The term “metaverse” has become a thing again because Mark Zuckerberg has decided to wholeheartedly embrace the idea of a 3D, interactive world where users can work, play and be entertained, even changing Facebook’s holding company name to Meta.
So while the social media mavens continue to tout how the cool kids will use whatever Silicon Valley can throw at them to interact with content, create creepy little avatars of themselves while they talk to and text their friends’ equally creepy-looking avatars and play games and whatnot using advanced augmented reality (AR) and virtual reality (VR) technology, just remember that this is really nothing new.
It’s being touted as a revolution but for me, a person definitely way outside the target audience for these products, we’ve been down this road before. Interacting with content is nothing new for media watchers — we’ve been talking about it ever since Time Warner Cable launched the Full Service Network back in the 1990s. And with streaming and ultra high-speed broadband outpacing more traditional forms of entertainment consumption, media types have long prepared for this inevitable evolution.
But the media business has never met a buzzword that it couldn’t beat to death and for the moment, “metaverse” appears to fit that bill. According to Bernstein Research, “metaverse” mentions on public company conference calls rose from just one in Q2 2020 to 449 in 3Q 2021.
Even actor Keanu Reeves, an owner of bitcoin and enthusiastic embracer of technology — he’s Neo, for gosh sakes — has asked for the metaverse hype to be turned down a notch, telling The Verge during the press tour for the upcoming Matrix: Resurrections movie that the term is decades old.
“Can we just not have metaverse be like invented by Facebook?” Reeves told The Verge. “The concept of the metaverse is like, way older. It’s like, c’mon man.”
Bernstein Research hosted a conference call with its clients about the metaverse on Dec. 10 (a transcript was provided on Dec. 16) and for software developers and hardware manufacturers it appears that momentum is going their way.
According to Bernstein, the metaverse could represent a $2 trillion annual revenue opportunity, but there is a big question regarding timing: nobody knows exactly when that opportunity will come. Still, that revenue is expected to come from multiple sources — advertising, gaming, software, mobile apps and more — and some is even being spent to some extent today.
“Companies are already spending to build it [the metaverse] and that costs real capital dollars,” Bernstein Internet analyst Mark Schmulik said on the call. “As they build it, we're already starting to see certain companies like Meta gain traction in hardware sales and related software sales. While it's still too early to draw a line of whether that's going to be successful or not, it's certainly underway.”
That includes cable and telecom companies, which see the metaverse as another catalyst to drive the need for higher speeds. On the Dec. 10 Bernstein call, cable and telecom analyst Peter Supino noted that he expects 80 million U.S. homes to have at least one way to purchase Gigabit symmetrical service by 2025.
And while wireless has been capacity constrained in the past, Supino noted that about 500 megahertz of mid-band spectrum has been reallocated by the Big Three carriers (AT&T, Verizon and T-Mobile) to 5G.
The metaverse also is important to the cloud services business, because connecting as many machines as possible is a big priority. And that need for connectivity could be a potential boon for Dish Network, which has about 100 MHz of fallow wireless spectrum and partnership possibilities with Amazon Web Services, Azure or Google Cloud.
“Dish is an unencumbered, high capacity link between the industrial metaverse and the cloud service providers that would like to serve and foster it,” Supino said.
But on the media and entertainment side, the benefits of the metaverse aren’t so clear.
Bernstein media analyst Todd Juenger admitted he was a “card-carrying” cynic when it comes to the Metaverse, adding that with all the hype surrounding the industry’s latest buzzword, he’s feeling more than a little déjà vu.
“The reason I'm cynical is that I feel like I've seen this before in media and entertainment,” Juenger said according to the transcript. “To me, the metaverse just sounds like a new word to describe an evolution that's naturally happening anyway.”
He then went on to offer an example. Remember 3D? Not too long ago, in the wake of James Cameron’s Avatar, the most successful 3D movie ever made, all content was supposed to be 3D, movies, television, networks began springing up all over the place. In 2010, ESPN was set to launch a 3D channel, Discovery was teaming up with Sony and IMAX to launch a 24-hour linear 3D network with movies, documentaries and children's programming and electronics vendors were scrambling to introduce 3D TVs to satiate what they expected to be tremendous demand.
I don’t have to tell you what happened, but I’ll let Juenger tell you why it did anyway.
“A couple years go by and where is 3D, right?,” Juenger said. “It was just [that] consumers didn't like it. They didn't benefit from it. It was almost being forced upon them.”
Juenger went on to talk about AR, which was all the rage a few years ago, fueled by Pokémon Go, the mobile game that had young and old alike wandering into traffic to capture little AR anime figures. That was supposed to take the video game business by storm and again, it didn’t. Juenger recalled that while Pokémon Go was a massive success and its still going relatively strong, it remains the go-to example of AR’s supposed takeover of the video game business a half decade after its introduction.
“It's funny that when we talk about AR when it relates to media, we still have to use Pokémon Go as the example, right?” Juenger said, noting that in the entertainment business, everybody copies everybody else, but so far that hasn’t happened with AR.
“If AR is a big idea, where are the other AR video games?” Juenger said. “Why do we still have to point to Pokémon Go?”
Juenger wasn’t denying the opportunity that a new and improved metaverse presents. He just believes that the concern as to whether media and entertainment companies will take advantage of it is a bit misplaced.They already seem to be doing it.
“When it comes to entertainment, I will say the content creation will follow the technology platforms.” Juenger said. “I don't deny that there will be a big advancement in devices people use and [are] using social elements of entertainment, which incorporates elements of what we call the metaverse.”
Juenger, who also follows the video game industry, said that Roblox, the online platform that allows people to play games created by other users, already bills itself as a metaverse. The difference between Roblox games and more traditional games like Grand Theft Auto, he said, is that a user can move his Roblox avatar through different games.
“I'm not sure you even want to take your GTA persona and move it into a different game, so maybe those will just stay separate,” Juenger said. “In terms of VR and AR games — in VR games, every major publisher makes some — but they all tell you that they just earn the minimum. And the only reason they do it is not really to make money, it's really just to stay involved and to build capabilities in case this takes off.”
Even Disney has jumped on the metaverse bandwagon, envisioning a merger of the physical and virtual worlds in its theme park experiences, which Juenger said, although a bit cringe-worthy, probably makes sense.
“To me, that just sounds like an idea of a Disney video game,” Juenger said, adding that the prevailing wisdom that only huge conglomerates can afford to take advantage of metaverse opportunities may not hold true.
Sure, the mega-media giants like Disney have all the money, technology and resources and have managed to build huge communities with their brands, but their size can make them slow to react to changes in the business. With development getting easier and faster and distribution barriers being shattered across the landscape, Juenger said some believe it is time to consider smaller, faster, more advanced startups to displace some of their older, larger competitors.
“This is all still new enough and video games are inherently innovative,” Juenger said. “I would bet on the big IPs. But I think it's an evolution, not a revolution. Video game manufacturers — they've gone through a lot of change already. I think this is just another one.”
Other analysts have delved into the metaverse conversation, with Evercore ISI Internet analyst Mark Mahaney issuing a 33-page report on December 10 that highlighted the pros and cons of the technology. Pros: there is a lot of money to be made. Cons: It’s going to take a big change in consumer behavior to realize that revenue.
On the plus side, Mahaney said Meta (the former Facebook) is putting its money where its vision is, investing more than $10 billion annually in the concept, has about 3.5 billion monthly users in its family of apps that are already engaging in what is most likely the core use of the metaverse (social media); and has the majority of the VR device business through Oculus Quest. And the pandemic has shown that consumers are willing to interact more online -- Zoom went from 10 million data meeting participants in 2019 to 300 million by April 2020. Roblox has more than 47 million DAUs that average 2.6 hours per day on the platform in Q3 2021, and while VR adoption is still nascent -- about 2% of monthly users on Steam -- it is rising.
But there’s a downside too. According to Mahaney’s report, the biggest question is whether enough consumers will swap “real” reality for virtual reality or whether VR will just be another niche product. And then there is the technology part of the metaverse. Zuckerberg has said that the biggest challenge for the industry is cramming a super-computer into the frame of normal-looking eyeglasses.
“Ultimately, we need high-fidelity graphics, low latency, with hundreds of millions of concurrent users in real-time at a relatively cheap price point,” Mahaney wrote.
That, to me, is going to be the real deciding factor in this. People have different expectations as to how the metaverse will look and feel and I will bet you that none of them has a basis in the current reality.
The technology industry is really good at driving interest and excitement about technology, but it takes time for these things to deliver what’s being promised. And now they are talking about a technology that in order to work as promised is literally going to have billions of users accessing servers and whatnot simultaneously. Just think of how annoyed you get when Netflix takes too much time to load a movie and multiply that by 1,000 or so when your virtual jaunt through the rainforest crashes into a sea of pixels.
And then there are the social and privacy aspects. It’s probably a safe bet that to keep the cost of these products and services down, people are going to have to give up a load of personal data. Sure many are doing that already, but you’ve got to wonder how much more everyone is going to have to surrender to make a low-cost metaverse worthwhile.
And as far as the social impact, while most people have spent a year in isolation, when they get a chance to go out and interact with actual people, they do it in droves. The news is full of stories of people, young and old, that risked going to large gatherings during the outbreak. Heck, just yesterday (December 16), AMC Theaters said that 1.1 million people went outside to an actual movie theater to watch Spiderman: No Way Home, the second largest box office day in AMC’s history (The Avengers: Endgame was No. 1).
So I guess what I’m saying is that for the metaverse to really be worth the hype, it has to deliver on its promises. If it doesn’t, it risks turning consumers off of the concept, or at least substantially delaying its acceptance until it resurfaces years later with another name -- my vote is for Vitametamegaverse (“It’s So Tasty Too!”). And that’s another thing that this industry has seen before. ■
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Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.
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