#but in VR he's just messing around in a department store

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Holocafé: The Entertainment of the Future

Thanks to exclusive VR multiplayer titles developed in-house, every visit to the Holocafé is an unforgettable experience. In our report, we show you the history of the successful franchise model.

What do you do if you face an oversaturated market, being an indie developer? It’s a question that most developers struggle with regardless of their talent. The lack of AAA funds for marketing purposes requires creative solutions regarding discoverability, and even well-executed games can go unnoticed by the general public. The fact that platforms like Kickstarter are on the decline doesn’t help either, and many developers don’t even closely recoup the funds they put into production. What used to start as a democratization effort to make the market more accessible to independent teams has become an inherent discoverability issue across all platforms.

Whenever a truly new gaming platform arrives, it creates new opportunities for new teams. Vastly different control schemes, customer usage patterns, and new technological challenges give newcomer teams a blue ocean playground, especially if they’re one of the first to ship on the platform. It doesn’t come as a surprise that Oculus’ successful fundraising and subsequent purchase by Facebook led to a technological hype cycle not very different from Apple’s iPhone, which spawned a whole new generation of mobile devices across the industry. When the first consumer-ready VR devices hit the market in 2016, research companies like Digi-Capital predicted the market to hit $120 billion in revenues by 2020. Despite the bold predictions, the majority of established studios stayed hesitant while the platform immediately became a playground for independent teams. One of those teams is the German company Holocafé from Düsseldorf.

In Holo Arena, two to four players defend their common space together against drones with futuristic weapons.

The Game Jam that started it all In 2015, an invitation to an HTC Vive game jam in London sparked the interest for VR development in Oliver Eberlei, who used to run the independent studio Hammer Labs and was the founder of the Indie Arena Booth. The idea not just to sit there, but walk around a virtual environment and interact with it using 3D motion controllers was so compelling that he started developing the puzzle game Carpe Lucem – Seize the Light in collaboration with publisher Application Systems Heidelberg. The game then turned into one of the Vive’s launch titles, but exposed how bold the market researcher’s predictions had been: Despite facing a market that was far from saturated with content, the installation base was rather small, and its growth should be nowhere near the predictions.

Around the same time in 2015, another indie team from Düsseldorf was evaluating the new technology as well, but from a different perspective. The studio “Frame6”, founded by four MD.H alumni, got caught up in the same discoverability issues as many other Indies and their official Crysis tabletop game got shelved by their publisher despite very positive focus group tests. Two of their founders, Sebastian Kreutz and Jessica Karger, used to work in the advertising industry for several years including a two-year stay of Sebastian at Ubisoft Blue Byte’s marketing department. The company thus shifted their focus more and more into B2B marketing services and started exploring Virtual Reality for interactive real estate and trade fair visualizations. Since both Hammer Labs and Frame6 collaborated on projects frequently, they quickly got into an exchange about the different VR technologies they were using.

The arcade management platform was developed exclusively for the Holocafé and can be used by the operators to control everything from a single tablet.

VR’s fundamental problem The two Frame6 founders Jessica and Sebastian were so impressed by the Vive’s capabilities that they decided to go back into games. However, they found the home consumer VR situation difficult for exactly the reasons that Oliver had experienced. While Virtual Reality allows consumers to immerse into game worlds in a way that’s not possible with any other medium, it has one inherent problem: Motion sickness. While some of these issues were caused by early hardware not delivering the necessary 90 FPS per eye or low enough latency, one key issue remains until today, and that is locomotion. Have you ever seen people getting dizzy or nauseous reading while driving? A very similar effect takes place in VR once people use classic locomotion input such as the thumbstick on their game controller. While their eyes notice the motion at full intensity, their vestibular system is being messed up at the same time because it doesn’t sense any movement. This sensational disconnect is the main cause for motion sickness until today and can leave customers feeling sick for an entire day after just five minutes of VR usage with the “wrong” controls.

Both game and hardware developers have tried different approaches to mitigate the issue, such as omnidirectional treadmills or relying entirely on teleportation. However, even three years later, the problem is largely unsolved without a significant impact on gameplay. Even room-scale VR gives home consumers a limited experience considering how scarce living space has become. Also, home theatre constructors are certainly a neglectable target group when it comes to modeling a sustainable business plan. With these limitations in mind (and not wanting to knock over their cats while playing), the entrance price for the hardware remains a major pain point for consumers, so it’s still not quite a mass-market range of devices.

Fabios Fantastic Fun Factory offers several fun minigames like target shooting with bow and arrow, pig feeding, or catching butterflies.

Going location-based Back in 2015 and seeing the home consumer market challenges, the three Holocafé founders decided that the technology would be an excellent opportunity to revive the arcade scene that never really thrived in Germany. Regulations in the 90s and early 2000s placed internet and gaming cafés in the same category as casinos, making it impossible for operators to maintain their business whilst having to throw out their primary target group, teenagers. In addition to conservative regulation, affordable broadband internet cut away the demand for these offers, effectively making the business model redundant. More than ten years later, the political climate has become far more game-friendly, and phenomena like eSports have created a demand again for gaming bars, such as TakeTV or the Meltdown Bar. Within this climate, the new generation of VR devices seemed like the perfect opportunity to build a new location-based business. Before their devices were even available to purchase, the Holocafé founders sat down with HTC who at that time were searching for satellite locations to handle the overwhelming demand for B2B demos. The shared plan: Create Europe’s first VR Arcade.

Finding an appropriate venue turned out harder than expected, though. Going from digital distribution into location-based exposed a myriad of previously unknown barriers, ranging from the scarcity of suitable sites over regulatory issues such as fire protection and construction permits to even more regulations. During this lengthy learning process, it became clear that the company needed a pivot. At the time, there were only very few commercially licensed titles available, and those that could be used did not quite fit a location-based setting. While the content had been produced for home consumers and thus a small installation base, most developers played safe and went for small singleplayer experiences as opposed to risking empty gameservers.

In Chaos Commando, you give orders to your teammates while dealing with toggles, switches, and buttons by yourself to save the most inefficient space station of all times from falling apart.

Common-Space VR was the key The founders started to question the available content. Would isolated experiences motivate people to go to and play at a physical venue? Most leisure attractions are built around the fact that people prefer bringing their friends or their family along. Whether it’s bowling, laser tag, escape rooms or movie theatres – all of these leisure offers are aimed at social experiences. Why should it be any different with VR? At the time of these considerations, HTC was impacted by a global restructuring and the original plans for a shared VR arcade got lost, forcing Holocafé into a pivot that later turned out to be the key to their success. The team started using their main background to create custom games dedicated to location-based entertainment. While the social aspect was clearly the main focus, the team took advantage of SteamVR’s tracking architecture, which allows for multiple devices – and thus multiple users – to be tracked in the same area. After some experimentation, the company’s main product came together: A 30 square meter large “Holosuite” with space for four players.

In contrast to other networked multiplayer approaches, players could, for the first time, share the same physical and virtual space, making the need for communication via headsets redundant. Instead, the team installed an open surround system providing game audio, while the players could naturally communicate and interact with each other. This common-space approach to VR gaming had so far only been in development by warehouse-scale providers such as The Void. Holocafé’s focus on more compressed spaces opened up the opportunity to build stores in city centers where the rental price per square-meter is too high to establish warehouse-scale offers. Throughout 2016, Holocafé developed prototypes for their first three common-space games Holo Arena, Chaos Commando and Carpe Lucem, the latter was a former singleplayer experience and turned into a multiplayer game. While warehouse-scale VR experiences all went for shooters and action games, Holocafé tried to take the Nintendo approach to create a niche for family-friendly gaming, with all games receiving an age rating of 6+.

The spaceship-themed Holocafé Flagship Store in the city center of Düsseldorf launched on December 1st in 2018.

A wholly different market The first market test launched in late 2016 in the form of a three-month pop-up store. To mitigate the challenges of going location-based, Holocafé partnered with the retail giants Unibail-Rodamco, Metro and Media Markt and established an 80 m2 pop-up in the shopping mall “Düsseldorf Arcaden” which hosted two Holosuites. While the team hoped that their social approach would succeed, it was necessary to test the actual demand before investing heavily into permanent store construction. Would people be willing to go out to play again and would they be willing to pay for it?

In order to create a meaningful market test, the team chose an organic approach to marketing and PR. While they did have their website and social media channels, they did not put a single cent into active marketing. Instead, a pre-launch press event was hosted in collaboration with Media Markt and on the opening day, people could line up for short, free sneak-peek sessions. After that, the company ceased all active communications to measure how the occupancy of the store would evolve. The price was modeled at 12 € per 30-minute session and player to keep the group price just below 50 €. Thankfully, Holocafé experienced organic growth, and after three weeks of being open, the store hit its capacity limits on weekends.

The team also needed a measurable comparison between the better-known singleplayer games such as The Brookhaven Experiment, The Lab, Space Pirate Trainer and their own common-space games to figure out whether an in-house development or external licensing approach should be pursued in the future. While the team was confident in their approach, the numbers surprised them: Over 92% of their revenue was generated by their custom-made games that nobody had known at this point. Also, while the three founders expected the target demographic to be similar to the online crowd, it turned out that core gamers were just a fraction of the location-based audience. The ages spanned from 6 to 82 years with a 31% ratio of female guests and more than 75% of the players having no prior VR experience – a demographic that hasn’t changed much in 2019, except that the percentage of female players increased. In certain ways, location-based VR seemed to have reached a broad target group outside of the typical gaming bubble, much like the Nintendo Wii once did.

The location in Düsseldorf offers capacity for a lot of guests and is very suitable for the organization of children’s birthday parties.

Launching a Franchise The pop-up store’s success led to an immediate search for permanent real-estate in the team’s home town of Düsseldorf. With various universities, a large Japanese community and the somewhat connected geek/otaku fan scene, the city seemed like an ideal ground to establish the first permanent venue. With Germany’s trade hour laws, the team couldn’t stay at its previous mall, since opening on the important Sundays could only be done within a standalone venue. In an unexpected turn of events, the first Holocafés opened up in the cities of Troisdorf and Aachen instead but were not operated by the founders themselves. Some of the pop-up store guests turned out to be leisure facility operators and entrepreneurs looking for new retail concepts. So while the founders were struggling to find a venue in their own city of Düsseldorf, some of the entrepreneurs already had their venues at hand. Once again, the team had to go through a learning process in a completely different area than game design by establishing a franchise program.

This process didn’t just require legal advice, but some heavy software engineering to develop the needed infrastructure for franchising. While the pop-up was a success, it also exposed weaknesses in both the games and processes. The unexpected target demography caused a significant support overhead with the games that were licensed from third parties. While the user interfaces were designed for typical Steam users, location-based players were already overwhelmed with menu systems that any core gamer would deem the most straightforward thing on Earth. Since location-based players are purchasing playtime as opposed to a game license, they do not want to spend their time browsing through menus, configuring their client, going through lengthy tutorials or trying to find other players in matchmaking systems. In fact, the best way to onboard players in a location-based scenario is to not expose any menu at all to them and to keep controls as simple as possible. Since the Holocafé team could not do anything about the third party games other than curating them out of their offer, their own games had undergone some heavy refactoring following these learnings. Another phenomenon that the founders have faced was a TV-like zapping behavior of customers. Initially, they could spend their booked game time with any game they wanted, so they tried to make the best out of their time by quickly hopping through all the games. Ironically, that caused the exact opposite: an unsatisfactory user experience. As a result, the team changed the entire booking process and the flow of the games so players could only book specific experiences at a set duration so they would take in the whole dramaturgy of a game. While this step posed a significant risk, it boosted user retention and satisfaction significantly. Inspired by the success of location-based offers, the Düsseldorf neighbors at Ubisoft Blue Byte requested the consultation of Holocafé to launch its own location-based offer focused on digital escape games. These games have now become the first permanent third party offer besides the continuously growing catalog of Holocafé-made games.

At the Holocafé, not only fantastic multiplayer games await you in the virtual reality, but also a very real, extraordinarily themed café!

Becoming a platform Not allowing the users to control any of the processes required the creation of an arcade management platform to automatize anything that could create problems. Moreover, these problems come in various forms, such as broken and forced SteamVR updates that arrive at the worst of times. Being responsible for the stable operations of their franchise licensees, Holocafé decided to make their platform completely independent from Steam and other third-party services by creating a content delivery network that would let operators have full control over when to deploy patches and even roll back versions in case of technical issues. Regardless of the size of the store, the Holocafé platform allows operators to control everything from a single tablet to make player sessions mostly attendant-free and detects technical failures to help users in trouble before they even ask for help.

One of the major challenges with VR is that first-timers have no clue what awaits them until they tried. This makes it even more important to build customer retention and use existing customers as messengers. However, since first-timers don’t know how VR works at all, an easy and intuitive booking system is a crucial component to drive traffic to venues. Once the user starts worrying whether a room is for one or multiple players and whether players can join the same world across various rooms, they will pick up the phone instead of making a booking themselves. In the retail world, though, personnel is one of the main cost drivers, so cutting phone contacts and have customers manage their bookings on their own is in the best interest of any operator. In order to maintain a continuous user journey, Holocafé needed to not just create the operator tools at the venues, but come up with an online platform solution that would allow users to intuitively place group bookings, make online payments and purchase gift vouchers. At the same time, operators required more and more business intelligence tools to analyze the behavior of their audience. How far ahead do people book? How do demography, user retention, and game attractiveness evolve after updates? Holocafé needed to develop solutions for all these day-to-day questions, which resulted in the creation of a rather powerful location-based VR platform.

Looking ahead While initially being pure game developers, the Holocafé founders managed to open their own flagship store after struggling with landlords, regulation and constructing of close to 300 square meters of drywalls, electrics, air conditioning and gastronomic assets for 18 months. On December 1st in 2018, their spaceship-themed store opened in the city center of Düsseldorf and had them face the not-so-digital challenges that any retailer has to go through. The team has grown to nine people at their main venue and using their digital and brick and mortar learnings, the company is on the brink of scaling to an international franchise. New installations are being rolled out in Cologne, Gießen, London (Ontario) and the Åland Islands (Finland) and many more under negotiation.

Holocafé has successfully managed to revive the arcade scene and the appeal of gaming cafés but is looking for the next challenges and improvements. Right now, they are working on multitouch tables for the tabletop gamer crowd in their cafés and are rolling out a gastronomic concept with organic coffee, homemade waffles and themed food that is aimed at geeks and gamers. At this year’s gamescom, the company is pulling together the international location-based VR and AR industry under the umbrella of the “XR Boulevard” to showcase the rapidly growing entertainment offers outside of the home entertainment market.

Oliver Eberlei

Studied Digital Media at the University Darmstadt and founded his indie studio Hammer Labs in 2013 with Farm for your Life. He also founded the Indie Arena Booth, which has become the main exhibitor space and meeting point for independent developers at gamescom and beyond. Oliver is the technical lead and platform developer.

Jessica Karger

After graduating from MD.H Düsseldorf as a game designer, Jessica co-founded the indie studio Frame6 with her focus being the art director and working on B2B projects e.g., for Mercedes Benz, Ubisoft, and Astragon. At the Holocafé, she takes care of both, HR and art direction.

Sebastian Kreutz

After years in the advertising industry, Sebastian worked at Ubisoft Blue Byte, graduated from MD.H in the same year as Jessica and co-founded Frame6. He was the lead game designer of the Crysis tabletop game and worked on clients such as 20th Century Fox. He is responsible for business relations, finances, and physical construction planning.

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