The reinvention of the arcade

That slump persisted until the end of the 1980s, when revenues spiked again with a wave of arcade innovation, like eye-catching 3D graphics. Games like Ridge Racer and Daytona USA wowed arcade goers, providing spectacles far beyond the capabilities of home consoles and computers. The arrival of Street Fighter II in 1991 sparked a craze for fighting games. In 1992, Street Fighter II: Champion Edition became the third-highest-grossing arcade game of all time, beaten only by Space Invaders and Pac-Man.

But by the middle of the 1990s, arcade revenues waned once more, as powerful 3D consoles like the Sony PlayStation provided graphics nearly on a par with those of arcade machines. Over the next couple of decades, arcade revenue continued to dwindle, and venues began to close. New York City, once home to hundreds of arcades, had fewer than ten by 2011.

Many of those that survived switched to a “ticket-redemption” model, where simple games spewed tickets as rewards, which could be exchanged for prizes like sweets or cheap toys. The old model of dropping coins into a machine for a couple of minutes’ play felt hopelessly outdated when consumers had access to more sophisticated games at home that could provide hundreds of hours of entertainment.

But things are changing. The arcade is making a comeback. And it’s taking a variety of forms. 

The arcade is dead, long live the arcade

One of the earliest of these new forms was Barcade, which opened in Brooklyn in 2004 with the simple proposition of combining arcade machines with craft beer. There are now nine Barcade locations across the US. Similar venues offering alcohol in combination with games have proliferated elsewhere, like Four Quarters and Loading Bar in the UK.

Nostalgia is a big driver. Venues like Galloping Ghost in the US and Arcade Club in the UK combine huge collections of lovingly maintained classic arcade machines, mixed with the odd contemporary cabinet. The old model of paying per game has been abandoned: instead, customers pay a single entry fee, and all machines are free to play. It’s proving to be popular: Arcade Club now operates three venues, and similar retro-themed arcades have popped up across the UK, like The Pixel Bunker.

Perhaps most exciting, new high-tech arcades now provide gaming experiences that are difficult or impossible to recreate in the home. After years spent fading into obscurity, the arcade is once more cutting edge.

A new dimension

Virtual reality (VR) has offered unique arcade experiences for a few years now. The new generation of VR technology kicked off with Oculus, following a successful Kickstarter campaign in 2012 for the Rift VR headset. The company was bought by Facebook, later renamed Meta, which went on to release the Quest wireless VR headsets. Other VR systems were developed by companies like HTC, Sony and Valve. 

The trouble is, these things can be pretty expensive. The high-end Valve Index VR headset, for example, cost nearly $1.000 upon its 2019 release; a sufficiently powerful PC to run the headset would cost roughly the same again. That puts it beyond the reach of most consumers. 

What's more, VR requires an awful lot of space. Without a dedicated room, there’s a good chance your home VR experience will involve falling over the coffee table or accidentally whacking the TV with a flailing arm. In an arcade context, VR offers a demonstrably superior experience to a home gaming setup … not only by offering cutting-edge equipment that would be unaffordable for most people, but by providing large, safe spaces in which to use it. 

This isn’t the first time VR has made its way into arcades. In the early 1990s, British firm Virtuality pioneered VR arcade gaming with a series of sit-down and stand-up cabinets that caused a huge splash. But they were limited by the technology constraints of the time, only able to output simple 3D graphics at a rate of 20 frames per second (fps). They were expensive, too: some stand-up machines cost in the region of £35.000, the equivalent to around £90.000 today. Thus the market was limited, and the company soon faded away.

By contrast, today’s machines are more powerful and cost a fraction of that price, making VR arcades financially viable for the first time.

Arcade evolution

Nick Wallace is a tech support and content acquisition agent at SpringboardVR, which provides software management tools for VR arcades. The company offers a game launcher for headsets as well as a booking system, and licences gaming content specifically designed for arcades. “Before SpringboardVR came along, it was up to arcade operators to contact developers to get commercial licencing,” Wallace says. “So you can imagine arcades would have to go to hundreds of developers and get different plans and contracts done with them.”

In addition to working for SpringboardVR, Wallace operates the Free Space VR arcade in Australia, and has witnessed a rapid evolution in the arcade field. “What we’re seeing is a progression from what we have started referring to as ‘Arcade 1.0’, which was about five years ago,” he says. “You had your Oculus headsets and your original [HTC] Vive headsets, but they were still extremely expensive, the PC required was very expensive, and it was difficult to set up, plus there wasn't a lot of content. What we're seeing now is ‘Arcade 2.0’.”

Arcade 2.0 involves the adoption of wireless headsets and the move to “free roam” arenas: large, open spaces where users can see each other in the VR space and interact. Wallace’s own arcade offers two- to four-player experiences with games like Arizona Sunshine, a zombie survival shooter, in addition to various VR escape rooms, such as Prince of Persia: The Dagger of Time.

VR escape rooms are particularly popular, and eliminate many drawbacks of physical escape rooms, which can “take anywhere between six months to a year to create” and can only be used by one group at a time, as well as taking time to reset. “We can have ours flipped over from one experience to the other in a couple of seconds,” Wallace says.

There are already a range of accessories for creating ever-more-immersive experiences. One of the most popular manufacturers is the Korean firm bHaptics, which in 2017 debuted the TactSuit, a vest studded with haptic motors that provide physical feedback. The company has since released updated versions of the TactSuit, and launched the TactGlove in 2022, which provides feedback to your fingertips, allowing you to "touch" objects in VR.

There are various peripherals available in the form of, for example, guns or swords. One of the largest VR arcade operators, Zero Latency, provides tennis-court-sized arenas in 74 venues across 27 countries, where up to eight players can compete in games like Undead Arena and Far Cry VR. Each player is given a gun controller and a backpack with a computer that connects with their VR headset. 

Wallace points out focusing on one peripheral can limit your options. “A pitfall for [Zero Latency] is that all of their stuff is designed around using the guns. So it could hamper what type of experiences they could actually offer to people.” Other VR arcades are experimenting with “4D” effects, such as vibrating floors, heating elements and wind machines to add extra immersion, “but those are very uncommon,” says Wallace.

Setbacks to the new boom

The COVID-19 pandemic hit the fledgling VR arcade industry hard in 2020. Enforced lockdowns and social-distancing rules forced venues to temporarily close doors. Many didn’t recover, particularly small ones. 

The biggest issue arcades faced was being locked into expensive leases, says Dita Grunte, LBE Business Manager at SpringboardVR. Venues in shopping malls can be particularly expensive. “Mall areas seem great, because there's a lot of people, but they also are linked to pretty expensive lease agreements that are not really easy to adjust,” she says. “Also they're tied to the hours of operation, so they don't have a lot of flexibility.”

She also observes that smaller arcades are more vulnerable. “Many want to set up being safe and cautious, starting with only a few headsets to see if it's gonna work,” she says. “Your main traffic will be during the weekend, and that has to generate enough revenue for you to survive until you build your loyal clientèle, and until you expand your other offerings. And the mistakes are that you don't have enough headsets for the Saturday, when there's so much traffic and demand at the peak times [that you] just can't cater to them.”

The Void was hit particularly hard by Covid. This American chain launched its first VR experience in 2016, and specialises in elaborate arenas featuring 4D elements like heat lamps and water mist, often in expensive, high-traffic locations like the Mall of America in Minneapolis, and The Venetian hotel and casino resort in Las Vegas. It partnered with Disney for experiences based on franchises like The Avengers and Star Wars, but defaulted on its loans not long into the pandemic and was forced to close venues. However, there are signs that The Void may be making a comeback.

Sandbox VR was another chain that suffered during the pandemic, briefly entering Chapter 11 bankruptcy. Unlike The Void, with its expensive, elaborate venues, the company managed to bounce back quickly. It opened its first location in Hong Kong in 2017, offering full-body-tracking VR that founder Steve Zhao described as “making the holodeck a reality.”

Sandbox VR now operates 30 venues in the US and Canada, four in Asia and two in Europe, with at least six more planned. It is actively seeking franchise partners, and offers a range of exclusive games where up to six people can play together, including an upcoming title based on the Netflix series Squid Game.

Wallace says SpringboardVR saw the number of VR arcade venues rebound since the end of Covid lockdowns. “So 2019 is our base level, pre-COVID,” he says, “and we're starting to see most of our numbers return to those levels, and at some points even exceeding them.”

Bespoke versus free-range experiences

China has long been a pioneer of VR arcades. As early as 2016, there were an estimated three thousand VR arcades in the country. Such has been the popularity of VR arcades in China that VR cabinets are being designed specifically for young children.

Many of the VR experiences there are more like theme-park rides than traditional games, and indeed a two-floor VR entertainment centre is soon set to open at the Shanghai Disney Resort, featuring VR motorbike rides and a "weightless" VR game in which players are suspended in a harness. The centre is operated by SoReal, co-founded by film director Zhang Yimou, who was behind the international hits The House of Flying Daggers and Hero. SoReal opened its first ‘VR theme park’ in 2017, covering 32.000 square feet and boasting a multiplayer system that could support 25 players at once.

A staggering variety of VR arcade machines are emerging from China, from VR skiing to rollercoaster simulators that can flip players 360 degrees. There are even giant robotic arms that can throw players hither and thither. Some of these extreme machines are finding their way into arcades in other countries. 

“We've seen them a lot,” says Wallace. “What we find is that, unfortunately, they are relatively expensive—no more expensive than, say, getting an arcade machine, but they don't provide a lot of support. And a lot of them seem to fold within a year or two, which means you're now left with hardware that when it breaks, there’s no support to be able to get it up and running again.”

He adds that often these bespoke VR machines aren’t upgraded with additional games or experiences, so once all of an arcade’s customers have tried, say, a rollercoaster ride, there’s little reason to go back and do the same thing again. “They can be good,” he concludes, “but we wouldn't recommend them.”

In the West, the focus is instead on free-roaming, multiplayer experiences. “What we're really seeing is the evolution of esports, and the league and competition aspect of gaming,” says Dita. “We're seeing evolution in the content, how it's being made for the need for leaderboards or for businesses [to] form tournaments, and I think this will only continue to evolve. […] There are esports stadiums being built for a reason, and probably we're gonna see more and more VR appearing there.”

Wallace predicts an explosion in VR arcades in the near future, when all-in-one wireless VR headsets become more affordable. “Once you can buy a viable headset for under $1.000 and that's all you really need to get going, you can easily go and purchase 20 of those, get a good lease at a reasonably sized place and start doing free-roam experiences. And I think we will see a bit of a surge in those sorts of ones. Initially, there will be a lot of places doing it, there will be a lot of competition, there will be a lot that will fail because they couldn't compete. But I really do think that we'll see a big surge of VR arcades over the next five years.”