Tsinghua University and Beijing Foreign Studies University's top students "play" life, caught the attention of miHoYo twice.

"I just hope to have a place where I can invite that girl who always stays at home." Recalling the opportunity to open the first offline escape room in 2012, Xu Aolin, the founder of Mystery House, confessed.

Because of this "little idea," Xu Aolin, a graduate of Beijing Foreign Studies University, and three friends who graduated from Tsinghua University, Renmin University of China, and Beijing Foreign Studies University, pooled together 15,000 yuan, designed several puzzle games, and rented a basement to start a side business. Unexpectedly, the escape room business grew rapidly, and these four "academic tyrants" with decent jobs decided to quit and turn their side business into their main one. They became the first group of escape room designers in China. That girl later became Xu Aolin's wife.

During an interview with "China Entrepreneur" magazine, Xu Aolin appeared somewhat reserved, sitting upright at his desk. The stack of papers on the closed laptop in front of him served as a container for his creative ideas. However, when the conversation turned to the challenges encountered in developing the game "Mountain and River Adventure," this tech-savvy but not very articulate person suddenly opened up, doodling on a blank piece of paper a maze that outsiders couldn't understand, along with all its twists and turns. His intense focus during game development immediately became vivid.

Mystery House is a domestic creative reasoning puzzle game and real-life entertainment content design company, with Beijing Zhenyu Aoxiang Cultural Creative Co., Ltd. as its main entity. From offline escape rooms, offline VR spaces, puzzle books, to online games, this company has made a name for itself in the entertainment field that can incorporate puzzle-solving reasoning.

The largest shareholder of Mystery House is miHoYo, holding a 23% stake. miHoYo invested in Mystery House twice, in 2019 and 2021. In 2019, miHoYo led the A2 round of financing for Mystery House with 40 million yuan. In March 2021, miHoYo once again invested in Mystery House.

Regardless of the transformation, Mystery House has excellent product capabilities, which is why miHoYo, who has been reluctant to extend an olive branch to content companies, has invested in it for two consecutive rounds.

However, Mystery House also has its own weaknesses. The four partners, all graduates of law schools and passionate about puzzle games, are rigorous in logic and adept at studying puzzles, but not proficient in business models. Over the past 12 years, the company has experienced ups and downs three times.

During the escape room boom around 2017, Mystery House once operated more than 50 global chain stores. After reaching its peak, due to reasons such as the existence of a ceiling in single-store traffic, heavy assets, difficulty in standardization, and high content iteration rate, the escape room business of Mystery House declined. Subsequently, Mystery House transitioned to VR experience spaces, puzzle books, and online games.

Although the VR escape room experience space reduced the cost of soft furnishings and the leased area, the model was still considered a failure—because the essential need for offline entertainment is not content, but social interaction. "In the VR world, if players can't see each other, how can they socialize?" Xu Aolin regretted that he should have clarified the core of offline entertainment earlier.

While solving the problem of lightweight assets, books for solving puzzles in real-life settings such as subways brought about challenges in the design, production, and inventory turnover of the books themselves, once again becoming a challenge for operating publications.

After reviewing the two transformations, Xu Aolin decided: when the team excels in creating content, they should eliminate as many non-content factors that may hinder revenue as possible and focus more on monetizing through content.

Therefore, in 2020, Mystery House abandoned all physical entities and went all in on online games. Today, Mystery House's second game, "Mountain and River Adventure," has sold over 200,000 copies on Steam, and Xu Aolin finally feels that he has made the right choice this time.

Over the past four years, the offline entertainment industry has experienced significant changes, with many operators behind the scenes of escape rooms leaving the market. Despite facing challenges in commercializing puzzle-solving content, Xu Aolin proved to be adaptable and successfully steered the course for his company, Mystery House.

Xu Aolin's Account:

From Peak to Decline

In 2012, I played an old-fashioned offline escape room in China and found the quality lacking. This inspired me and a few friends to build our own.

At that time, I and three friends from Renmin University, Tsinghua University, and Beijing Foreign Studies University came together and designed several puzzle games. We rented a basement and embarked on our entrepreneurial journey.

We all graduated in law and were working as lawyers at the time. Initially, the startup capital for our first store was only 15,000 yuan, with rent costing over 4,000 yuan and interior decoration costing over 10,000 yuan.

At first, we treated this rudimentary escape room as a way to earn extra income and as a gathering place for friends. I vividly remember that our first weekend's revenue was just over 700 yuan. The founders happily spent all the money on a meal at Haidilao Hot Pot.

During that time, the escape room was also related to our romantic encounters. I invited a rather introverted girl to the escape room and eventually won her over. She is now my wife.

Later, the number of escape room businesses, both domestically and internationally, continued to grow. By 2012-2013, the cost of a single escape room was approximately 500,000 yuan, and the business could break even in about six months.

Around 2017, Mystery House had nearly 40 direct-operated and franchised stores in China and over a dozen overseas, spanning cities such as New York, San Francisco, Toronto, London, Paris, Phuket, and Melbourne. For franchise stores, we only charged a brand franchise fee and a one-time content authorization fee, with continuous revenue coming from direct-operated stores.

The turning point for the industry came in 2018. The annual growth rate of the offline escape room market reached 60%, leading to intensified competition. The evolution of escape rooms shifted from traditional ones to mechanical, audio-visual, and electronic (MAE) rooms, then to NPC (live-action role-playing) rooms and immersive rooms (requiring players to assume roles and search for evidence).

The costs for each stage increased successively. The investment for a single escape room rose from 500,000 yuan to around 3 million yuan. However, consumer purchasing power did not increase proportionally. Our pricing went from 80 yuan to 150 yuan, but was later adjusted back to 120 yuan to increase customer flow. The efficiency of single stores continued to decrease, and we realized that the golden age of escape rooms was fading.

In addition to the rising costs of single stores, the high rate of content iteration was a continuous challenge for escape rooms. Due to the nature of escape room experiences, where once completed, players do not return, the thematic content needed to be redesigned every six months, along with the simultaneous replacement of interior decorations. This posed an additional financial burden for the company.

From a content perspective, offline escape rooms also faced difficulties in replicating content standards. For the same theme, adjustments were required for different spatial layouts, making the franchise model not easily replicable in a standardized manner.

As a content creator, I particularly hoped that the games I designed could be experienced by more players. However, due to the geographical limitations of offline escape rooms, the audience for a theme I painstakingly created might be limited to just tens of thousands of people, lacking a sense of achievement. The biggest limitation of offline escape rooms was the limited reach.

Cutting Losses

In 2017, escape rooms were still a hot trend, but the industry competition had intensified.

At that time, we heard about a large-scale VR offline experience brand, the Void, in the United States, which had received investment from Disney. The logic behind this offline entertainment experience was to bring the gameplay from "Ready Player One" into VR experience stores. The space required for VR experiences was smaller than that for escape rooms, with minimal store assets, and content distribution and iteration were independent of the venue, making standardization easier.

A VR experience store only required a 6x6 square meter space, with almost zero decoration costs. The only hardware needed was a computer backpack device, a pair of VR glasses, and a controller for each player. These seemingly "perfect" aspects addressed the commercial bottlenecks of traditional escape rooms. We were all excited and began to build the VR experience store business from scratch.

In 2017, when the cost of a single escape room had risen to over 2 million yuan, the cost for a VR experience store could be controlled between 500,000 to 1 million yuan. At the beginning, the revenue from a VR experience store in just three months equaled that of an entire year for an escape room. Consequently, we quickly expanded to 10 stores and even started developing VR full-chain products such as sensors and controllers.

Unfortunately, the good times did not last. Six months later, the customer flow for VR experience stores began to plummet. One store had not even finished its decoration when another store had to close due to losses, resulting in penalties for breaching the lease agreement.

After conducting research, we realized that the essential need for offline entertainment lay in social interaction, rather than content. When we were younger, why did we go from one escape room to another? Some people genuinely enjoyed escape rooms, but many players did so for the lively experience of youth, for social gatherings and interactions with friends. If we didn't go to an escape room, we would go to a karaoke bar or play murder mystery games.

Upon reviewing the issues with VR spaces, we understood that their biggest flaw was the lack of social attributes. Current VR products are striving to capture facial expressions, aiming to reintroduce social scenes that were previously blocked. In theory, this is possible, but the current state of skeletal tracking and facial expression capture is still far from real human interaction. The experience of playing games in a VR experience store is not significantly different from playing VR games online at home. Additionally, removing the VR headset could ruin one's makeup, making it difficult to maintain a polished appearance in public.

When these issues kept popping up, we hesitated to close the VR experience store business. However, when one of our partners visited the Void and found that the experience was not as impressive as expected, we became more determined to cut off this business.

When one door closes, another one opens. After the short-lived trend of VR experience stores, we conducted a lot of reviews and decided to re-examine the offline content industry to find a better product form.

At that time, our answer was puzzle books. The inspiration for puzzle books came from my experience in Tokyo, where I saw many people on the subway looking around and later learned that they were playing a game called "Subway Escape," which involved solving puzzles based on clues in the real subway.

Puzzle books required zero offline assets, and this product once again gave me hope for the product form. Subsequently, we developed related books and also launched an online app. Players who couldn't gather evidence on-site could still recreate the scenes and play online. The business model involved paid books and a free app.

The puzzle book business of the Mystery House has gone much further than the VR experience store and remains the main source of income for the Mystery House. The revenue from just three books in the Forbidden City "Mystery Palace" series reached 150 million yuan, and the revenue from other puzzle books also exceeded 10 million yuan annually. From 2020 to 2022, we gradually closed down the offline escape rooms, and the revenue from puzzle books accounted for 70-80% of the company's total revenue.

However, puzzle books also have their own business model bottleneck. The peripheral attributes of puzzle book products are too strong, and a large portion of the cost is spent on IP licensing fees, packaging, and binding craftsmanship. The part of the selling price that reflects the value of content design is very small.

For example, a "Subway Escape" book, after finally breaking even, requires funds to be paid to the printing factory for production, and the cash flow quickly runs out. It is also difficult to estimate the production volume of books, and some publications are still sitting in the warehouse.

This is also the reason why we crowdfund our products in advance - to predict the sales volume to a certain extent based on the amount raised, although the prediction may also be inaccurate.

All in the game, content is king.

After two business transformations, the Mystery House seems to be getting closer to a business model that suits us, but we still haven't found the best path.

Coincidentally, in 2019, I had a meal with Dawei Ge (Liu Wei, co-founder and chairman of miHoYo). He heard about the ups and downs our company had experienced and felt that there were many similarities with miHoYo. After learning about the different forms of reasoning products we had been working on, he invested in us and encouraged us to transform online.

The funding, product strategic planning, operation, and distribution provided by miHoYo have become the backbone for the Mystery House to go all in on online games.

In early 2021, we launched the first reasoning game "Mimo," which took 6 months to develop and received a high score of 9.4 on TapTap (a mobile game download platform). On January 31 of this year, a case-solving game set in the Qing Dynasty called "Shanhe Travel Detective," which took 3 years to develop, was first launched on the PC platform Steam and sold over 200,000 copies, earning a reputation score of 9.7.

The commercial logic of independent games is relatively simple, with revenue mainly coming from consumer payments and expenses from development and promotion costs. Additionally, Steam's platform revenue model involves a 30% commission on game sales, without the need for advertising expenses. While advertising expenses can be incurred on TapTap, the costs for promoting independent games on this platform are generally not high.

This means that game distribution and operation are relatively easier compared to offline entertainment and publishing businesses. For those of us who excel in content creation, the current state of the Mystery House means that all fixed assets, inventory turnover, and standardized store issues no longer exist, allowing us to focus solely on content. This time, I feel that the company has finally embarked on the right track.

Currently, the revenue from "Shanhe Traveler" can also prove this point. Our game business costs are approximately 15 to 20 million RMB. Based on the domestic price of around 58 RMB and the overseas price of around 100 RMB, minus the 30% commission from the Steam platform, selling approximately 300,000 to 400,000 copies of the game can break even.

Looking back on the 12 years of the Mystery House, we have always had a good reputation, with our main advantage being that all four of us are lawyers, very rigorous, and have always been deeply committed to content creation, with our creative passion never diminishing.

For example, our permanent development team for "Shanhe Traveler" consists of approximately 16 people, including myself, over 10 planners, several programmers, as well as a historical consultant and a forensic consultant to ensure the rationality of the game's plot.

During the development period, I would wake up at 4 a.m. every day, go to bed at 10 p.m., and when my mind was exhausted, I would study history and read many detective books and materials. I also summarized the differences between the product forms of detective games and detective novels—detective novels can share information with readers without any difference, as long as there is a shocking reversal at the end; while online detective games need to be fair to players, with all clues fully laid out and the logic being particularly rigorous. Only by grasping the logical content of the product can the product be done well.

However, we did take some detours in terms of the business model.

It takes courage to make tough decisions, and for me, the most wrong decision I made was to make a wrong decision in order to keep everyone busy and secure their jobs.

For example, the revenue of the VR experience store plummeted within six months, but I continued to invest in it, only stopping after a year and a half. Fortunately, we eventually managed to stop the bleeding and, with the infusion of external funds, made it to today.

When the company was established, at the age of 24, I was determined to achieve independence and self-reliance by starting my own business. Now, at the age of 36, I am beginning to ponder the meaning of "not confused," and I have a better understanding of the corporate positioning of the Mystery House: not to focus on flashy forms, but to concentrate on doing content well.