As the Oculus Rift makes headlines for snagging big-time consumer interest, the annual investment in augmented and virtual reality companies has hit an all-time high.
The market has seen a record $1.1 billion invested into AR and VR companies in 2016 so far this year, according to Digi-Capital, marking the first time that investment has topped a billion dollars in any year. It also shows incredible growth compared to the $700 million invested during all of 2015. About $800 million of the $1.1 billion investment this year went to first-mover Magic Leap, but even taking that company out of the equation, investment is up 20 percent in Q1 2016 compared to the $250 million invested in Q4 2015.
The study is just one indicator that the drumbeat of virtual reality is getting steadily louder. Headset launches are on the upswing: The Oculus Rift is already taking orders, and HTC’s Vive will be released this spring. The Sony PlayStation VR also will be coming out later this year.
All of this activity could create a very interesting market indeed: Digi-Capital said that overall augmented and virtual reality revenue is forecast to hit $120 billion annually by 2020. But a large part of that will depend on the price points for the glasses and the availability of content beyond a few premium offerings.
Oculus Rift Takes Aim at the Mass Market—Despite Pricing
Given that VR can be viewed using even the simplest headsets — Google has one made of cardboard for the education market — and most consist of goggles that users simply pop their smartphones into to use, the ease-of-use barrier is low enough to spark interest, industry-watchers say. But the first big commercial launch, the Oculus Rift, could suffer because of its relatively high price point—it goes for $599.
Facebook bought Oculus Rift last year for $2 billion—and CEO Mark Zuckerberg has said that it needs to sell 50 million to 100 million units in order for it to live up to expectations and become an important platform. Once open for pre-orders in January, the device quickly sold out the first round—and at least one analyst, Wedbush Securities analyst Michael Pachter, estimates that it should sell 1 million units this year, and depending on content, even more.
“[Oculus Rift makes virtual reality] very viable,” he told GamesBeat. “The price is much lower than I thought it would be.”
R.W. Baird analyst Colin Sebastian in a note to investors disagreed.
“We note that the initial price point of $599 is at the higher end of expectations, although Facebook and Oculus have hinted in recent months that pricing might not target the mass market,” he wrote. “Moreover, since Oculus Rift requires a high-end compatible PC, most consumers would need to spend at least $1,500 for the headset and PC to run at full strength.”
What happens remains to be seen. The Oculus Rift is starting to reach early buyers, and "an unexpected component shortage" has slowed early deliveries, indicating, perhaps, greater-than-expected demand. Facebook is working to get updated shipping windows by April 12, and a slew of articles on the gadget have raised its profile. Even the uncertainty of the ship dates has only ramped up the buzz around the product.
“We continue to believe that mobile VR platforms — like Google Cardboard, Gear VR — will gain faster momentum, with expensive headsets initially limited to technology ‘early adopters,'” he wrote. “[High-end VR will] not penetrate the mass market likely until 2017 or 2018 as price points fall below $400,” he said.
Content Ramps Up
Even though the market models are still shaking out, all of the developments on the gear side have the potential to offer an attractive, untapped viewership base. So, more apps and content are becoming commercialized, and big media players like ABC, Sky, Telefonica and Intel are experimenting with different ways of using the technology. Microsoft is releasing its HoloLens development kit to developers as well, to boost the applications arena.
For its part, Hollywood is innovating with VR on the content side, with several projects in the works.
TV might seem the natural provenance for VR, being more of a persona technology, but the film community is filled with first-movers. For instance, the upcoming Tribeca Film Festival will stage a whole series of VR screenings, to be offered in small rooms that can better accommodate the experience. And, according to the Wall Street Journal, A-list directors such as Ridley Scott and Steven Spielberg are working on “top-secret” VR projects. Not to be outdone, Airplane! director Jerry Zucker has even announced that he is developing an immersive comedy.
“For decades, we’ve been watching as observers in a dark theater,” said Robert Stromberg, the director of Walt Disney’s Maleficent and an executive at Virtual Reality Co, speaking to the Journal. “Now, we’re taking on the role of observer [inside the movie’s] world.”
But, TV is not being left behind either.
ABC for one is experimenting with VR ads with its Quantico series. During the broadcast, a promotional banner will appear at the bottom of the TV screen suggesting viewers take a look at QuanticoVR.com. If they choose to visit, viewers can go into the world of the program and assume the role of a new recruit on a mission with Quantico characters Shelby Wyatt and Caleb Haas, helped by a Lexus LX 570 flagship SUV. The segment can be viewed via desktop or via a Littlstar VR app for headsets, mobile and Apple TV.
“There’s tremendous opportunity for storytelling in this space, and I think it offers unique opportunities,” said Jeffrey Weinstock, vice president and creative director at ABC Integrated Marketing, told Variety. Viewers “are going to actually be part of the world of the show.”
Telefónica’s Movistar+ and Samsung meanwhile launched a VR pilot experience during this past weekend’s El Clásico soccer match. During the Barcelona vs Real Madrid game, Movistar+ broadcast a live trial feed to Samsung Gear VR devices. A specially designed app enabled viewers to sit in a virtual place inside the Camp Nou stadium and choose between three different perspectives during the game.
Not to be outdone, having made an initial foray into VR in news coverage, Sky is now launching an aggressive push into the world of VR with sports. The pay-TV giant has created Sky VR Studio, a dedicated in-house VR production unit. As well as creating sports content, the new unit will also produce films, news and entertainment.
The new venture is the culmination of work in VR that began in 2013 when the company invested in Jaunt, a US-based company pioneering cinematic virtual reality.
“The Sky VR Studio allows us to add a new dimension to storytelling, taking viewers to extraordinary places and offering a unique perspective on a whole host of events,” commented Gary Davey, Sky’s MD of content. “The development of VR technology is moving at an incredible pace and excitement is building about its potential. Our expertise across a wide range of video content, from original drama to live sport, gives us a unique ability to bring VR to life for customers.”
The first pieces of fully immersive VR content to be produced by the unit will be released in the form of two so-called ‘unprecedented’ films shot during Formula One testing in Barcelona. The film is attributed with being able to transport viewers to the pit lane, into the team garages, and out onto the track.
Apps and More
There are also platform-specific apps that are being released, for now mostly around Oculus Rift.
For instance, Project CARS, the motorsport racing simulator, will feature as a key launch title for the device. Racing enthusiasts can use the VR headset to experience point-of-view racing.
“Project CARS offers an unparalleled experience of sitting in the driving seat of a speeding race car,” said Stephen Viljoen, game director at Project CARS creator Slightly Mad Studios. “The racing genre is a perfect fit for virtual reality, and the ability to now wear a virtual helmet that allows you to see through a driver’s eyes is a massive step toward recreating the real thing.”
Andy Tudor, creative director, said, “Project CARS offers exquisitely fine details that both harness and take advantage of our dynamic processing. When you look around using the Oculus Rift, you’ll see the detailed cockpit of a supercar like a Pagani Huayra BC in a whole new way. The visual realism and depth of perception – whether you’re looking to your right at a high-end Indy Car surging past you or whether you’re looking towards the apex while trying to nail a perfect lap, or out the back window while reversing – is really astonishing.”
Sky’s two F1 VR experiences, produced in conjunction with Formula One Management and Williams Martini Racing, will be made available via the Facebook 360 Video platform and the Oculus platform, and viewable on the Samsung Gear VR and Oculus Rift headsets. Sky will look to distribute content through a dedicated Sky VR app later in 2016.
Meanwhile, Intel has agreed to acquire Israeli VR startup Replay for somewhere between $150 and $170 million. The idea is to pioneer what Intel calls “immersive sports.” Replay’s proprietary freeD format uses high-resolution cameras and computer-intensive graphics to let viewers see and experience sporting events from any angle. The resulting apps will be tailored for various platforms.
And, streaming video pioneer Hulu is bringing VR to OTT with the launch of a new virtual reality app. It’s an ambitious endeavor: The app will bring the entire Hulu 2D library — including current season broadcast programming, libraries of classic content, hit movies and Hulu Originals — into an immersive 360-degree environment, along with original, exclusive and premium content from Baobab Studios, Discovery Communications, Las Vegas, The National Geographic Channel, RYOT, Showtime Networks, SilVR Thread, Spoke, Studio Transcendent, The Uprising Creative and Viacom. The VR app also includes Hulu’s first originally produced VR short film, The Big One.
“We are at the very beginning of VR, and like everyone involved in VR technology and content, we at Hulu, have a lot of learn about what makes for a great VR experience in the eyes of the viewer,” said Ben Smith, head of experience at Hulu. “We are super excited about our first steps into VR.”
The Hulu VR app will initially be supported on Samsung Gear VR powered by Oculus, which works with the Galaxy S7/S7 edge, Galaxy Note5, Galaxy S6 edge+, Galaxy S6 and Galaxy S6 edge phones. Hulu added that additional supported devices and platforms will be launched soon after.
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