ARTICLE BY COLIN MCMAHON

Colin McMahon is an Analyst with Greenlight Insights covering emerging technology trends at the intersection of VR, AR, and the gaming industry. Follow him: @ColinPMcMahon.

Sony Interactive Entertainment created a new unit, one that will specialize solely in location-based entertainment. This new portion of the company has already made headlines, bringing the first Sony PlayStation VR headsets into Japanese arcades. Sony is actively seeking partners for this initiative. While details are still scarce, it is reasonable to expect placements throughout the country before year’s end.

Sony’s move into the Japanese arcade market can be seen as a response to what is happening in China. HTC partnered with Leke VR last year to begin aggressively populating the Chinese VR market with Viveport Arcades. The company plans to open “thousands” of locations by 2017’s end. Given the strength of the Chinese VR market, this move will likely cement the Vive’s hold as China’s primary arcade HMD.

While the Chinese VR arcade market is already thousands of locations strong, Japan and South Korea’s markets remain in infancy. Sony’s move to popcorn off existing arcades makes sense, as the Japanese arcade market is still fairly robust (15,612 arcade facilities). Taking advantage of these established locations will greatly reduce the amount of spending on Sony’s end, provided it can secure the partnerships it wishes.

The company currently has a slight advantage if it wishes to expand into South Korea, as well. Currently, the VR arcade industry in South Korea is being radically slowed by government regulation. Many businesses are still waiting for the proper licenses to clear.  The current VR arcade franchise in South Korea, VR Plus, technically only sells coffee. All the VR experiences are free, however customers must buy coffee to enter. VR Plus has decided to supplement its income by selling VR HMDs – namely the PSVR. Currently, the company is courting Oculus and HTC but it may be in Sony’s interest to attempt to secure exclusivity in this marketplace.

Sony’s move also represents the company’s desire to shift more into the black. Sony is a large company and many of its once staples – movies, blu rays/media players, and TVs – are not selling as they used to. The commercial VR arcade industry represents a significant source of revenue, especially if Sony beats HTC Viveport to the market.