Stinger Report - 30/03/2021

TSR Newsletter | March 30, 2021

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-- The Stinger Report: Service Message --

The Global Digital Out-Of-Home Entertainment (DOE) Sector covered in The Stinger Report .

Wishing all our subscribers, famlies, loved ones, (and those serving) stay safe and well.

Kevin Williams

Publisher, The Stinger Report (TSR)

Embracing Entertainments Change

Part 2 | # 1063

Report Skinny

In The Stinger Report #1063 – This issue covers in detail:

1. Reflecting on the merger, acquisition and restructuring of the facility business, this first part of this report looks at the impact of the latest closure of Toys “R” Us, along with the new openings and developments from Cineplex and CJ CGV.

2. Developments in acquisition and control continue, with news of Mellors Group’s latest facility takeover. Meanwhile, another prominent UK seaside entertainment venue is acquired with the sale of Dreamland, along with other developments

3. Developments within the eSports frontier continue, and we chart acquisitions by EA and Motorsports Games in a bid to dominate the landscape. Meanwhile, Bally’s Corporation attempts its own moves on market control.

4. Immersive tech also plays a part in eSports, with VRstudios involvement in the scene. Alongside the latest developments in MR applied to competitive concepts from Microsoft and Niantic, and latest streaming entertainment from LEGO.

….and much, much more!

To read the full Stinger Report, register for your subscription here.

- The Stinger Report, published by KWP and its director, Kevin Williams, is the leading interactive Out-of-Home Entertainment news-and-views resource, covering the immersive frontier and beyond.

Main Report

Continuing this two-part report, we look at the two areas of development that are shaping the growth of investment into Out-of-Home Entertainment, and we conclude with a look at developments in the facility business going forward. We also chart investment in new brands (echoing our previous Crossover feature), and then look at eSports and new technology offering unique elements to the market.

- Restructuring the Facility Dynamic

We seem to be in another period of major redevelopment and upheaval within entertainment facility property – not just fuelled by the investment towards the post-COVID landscape, but also with the impact of the “Retail Apocalypse”, fuelled by the massive upheaval in the market. Continuing to underpin our evaluation of trends in the market regarding “Mergers, Acquisitions and Restructuring”, some major developments were charted recently.

Those who have been following recent Stinger Reports will be aware of the saga of the retail entertainment corporation, Toys “R” Us. The operation had entered into the voluntarily closure of some 800 toy stores in August of 2018. Soon after, an operation emerged from bankruptcy, called Tru Kids, that attempted once again to open a retail store operation based on the brand. In 2019, two locations were opened in Houston and New Jersey, operating under new management. (This is separate to the reopening of the brand in Australia, under an agreement with Hobby Warehouse.) These new, scaled-down 6,500sq.ft. locations, were more open-planned toy showroom venues, looking at adding “retail-tainment” elements (such as a Nerf shooting range), towards creating a new interactive exhibiiont-style business approach.

Well, with the full impact of the Global Health Crisis and the lockdown of businesses, this new concept was off to an incredibly rocky start – and so it was no real surprise when the news came, in February, that Tru Kids confirmed the permanent closure of the two initial retail stores, along with the suspension of plans for licensed partner business. This news shows that another high-profile retail brand (even under new management) is finding the landscape impossible under the current conditions. However, it is expected that dedicated children’s entertainment center business will be applied from new developers in the coming months (see our recent report on the new ‘Mission: Play! – by Mattel’ development).

Rending of short-lived interactive exhibit store approach [Tru Kids]

Talking about adapting to current market needs and our readers will remember our reporting, in November of last year, on the closing of the original Playdium entertainment facility in Mississauga (first opened in 1996). This was not the abandonment by owner Cineplex, but the continuation of restructuring and development of the ongoing “Cinema Entertainment Center” (CEC) initiative. The next stage was revealed in February, with the opening of a new facility Playdium venue in Dartmouth Crossing, Canada. The new 30,000sq,ft. location comprises a bowling alley and amusement zone, and also includes ‘VRcade ATOM’ eight-player immersive virtual reality games, developed by partner VRstudios. The site also includes its own hospitality offering and sits adjacent to a 12-screen Cineplex Cinema. This marks the third Playdium venue, sitting alongside the eight Rec Room entertainment brand, also run by Cineplex. These moves come as the company redefines the balance between its theaters and location-based entertainment offerings.

This redefining of theater and CEC balance will be fuelled by new investment in the operation and it was announced, at the end of February, that Cinepelex had been holding a private placement note offering of investment and had successfully raised around $200m in capital. This indicates a strong level of support in the current and future plans presented by the executive team to investors. It will be interesting to see how many other cinema chains will be looking at this initiative towards driving their needs to raise new investment capital, with hopes to stay relevant in the changed entertainment landscape going forward.

Talking about how the international cinema chain business is attempting to restructure itself towards the new dynamics of the post-COVID landscape, a new development was reported from Asia. Missed by most of the media, CJ CGV, the largest multiplex cinema chain in South Korea, revealed a massive restructuring of its business that include the launch of a brand-new business vertical. It was announced that CJ CGV would now allow guests to bring game consoles into the movie theaters, with the ability to rent the screens to play the games on the giant screens. Stinger Report readers will be familiar with our previous coverage on the offering by key cinema chains to rent out screening rooms to watch selected movies in bubbles of friends. This move mirrors much of the “Crossover” business developments iterated previously in The Stinger Report. This latest development allows the reservation of the screen currently in venues within Seoul area, hocked up to the users’ console and playing their own games free of charge.

Big screen console gaming in a Seoul cinema theater [CJ CGV]

This utilization of COVID-hit business reflects the need to diversify and address the debt crippling the corporation during the lockdown, due to the negatively impacted attendance during the Global Health Crisis. CJ CGV continued with extreme measures to cut debt by announcing, in 2020, it would be selling a stake in its Vietnam property business. CJ Vietnam represents some 488 screens across the country, and is making available a 25-percent stake in this operation. At the same time, CJ has started a process of shuttering theaters to address the impact of COVID measures on the territory. While plans are currently shelved, CJ had been working on its own CEC projects, with much of this driven by the CJ 4DPlex division (that had consumed the Simuline operation in 2016). Developments concerning an entertainment focused cinema venue business are expected to be proposed in the restructuring process, emulating other plans from international chains.

Moving from cinema to the wider entertainment landscape, the need to take control of the entertainment offering in high-footfall locations was underpinned by news that Mellors Group had been successful in its ongoing bid to acquire the iconic visitor attraction, ‘Skegness Pier’. It is one of the UK’s landmark seaside attraction destinations, and Mellors acquired the venue from leisure property advisors Christie & Co. for a reported £3m. This will be the latest acquisition in the organization’s list of entertainment operations, including the adjacent Fantasy Island Resort and running numerous entertainment events in the UK.

Staying with the UK, and another seaside acquisition was revealed. The iconic, if troubled, ‘Dreamland’ amusement park in Margate was revealed to have been sold by owners Thanet District Council – with the council having to execute a compulsory purchase for the seaside entertainment venue in 2011. Now it has been revealed that the seaside amusement park has been sold by the council, in December 2020, for the sum of £2.3m to Sands Heritage – acquiring the park consisting of a cinema, scenic railway, amusements, and parking. It was revealed that compensation will be paid to the original owners, to the tune of £5m. The council is facing the facts of its inability to manage the property, or achieve a return on its £19m investment in rebuilding the derelict attraction.

The iconic seaside venue [Dreamland]

The UK also figured in another announcement of a new entertainment project. Revealed by Intergame media, ‘Concourse Shopping Centre’ in Skelmersdale, UK, unveiled that Moorgate Developments had submitted plans to the local council, for the installation of an attraction-based experience on the mall’s second floor. The details for this Mixed-Use Leisure Entertainment (MULE) development have yet to be revealed, but are said to include VR attractions, mini-golf, bowling, and hospitality. The installation is encompassing existing retail units in its design.

Moving to the warmer climes of Malaysia, and the casino and entertainment corporation Genting announced its plans to invest some $800m into a brand-new theme park project. Under the title ‘SkyWorld’, this planned 26-acre theme resort will comprise some 26 attractions, as well as hotel and leisure elements. It is being built on the space currently used by the existing theme park, created by the organization. The new park will comprise many attractions, including those based on brands from movie group 20th Century Studios (a subsidiary of Walt Disney Studios). The Genting entertainment interests have previously partnered with Walt Disney, having been one of the few Asian operators of The VOID, VR arena space property.

- eSports’ Intense Competition

News regarding the consolidation of control in the eSports landscape is inevitable in the face of the explosion of interest in the platform. This includes attempts to control the ownership of the key providers of content, and the places to compete.

Though having been in discussions for months, February saw the completion by Electronic Arts (EA) of the acquisition of UK game developer and publisher Codemasters, for $1.2b. This will make EA the largest game publisher of racing videogames and entertainment properties, ranging from ownership of the ‘Formula 1’ properties, ‘WRC’ (World Rally Championship) properties, ‘Project CARS’, ‘DIRT’ and ‘GRID’ properties on console and PC, as well as the ‘Real Racing’ mobile game properties. While many will be familiar with the consumer titles in these series, there is also the use of IP that has seen SEGA Amusement International release several amusement titles based on these games, working closely at the time with Codemasters development teams.

Regarding the greater impact of this momentous acquisition, this development will make EA the world’s largest sports-related eSports game publisher (as observed by Esports News UK), with a calculated 430m players subscribed to the company’s multi-platform subscription service. The impact of eSports on the streaming and conventional broadcast media, and the EA acquisition, will obviously have impacts on the ‘F1 Esports Series’, ‘Virtual Grand Prix’ and ‘FIFA Esports’ championships. There are several peripheral eSports competitions that currently use Codemasters game properties, which will also be up for review as EA charts its new direction for these properties. EA is infamous for several elements added to its competitive titles, such as ‘Ultimate Team’ mode or microtransactions (loot boxes), and questions were raised if these elements would creep their way into existing Codemasters properties.

Intense motorsport competition, the big draw [F1 Esports Series]

EA is about to undertake a considerable restructuring of its operations following this latest acquisition, along with other developments. It is expected that a dedicated eSports operation in support of EA’s multi-platform subscription service will be cultivated, along with a possible cross-platform competition element that could be linked to a unique streamed channel (all speculation at this point).

It is important to understand that EA itself is rumored to be under consideration for acquisition by China-based Tencent, the largest game publisher in the world. Reports started to surface, at the beginning of the year, that Tencent was looking at a North American expansion, and the acquisition of EA was a strong possibility to achieve this. The corporations have not confirmed the validity of these reports, but industry watchers are not surprised by the possibility. EA is speculated to generate $1.790b per year and Tencent, with already extensive interests in the eSports arena, could easily see this as a perfect fit. The industry awaits developments with interest.

Continuing the trend in the game market (if not all aspects of the entertainment landscape), there were more mergers and acquisitions. Again, directly reflecting the interest in eSports. It was reported that Motorsport Games had started the process to acquire Studio397 – the developer and publisher of the popular ‘rFactor2’. The game is one of the most popular realistic racing simulator engines, with a large following of players, and deployment in the eSports community. Motorsports Games would, in fact, pay Studio397 owners Luminis International a sum of $16m for all the shares in the developer, whilst retaining control.

Studio397 supplies the simulation platform for eSports competitions such as the ‘24 Hours of Le Mans Virtual’ and the ‘Formula E Race at Home Challenge’ (formally the ‘AAB Formula E Race at Home Challenge’). Concerning the ‘rFactor 2’ racing content, this has been deployed into several commercial sim-racing centers, in malls and training venues, over the years.

The acquisition free-for-all that seems to be growing in eSports continued to gain pace with the latest news that an unsolicited proposal had been received by Allied Esports Entertainment (AEE), to be acquired by Bally’s Corporation. The casino resort and racetrack operator, and gaming company, placed an offer to buy all equity in the company for the sum of $100m. This was reported to be under evaluation by the board of directors at AEE – while another acquisition proposal to sell equity to Element Partners is also ongoing. A consolidation of operations in this sector seems to be growing in momentum.

As with the other reports we have been covering from the immersive landscape, eSports is also seeing its own explosion in new facility development in this sphere. Recent announcements also included what is called the “best-in-class performance venue” in the world. The facility will comprise a vast theater/stadium arena, comprising 7,000-seating, supported by broadcast capability, with its own entertainment space (planning to hold 200 events a year), and extensive hotel accommodation. This is a project that will see a $500m investment by OverActive Media. To be created in Exhibition Place in Toronto, Canada, the venue is scheduled for opening in 2025. The hope is that this site will place Canada on the map for holding and promoting eSports events and tournaments, and will also drive the coverage of this sport to new levels internationally. This is the latest ambitious eSports arena project reported in recent months, including plans in China, Los Angeles, Las Vegas, and London – and sure not to be the last.

Artist’s interpretation of the ambitious eSports venue [OverActive Media]

The adoption of eSports venues to dedicated VR experiences has been a continuing element in the emergence of both genres. Most recently, VRstudios Sports announced the launch of its ‘Hoops Madness’ basketball tournament sports experience. Following this, ePLEX, the South East California eSports venue with its sponsored and purpose-built stage and arena, revealed it will be hosting events which incorporate the VRstudios VR eSports competition across thei two venues.

The need for a strong tournament capability, emulating what has been seen in the bowling community, is a factor that drives much of the new investment in what is generally ladled as eSports, even if the definition is not exact. Other VR developers employing a dedicated eSports component to their releases include Virtuix, celebrating surpassing some 2-million plays on its platform, supporting five dedicated eSports games. Another VR manufacturer, VEX Solutions, represented by Shaffer Distribution in the States, has also promoted its competition credentials with an eSports model that is available for its ‘VEX Arena’ platform. Oher developers are following suit.

- Augmented Reality vs Mixed Reality

Interest in AR/MR tech has continued to gather momentum since CES’21 and this latest wave of interest in the tech has percolated across a number of sectors. Most recently, following on from the Toy Fair, news broke of a new joint development between toy giant LEGO and music content publisher Universal Music Group. The companies are partnering towards creating the ‘LEGO Vidiyo’, a music video streaming toy to allow children to express their creative side and create streaming videos of their interactions with the AR-based toy and selected music tracks. This is the latest AR-based incarnation employing the LEGO toy brand, but this is the latest to focus on a social media centric streaming platform.

The support of facility business using Augmented Reality was illustrated in a unique crossover (following on from the previous Stinger Report coverage). It was reported that a Castleton arcade called ‘Boss Battle Games’, a local arcade which was struggling with reopening, saw an increase in attendance achieved by AR. The company was one of the 1,000 global small businesses selected by Niantic to be able to become a venue for ‘Pokémon GO Gyms’. This allows players of Pokemon to come to the site and train and compete with their collected characters virtually. The gym’s physical locations act as gathering points. This follows on from the sponsorship deal carried out in 2016 with Starbucks, that saw some 7,800 stores across the US, turned into pokéstops, or gyms, as part of a promotion. Or as seen in Japan, with the 3,000 McDonald’s restaurants. Initially, Niantic had proposed this kind of sponsorship as a major business to create sponsored locations, supporting the scavenger hunt app, although the current conditions have paused this development until recently, with the free offer to small businesses – expected as a promotion towards a full rollout later in the year.

MR version of Pokemon GO [Niantic]

Niantic’s famous property was also in the news with the tease of a proof-of-concept in partnership with Microsoft. Using the company’s ‘Hololens 2’, Augmented Reality glasses, the demonstration shows a user of the AR glasses interacting with their Pokemon, in a demonstration of how the future ‘Pokemon GO’ multi-player game experience will work. This program uses the new ‘Microsoft Mesh’ – a MR program that allows collaboration via multiple devices in what was described as a “shared holographic experience”. It has become clear that Microsoft has attempted to promote its AR/MR aspirations, focused extensively on Enterprise deployment. In the face of new announcements from Apple and Facebook towards entering this domain, Microsoft seems to feel that publicity of a consumer-facing popular IP like Pokemon is a good strategy. We shall see.