IMAX CEO Talks Virtual Reality and His Plans For High-Tech Arcades

IMAX has virtual reality fever.

The big-screen theater giant opened its first VR hub this month in Los Angeles. People will pay $10 to strap on a VR headset inside one of 15 soundproof rooms to experience either VR video games or films for roughly seven minutes.

The VR arcade in Los Angeles is one of six VR hubs that IMAX (IMAX) will debut worldwide this year. For many people who have yet to fly spaceships in VR or stood next to their favorite actors in hit films, IMAX’s new arcades could be their first experience.

In this edited interview with Fortune, IMAX CEO Richard Gelfond discusses why IMAX is pushing into virtual reality, what it hopes to learn from its new entertainment centers, and whether the emerging VR technology is ready for primetime.

Fortune: Why are you building virtual reality centers?

Gelfond: Because of IMAX’s brand, we felt we were in a very good position to be a first mover in the VR entertainment space. Many people have described VR to us and they’d say, “We’re the IMAX of VR,” meaning they’re providers of a high-end virtual reality immersive experience. We said, “Gee, why couldn’t IMAX be the IMAX of VR rather than someone else being the IMAX of VR?”

We bring entertainment technology and we’re joint venturing with Google (GOOG) to build a cinema-grade camera. We have relationships with filmmakers and studios. We raised a $50 million dollar VR fund to create content. We do location-based entertainment and we know how to manage it with our 1,200 theater network. Finally, we have relationships with real estate developers, so we’re in an extremely good position to actually roll it out.

Tell me about the challenges of debuting these hubs.

One of the biggest challenges is the timing. VR is not a finished product as much as a work in process. I don’t know what the best headset is. I don’t know whether gaming content is better than movie content. I don’t know how much you can charge. I don’t know how long the experience should be. There are a lot of unknowns.

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We decided to test the waters to really learn what the variables are. By the end of the first quarter of this year, we’ll have six locations in a number of countries and we’ll start to get data. We’re going to learn a lot and we’re going to be really flexible because we don’t have the answers.

Do you see VR becoming a theater-going experience or is it something for the home?

I think they can both exist side-by-side. If there’s a blockbuster movie, you’re going to want to see it in IMAX, then you’ll see it in your home. If it’s not a blockbuster, you might skip an IMAX and just see it in your home.

To give you an example, if there’s a big Star Wars movie coming out and you have the chance to fly the Millennium Falcon in a cheaper way than you could afford in the home, you’re going to do it. I think you might then buy [a VR headset] and do it in your home later.

One of the big things is cost. In the home, you’ve got to buy the headset, you need the computing power, and you need the room space. We see theaters as being complementary. You can pay $10 to see VR in the theater and maybe later when there’s a lot more content, then you’ll do it in your house. This seems to us like the way the business is really going to start.

Why is now the time to open VR hubs?

I think we’re close to an inflection point on the content side. You have studios starting to make their own content. You have well-known filmmakers, like the Russo brothers and Michael Bay, starting to make their own content. You have entrepreneurs like David Ellison and Skydance starting to do VR gaming content. It was never going to work unless you had content. I think we’re in the first wave of significant, high-end content.

What’s a VR experience you’ve seen that made you realize VR’s potential?

I try not to relate too much to my personal experiences. I think that’s limiting. There’s just enough heat around different things that we believe a fire could start quickly. By the way, we could be early. It’s possible, but I’m not going to spend that much money in the short run. If we’re early, we’ll still have the resources to do it when the time comes. We’re trying to keep it manageable.

Businesses seem to be only dipping their toes in VR despite the hype.

I think a year or two ago, a lot of money was being poured into specific companies. I think maybe the development has been slower than people thought at the time. That’s why we’re trying to invest and develop a flexible platform, because I think it’s tough to pick what’s going to win. I’d rather bet on a platform that could evolve when it becomes more clear who the winners are going to be.

Which VR headsets will you use for the new hubs?

We’re going to primarily use the HTC Vive. There’s a lot of content available for the Vive. We’re also experimenting with the Starbreeze [Stockholm-based VR entertainment company] headset. We’re working with Acer, who’s partnered with Starbreeze, on those next-generation headsets. We hope we can use those as well.

Is Facebook (FB), which makes the Oculus Rift VR headset, involved?

At the moment they’re not, but we’re open to talking to anybody.

What’s some of the VR media you want to show?

When a movie is in production, we’d like to create a companion VR piece. I think there’s a natural tie-in when someone sees a really exciting adventure and they could be part of that adventure [in virtual reality]. That’s the place we want to get to, and we’ve had preliminary conversations about that. We’re not there yet.

Would it be something like the VR experience that accompanied the new Ghostbusters movie this summer in which people can hunt virtual ghosts?

Yeah, so that experience was done by the Void [a VR entertainment studio]. It’s a very good, high-end experience, but that’s more an inclusive experience around that one thing. We hope to have a variety of offerings in a different type of environment, but that’s an example, yes.

Do you foresee these VR experiences as being additional marketing for movies, or do you envision them as something more?

We’re going to stay away from using VR as a marketing tool, although certainly if people want to use it promotionally and want to sponsor it, I think we’d be open to that. Our plan is not to charge for a marketing experience.

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Do you have a sense of the general public’s hunger for these kinds of VR experiences?

You mentioned the Ghostbusters experience. That’s part of Madame Tussauds [wax museum] in New York. People are paying $20 for that. It’s a significant demand. Starbreeze has a portable VR facility, and I think they charge close to $20, and there is a lot of demand.

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