Business in different reality

On September 12, ARena Space marked three years. The anniversary was held at Russia’s largest virtual reality park in Central Children’s Store at Lubyanka, Moscow. It seemed like an appropriate place to celebrate the fact that one of the first Russian VR and AR startups has successfully overcome the difficulties of its infancy and is scaling up.  Plans are truly ambitious: ARena Space wants to build VR parks in every major city in Russia and eventually conquer the European and US markets.

In the early fall of 2016, founder of the first VR park in Russia, Vasily Ryzhonkov, was preparing to launch the first VR amusement park with his project manager and two software developers. It had been only a month since the entrepreneur infected a Sberbank top manager, Alexei Mekhonoshin, with enthusiasm about a new business. Mekhonoshin became the project’s first investor and has invested around $450K to date. In 2018, another investor, Rucard Group, sponsored the VR parks with over $7.5 mio.

Vasily Ryzhonkov recalls that the pilot mini park at VDNKh proved that his intuition was right. A new market was born. During the first month, the park had 1,000 visitors. The attraction that served as a testing ground for the project’s business model and various hypotheses is very successful to this day.

The company has grown significantly over three years. There are three company-owned locations and one franchise VR park. The team has expanded to 40 people. Financial indicators are also on the rise.

“We have doubled our revenue compared to the previous year. I think by the end of 2019 we will break the ceiling of $1 mio,” ARena Space founder says. “In July our parks had a turnover of 100K visitors, which is also a record.”

Vasily Ryzhonkov shared his plans too. Three more parks will open in Russia, including a park in Moscow that will have a different format. Then the company is aiming towards foreign markets.

This is not going to be easy, as there is a lot of competition in the global market, around 10K VR parks in the world. Interestingly, Moscow is far ahead of New York or London in terms of the level of this market’s development, but this does not mean that Russians will be welcomed there with open arms. But in any case, both the global and national markets are ready to digest new projects.

“By 2029, from 5 to 10 VR-parks are bound to open in each of the world’s 100 largest cities, that is, one park of our format (about 30 rides/600 sq.m.) per 250-500K residents,” Ryzhonkov predicts. “One of the drivers of our growth is Retainment. True, it is talked about more than is actually implemented: the industry is very conservative, and the transition from words to action takes from one to five years. But there is no chance to avoid change: online shopping kills shopping malls, and the latter are forced to evolve to family entertainment hubs. ”

In Russia, development is possible in million-plus cities and other big cities where entertainment offers are sparse – Perm, Tyumen, Rostov-on-Don, and Krasnodar. One of the difficulties in the development of all such projects is that you have to compete not only with other VR-parks, but with all companies Google returns to the search query “where to go with a child on a weekend.”

Families, teens, and adult groups are the main target audiences of ARena Space, which offers more than games and travel with immersion in virtual reality, but also various events. The next step is the B2B segment development – corporate events and networking. By the New Year holidays, the company expects to boost revenue from this segment to 25% of total sales.

One of the biggest costs in the development of VR parks is the purchase of equipment (it is supplied from China, Taiwan, and Korea) and licensed content. ARena Space parks work the way cinemas do – they buy licenses from global manufacturers of VR games. Their portfolio now includes almost a hundred different scenarios. The repertoire department studies the preferences of the public and keeps track of the market premieres.

By Anna Oreshkina

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