Virtual reality with friends: Steve Zhao’s business was promising until last year. His company Sandbox VR took over several retail spaces, and people went there to run around shooting zombies, crossing swords with treasure-hunting pirates, or exploring distant planets as part of the crew of a Star Trek ship. For all this, they gathered in groups of up to six in 600-square-foot rooms, where they wore virtual-reality headsets, attached backpacks, and wore arrays of sensors on their arms and legs.
Coronavirus, of course, changed all that, effectively shutting down his business as his customers went into quarantine. “We thought, ‘That’s it, we’re done,'” Zhao says. More than a year later, with the world economy slowly opening up with every shot of the vaccine in people’s hands, Zhao’s business is growing again.
Since reopening in the spring, when states began lifting restrictions, Zhao says, his eight stores in the United States, Canada and Asia have seen ticket sales and attendance rise above pre-pandemic levels. And now his company is on track to turn a profit next year.
“I think this platform is what people need: an immersive, social, full-body experience,” said Zhao, 38, who began creating games while in college. “We’re trying to create an experience where you build meaningful relationships with your friends.”
Zhao’s business success is the latest in a series of anecdotal signs that the video game industry, and especially VR, can show promise in a newly opened economy. Over the past year and a half, many of those in isolation mode have flocked to video games as a means of escape and entertainment. As of May, people were still playing and spending 40 percent more money on smartphone and tablet games than they did before the pandemic, according to surveys by market research firm IDC. And in a separate survey, only about 25 percent of gamers said they plan to cut back on their gaming habits when the COVID-19 pandemic recedes.
People seem to be looking for other entertainment in addition to gaming. The high-octane action movie “Fast and Furious 9” grossed $70 million in its first weekend, the highest for a single movie since December 2019 (though overall box office receipts are still lower than before the pandemic). The economy as a whole is also showing positive signs, with jobs recovering and retail sales rising.
Although many small and medium-sized businesses closed last year, including Zhao’s competitor The Void, Sandbox VR plans to expand to places like Chicago, Los Angeles, San Francisco and Hong Kong. By the end of July, Shanghai and Las Vegas will be added, bringing the total number of sites to 11. The company charges $51 per person for a ticket for an hour and a half session that includes training and setup.
Lewis Ward, an analyst at IDC, said he was skeptical about many of the location-based VR companies he heard about before the pandemic, mainly because he thought it was hard to make money on something that seemed a little outlandish. But he also said the social element emphasized by companies like Sandbox could make a difference.
“The idea of a social outing with friends, reminiscent of paintball or something else, could be exciting,” Ward said. But what will matter in the long run is loyal customers. “It has to be distinctive enough to keep people coming back.”
VR Survival
Last year, Sandbox VR applied for more than $754,000 in the U.S. Pandemic Wage Protection Program to essentially pay employees in the global economic shutdown. The company has also begun working under contract with other game makers to pay the bills. Zhao said he also worked with landlords and began experimenting with franchising his business. However, it eventually had to file for bankruptcy, lay off about 80 percent of its roughly 100 employees and cut the salaries of those who stayed. In March of this year, the company applied for another $241,000 PPP loan, again to cover payroll costs.
To help customers feel comfortable at the thought of wearing a headset that someone else wore at the height of the pandemic, Sandbox VR employees wear masks and gloves, and the company says it disinfects and disinfects using government-recommended disinfectants. The company also says that customers must wear masks if they have not been vaccinated; employees wear masks regardless.
Sandbox VR also initially spaced out client meetings to reduce the chance of contact between groups, and added disinfection stations for use before and after each experience.
“We wanted guests to feel like it was a safe space,” Zhao said.
He also hopes to expand the types of experiences Sandbox VR offers. Currently, there are five, ranging from a horror survival game to a futuristic one-on-one swordfight. But he’s also interested in creating games in which customers could become a wizard making magic or experience what it’s like to be a multi-armed monster. Development, he says, “will take some time.”
In the meantime, he hopes that people will continue to seek out new types of entertainment as they get used to life outside quarantine. And he believes the key will be to offer entertainment such as his in small groups.
“We don’t market ourselves as VR,” Zhao said. “We’re offering people to be in different worlds.”
