How Should I Price Virtual Reality?
Updated: May 25, 2018
In June of 2016 I started the first VR Arcade in the US. At the time there were no resources and no success stories to be heard of. Even the HTC Vive was not yet available to the consumer market! We scrounged up a handful of Vives from people who had preordered some and were now selling them for top dollar. Even PCs that could run VR were hard to come by. It almost seemed like another lifetime only 2 years ago. After we had gathered the equipment and fought with the landlord for a deal on some space in the local mall, we were left with the same question you are likely asking yourself.. how do I price VR? I will tell you how we did it and how we have come to set the industry standard with our pricing model.
Understanding Your Model
It's important to first realize what your model is and how your facility makes money. Are you a dedicated VR Arcade or adding VR into your existing park or FEC? If you are an arcade, you will need to monetize every minute people are in your facility. If you do not effectively capitalize on the time the customer is wearing the VR headset, they will happily play you out of business. On the other hand, if you have an existing facility with a lot of foot traffic, you may likely be better served by simply tacking on an extra dollar or two for every ticket sold and opening the VR up to unlimited play time. You will want to restrict the number of minutes someone is allowed to spend wearing the VR headset to around 10 minutes at a time so you can keep the line moving. We have facilities that prefer to charge on a per-minute basis, but depending on how you have your pricing structure setup, it could potentially be a more profitable model to offer a slight upcharge and open play.
Figure Out All of Your Costs
You need to understand where all of your costs are coming from in order to keep your lights on and the VR running. Start with your fixed costs. These are your rent, utilities, and other items that remain consistent month to month. The next step is to figure out your variable costs, which will fluctuate with utilization. Since most game titles offer a price-per-minute license model, this can be looked at as a COGS (Cost of Goods Sold). This makes your play time much like a retail product. Every minute you sell should be making you money but it is also costing you a little money as well. Currently our facilities average fees of $.05-.09/min on all game time sold. Most facilities will charge around $1/min for the use of the equipment. So your margin should be $.91-.95/min if you always charged that rate. Most facilities will add in discounts or incentives once in a while, such as discounting for longer play time (around 30-60 minutes). As a general rule, a VR Arcade charging $1/min and $45/hr will have an actual margin of $.75-.83/min. A typical VR Arcade may run around 1,000 paying customers through each month once it is at full operation.
You should also factor in staffing costs to run your facility. Here the key metric is how hands-on you want your facility to be. The more hands-on you are, the more likely customers are to have a great experience and come back, but the more it is going to cost in labor. Most successful facilities are medium to low touch. Medium means that on a busy Saturday, you may have 2-3 people working to cover 6 booths. Light touch will remove all but one staff member to run the booths on all but the very busiest of days.
Put the Numbers Together
Finally, you need to figure out potential cash in versus cash out. Create a basic spreadsheet and add in your fixed and variable expenses along with your utilization rates. Plan for a ramp up of around 6 months and make sure you have the money to keep the lights on while you grow to profitability. If you are in and existing facility, you will have far fewer expenses and can much more easily reach profitability. Most dedicated facilities will have a hard time making the numbers work with less than $35/hr and I suggest starting higher at around $45/hr and $1/min. If you have a lot of people that are already coming through your facility, try adding a little cost to everyone or offering a package with VR in it for a slight up charge. If you are already seeing 5,000 customers each month, taking on an average of only $3/head for unlimited VR, you would be looking at an extra $15K in revenue and likely around $12K in profit.
Utilize the Right Software
It can be overwhelming trying to figure out the best way to monetize every minute. We quickly realized that we needed a good software solution to run our VR arcade and ensure that we were actually profiting off of each minute of game use. We created the PLVR software suite to include certain features that would help us be successful, including the timeclock to measure game play, the game chooser to allow customers to pick games while wearing the headset, the leaderboard to keep customers competitive, and the rewards application to display statistics regarding customer return rate and top earners,.
One of the biggest lessons we've learned is that if it doesn't work on paper, it won't work in real life. VR can be incredibly successful, but you have to do it right. If you have questions or want help figuring out how to price your facility, visit privatelabelvr.net or feel free to shoot me an email at firstname.lastname@example.org.