In 1994, Nintendo's "Virtual Boy" brought viewers into the wondrous world of virtual reality (VR) with a promise to “totally immerse players into their own private universe.” Fast-forward 21 years — past a lot of failed companies and false starts — and that universe is expanding into living rooms via devices and headsets that can deliver a viewer inside the experience of sports, gaming, travel and entertainment.
Virtual reality is getting real. And while technology and business challenges remain, neither of which are trivial, VR is capturing the attention of an evolving ecosystem comprising content developers, postproduction companies, pay TV providers and more.
The VR movement recently gained momentum with gamers with the emergence of Oculus Rift, a set of VR goggles that places the user in their own digital “world,” set for release next year.
“VR was jump started by Oculus’ Rift [acquired by Facebook in 2014 for $2 billion], and now more money is moving into the market,” SNL Kagan analyst Greg Potter said. “Sony is also working on VR for its Play Station 4. There are challenges like the display quality of live streaming, but that should change when 4K improves with VR headsets and VR is untethered, not connected.”
More recently, GoPro agreed to buy Kolor, a French software startup that specializes in creating 360-degree interactive videos. And Spike TV’s Lip Sync Battle, is getting into the virtual reality act, with plans for clips to debut on Samsung’s Milk VR app, a database of virtual-reality content for Samsung’s recently released Gear VR headset.
VR’s future for pay TV providers is a sketchier endeavor.
CABLELABS ON BOARD
“It’s a stretch for cable,” Potter said. “Content providers will try to keep hold of the VR space. Cable could do VR feeds by just doubling streams to viewers, but the user experience part is very early.”
Early or not, VR has reached organizations such as CableLabs, which is helping advance the technology and its potential as a new revenue stream.
“We’re looking at emerging VR technology,” Steve Glennon, principal architect at CableLabs, said. “Is it real? A fad? We’ve seen 3D try to create stereoscopic 3D, but it hasn’t taken hold. We’re trying to understand if VR is ready for primetime and if customers see value in VR. But if it’s real, there are certainly revenue opportunities.”
Some in the pay TV universe are more deeply immersed in the reality of VR than others. DirecTV, for example, believes VR has an opportunity to become a valuable service and a revenue-generator.
“We have a digital innovation lab to use mobile for the next-generation video experience and VR,” Tony Goncalves, senior vice president of digital entertainment for DirecTV, explained. “We’re not sure how VR will evolve and shift from flat, non-immersive TV experiences to the level of almost putting consumers inside a movie, but for pay TV and video content providers, it’s very important to explore new ways of seeing content, and VR falls into that category.”
NO TRIVIAL EXPENSE
Exploring these new avenues aren’t free. “VR is very immersive and could mean a whole new set of equipment and viewing mechanisms,” Goncalves said. “The expense is not trivial.”
Nonetheless, the roster of players in the VR space is growing, with Samsung and its Gear VR essentially leading the way.
“It’s a $200 add on to a smartphone, so we’re keeping an eye on its retail availability,” CableLabs’s Glennon said. “The early read is very promising, and we’re now having conversations with cable engineers who are monitoring the situation and demand.”
And how does VR integrate into a cable plant? “We can rule out delivery of content via the standard process over coax, but it can [work] via the Internet,” he added. “Networks could add an augmented, immersive experience tied to TV by using headsets.”
Samsung is a key driver for VR. It’s early, but according to Matt Apfel, Samsung’s vice president of creative content and strategy, the company’s recent launch of the Milk VR service for the Gear VR headset is breaking new ground
“It’s a totally new viewing experience with four genre buckets: music, sports, planet VR and scripted, animated series,” Apfel said. “But it’s very early, and all of the pieces in the eco-system — editing, stitching, advertising and more — must be thought through. And, we must figure out how to get storytellers to work with production companies and get distributors like cable leaning into VR. Right now, that’s completely up for grabs.”
Google Cardboard is one low-cost system to try out; it’s a viewer literally made out of cardboard (a quick check on Amazon shows a basic version of the viewer for $13) that can be paired with a smartphone running Google’s VR app.
WILL VR BECOME A REAL MONEY-MAKER?
But time will tell if there’s a real VR business. “Will we see added value by augmenting traditional TV?” Glennon said. “It’s a bit less clear where the money is and probably too early to extract revenue from it.”
Maybe so, but for production players such as Next- VR, the business models are coming together as the technology advances.
“The business models are being fleshed out and how VR content will be monetized and sponsored,” said David Cole, co-founder of NextVR, which recently teamed with Fox Sports to test VR at a NASCAR event. “I think we’ll see some experimentation with OTT as well. The technology is ready to go. The challenge is maintaining quality. That’s crucial, because in this space, bad VR is bad VR, and consumers know that.”
Oculus’s Story Studio, an in-house innovation lab exploring “VR Cinema,” is playing in the content sector as well. The VR technology changes the pace of a story based on the actions taken by the viewer.
Yet a growing number of players in the VR ecosystem suggest that for VR to reach its full potential, it must be un-tethered.
“Only when people begin talking about mobile and non-tethered did VR make gains,” Scott Broock, vice president of content for camera-maker JauntVR, said. “For mass eyeballs, we must look at Android and iOS. And for cable, there is tremendous opportunity to bundle channels and charge $2 a month to get extra VR content via Google Cardboard. Now the challenge is to get consumers to try it and reduce the cost of producing. But it’s happening.”
But figuring out when VR will become a real business — and who will make it happen — is a work in progress.
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