One of the many ways that the worlds of tech and media have pivoted in 2020 is virtual events. And just like remote work, curbside pickup and other Covid-era business pivots, there are virtual event business models being discovered that could actually stick around.
The latest evidence of a meaningful business case for 3D virtual events comes from the revelation that Travis Scott’s landmark Fortnite event in April yielded him a $20 million payday. We already knew that 12.3 million people showed up, but the dollar returns shed new light.
Revenues came from merchandising that’s attributed to the nine-minute event, and reported payouts from Fortnite maker Epic Games (unconfirmed). Most notably, this compares to Scott’s last tour, whose 56 stops yielded $53.5 million — just under $1 million per show.
For one, this validates several things we’ve theorized about virtual events — namely the margins and network effects that can be gained from placeshifting. If the web offers anything, it’s an ability to achieve scale: 12.3 million attendees don’t fit in a physical event venue.
With that scale, pricing can be lowered while preserving margins. Furthermore, overhead shrinks when delivering bits versus atoms (venues, staff, stagework, etc.). Boiling that down to real numbers, $20 million from 12.3 million attendees works out $1.60 per attendee (ARPU).
Considering those unit economics, virtual event models — and versions that continue to evolve — can bring scale and software economics to live entertainment. Low ARPU at scale is Fortnite’s jam, but this could also serve artists in dire need of more viable revenue models.
Virtual 3D and VR events can also serve fans. Though nothing replaces the visceral experience of a real concert, virtual shows present optionality where the two models can co-exist for different contexts. Some occasions call for paying $1.60 versus $160, or somewhere in between.
If you’ve been to a concert in the past decade, you know the feeling of cash getting sucked out of your pockets. Beyond escalating and unsustainable ticket prices, there’s parking, exorbitant food & beverage costs, and don’t forget other soft costs like transportation and child care.
So that’s the cost differential…. What about the experience differential? The Travis Scott show was engaging and novel according to attendees. And that will only improve. Even if the “experience value” is 20 percent of an IRL concert, it’s still a bargain at 1 percent of the cost.
So that presents two tracks for live events. The Beyonces of the world can still host mega-tours. But they — and a long tail of smaller acts — can backfill the calendar with immersive VR concerts. This could give smaller musicians a viable channel….just like blogging democratized publishing.
Now consider business conferences. Here, we’ll invoke the concept of share of wallet. One thing learned from years of large-scale event programming is that when marketing a destination event, you’re essentially proposing a given executive pay (or expense) of $2K-$3K, all-in.
But the event organizer only gets about $1000 of that, depending on registration fees. The rest goes to United Airlines or Hilton Hotels (or the bar tab). The same formula applies to musicians. How do you capture a greater share of wallet, even if that means lower user spend?
Put another way, could the value proposition to attendees be to pay $200 for a virtual event? That’s 10-15% of the all-in cost for attendees, but 100% share-of-wallet for an event producer. It’s also mostly margin, given less overhead like venues and forgettable continental breakfasts.
Conference gross margins are about 40 percent, given per-attendee costs (fluctuates with volume and fixed-cost amortization). Applying that to the $1000 ARPU above yields $400. The question is how to reconcile the gap between the $200 and $400 margins per-attendee in these two models.
The answer is volume. By diminishing cost, friction and time, event producers can attract more attendees per event. There’s also frequency (a form of volume): With significantly-less production requirements for virtual events, they can be done more often and by subdivided teams.
Moving on to user experience, the challenge here is to create an event experience that’s truly immersive….not a glorified Zoom call. The above economics won’t work for something webinar-like, as the world has been conditioned to expect webinars for free. We can’t unring that bell.
Beyond behavioral economics, the experience itself has to be compelling enough to overcome typical adoption barriers and “activation energy.” As Visicalc inventor Dan Bricklin says, any new technology has to be two orders of magnitude better than its predecessor to get over that hump.
One way to get there is to reengineer events around VR’s advantages. 8th Wall’s Tom Emrich points out that this is an opportunity to use VR’s suspension of physics to do things you can’t do IRL. For example, mute attendees in a virtual ballroom for private sidebars with specific people.
That brings us to conferences’ real draw: networking. Can VR alleviate scalability challenges like chasing down leads at an event with finite meeting slots? Can virtual status indicators float above attendees’ heads so BD pros can work the virtual room in hyper-targeted ways?
If they can also timeshift and placeshift by interacting with the same targets in VR for weeks after the event, they’re no longer bound by a 36-hour sprint before they have to fly home. Joining that precision can also be serendipity in speed dating formats. Think: Chatroulette meets Altspace.
We can already hear the chorus of comments about virtual networking not having the visceral quality as physical conferences. And that’s accurate. There certainly isn’t the classic booze-fueled late-night big sale at the hotel bar offered in platforms like Altspace or RecRoom (yet).
And we need less onboarding friction. Though it’s not a favorite tactic of platform providers, infusing other social graphs can ease authentication and onboarding. Facebook Horizons has a native edge here. Meanwhile, LinkedIn and Altspace are corporate siblings. Just sayin’…
But one thing’s for sure: it has to be in VR or at least 3D, a la Fortnite (or both). Zoom isn’t going to cut it in terms of immersion levels that justify the price of admission. Notice that Travis Scott’s $20 million didn’t happen in 2D. Three dimensions is the only way to compete with real life.
Whether it’s music or business, we go back to the point about dual-tracks. The AWEs of the world can and should still hold a few massive annual events for their communities to assemble. But the remaining 98 percent of the calendar year holds ample real estate for virtual interaction.
Combining that time inventory with virtual-event unit economics presents an opportunity for artists, musicians, psychologists, and business thought leaders to liquidate their time. That could bring software economics to events in ways that enable millions of tiny Travis Scotts.