live experiences like interactive rollercoasters and virtual shooting galleries. That Joypolis made a splash was to be expected.

It’s the more recent announcements from players who aren’t as deep into the arcade ownership scene that have piqued my interest. For example, Capcom announced CAPDOM, a game where you play a Godzilla-like monster,destroying cities. Imagine Rampage, in VR. It’s available to play at the Capcom arcade in Kichijoji, Tokyo.

This week also saw the announcement of mobile publisher GREE partnering on a VR amusement park called VR Park Tokyo, near Shibuya Station. (I couldn’t find an article in English on this yet, sorry.) The indoor “theme park” will be open in December 2016 and is taking reservations now at a cost of about $30 for 70 minutes “all you can play” for a variety of sports, horror and other games.

With content being made for Japanese arcades, at some point these arcade makers will look outside the country to expand their opportunities. Room scale VR could lead to the resurgence of the worldwide arcade business.

–Jacob Navok