LBE VR Arcade Startup Sandbox VR Files for Bankruptcy
Location-based VR startup Glostation USA Inc which is better known as Sandbox VR has filed for bankruptcy protection following disruptions in business brought about by the COVID-19 pandemic. The VR arcade startup drew investments from some of the big-name and high-profile celebrities including Katy Perry, Orlando Bloom, Will Smith and Justin Timberlake. Sandbox VR was also funded by Stanford University, Alibaba, Andreessen Horowitz, Floodgate Ventures and Triplepoint Capital.
Virtual reality arcades along with the other out-of-home VR experience centers, which rely on patrons actually visiting the physical location, have been some of the hardest hit by the restrictions and lockdowns imposed by governments on the back of the coronavirus pandemic. Sandbox VR has been one of the best funded VR startups in the industry, drawing investments from top Hollywood celebrities. Yet, it too has been blunted by the economic fallout from the pandemic. The company’s US-based subsidiary has now filed for bankruptcy protection.
Sandbox VR was founded in 2016 and had over $80 million in risk capital. The VR arcade company operates ten virtual reality arcades in Asia and North America. The startup was on track to open 20 new arcades this year. Sandbox VR was also in talks to secure another $50 million in investments according to a WSJ report. All of these plans have now been foiled by the coronavirus pandemic which forced Sandbox VR to close its virtual reality arcades and bring its location-based entertainment (LBE) business to a sudden halt.
Sandbox VR hosts both in-house developed games as well as branded VR titles such as Star Trek: Discovery. The Sandbox VR experiences typically last about 20 minutes and each session can accommodate up to six people.
In early June, the company CEO Steve Zhao had told Protocol that the startup had effectively lost 100% of its revenues. This wiping out of its revenues base forced the company to lay off 80% of its staff at the end of April. Twenty skilled staff were retained who are now working with investors on reopening plans. In spite of the raging pandemic, it’s not all over for the startup and the company is already planning to bounce back and continue with the business. According to Zhao, the company has had to rethink its business strategy and is now focusing on the Asian market where the effects of the pandemic, both on lives and business, have not been as severe as in the U.S. and Europe.
Sandbox VR had already reopened a few of its VR arcades recently. However, the extended closure of its locations appears to have taken its toll on the business.
Sandbox VR’s competitor in the arcade business, The Void, hasn’t been spared either. The Void closed its global facilities in mid-March this year and sent its service staff on leave. Like Sandbox VR, its executives, too, are already working on reopening plans which will be announced in the coming weeks. As part of safety procedures in the midst of the pandemic, the Void has stated that the virtual reality headsets and rooms will have to undergo an even more thorough cleaning in the future and the number of patrons at any one time is set to be reduced.
In July this year, it was announced that The Void’s content licensor Disney had terminated its contract with the VR arcade company. It is likely that this was as a result of a default in the license payments. At the time, The Void didn’t comment on the rumors surrounding the license and cancellations, instead announcing that its VR arcades will be reopening soon.
The other major VR arcade player Hologate has also imposed thorough cleaning and sanitizing regimen which it hopes will allay the public’s concerns and encourage them to start visiting its arcades once more. But will they heed it? Whether these measures will ease up anxieties and get the foot traffic streaming in once more remains to be seen.
The arcades were once a promising VR market segment but the coronavirus pandemic has wiped out the gains made over the past years and put a brake on the robust growth that was expected this year. At the end of July this year, Superdata XR market researchers drastically revised down their VR arcade sales forecasts. The COVID-19 pandemic forced the closure or reduced foot traffic in several VR arcades and as a result, the 2020 sales will only be a quarter of the 2019 sales with the industry grossing $150 million compared to the $600 million estimate for the previous year.
The pandemic-precipitated slump in the VR market is expected to have a medium to long-term effect on the VR arcade market. According to the Superdata forecast, even 2023 annual sales are expected to be 30% lower than the 2019 sales. The pandemic has cast a long shadow on this industry segment.
In spite of the bankruptcy filing, Sandbox VR also announced that it had reached a deal with its creditors to restructure its debts and reopen its locations after some sense of normalcy has returned. With the coronavirus pandemic increasingly being endemic, it is unclear whether we will have any ‘normal’ in the near term.